We’re excited to introduce a few new voices with the first in a series of guest posts. The tips and advice they share are a great addition to our blog!
All business owners are well-intentioned, but we’re also busy. Sometimes, the biggest invoicing mistakes stem from a lack of time. You might forget to send the invoice on time, insufficiently describe the services or products you’re billing for, forget to thank your customer for their business, or not make it clear how a customer should remit payment. As entrepreneurs, our passion lies in our product and it’s easy to neglect the mundane tasks that can seem second-tier.
The problem is, without consistent cash flow, all of that passion could still result in a failing business.
Here are 5 best practices for invoices that get paid faster–and keep you doing what you love.
#1 Use clear terms
If you want to get paid, don’t leave any room for confusion. Customers are more likely to pay accurately and on time if the terms are specific and precise.
Payment terms are the most important part of an invoicing agreement, so be exact. It used to be standard for companies to say “Net” before a certain number of days, but this actually confused their customers–resulting in delayed payment. An invoice is not the place for business jargon. Something as simple as “Payment is due within 30 days” clarifies expectations and remains professional.
Item and task descriptions should also be clear and concise. If a customer is confused about what they’re being charged for, they’ll want clarification before they send payment. This doesn’t mean every description should be the length of a novel but include enough detail that your customer knows what they’re paying for (between 20-50 words is safe).
#2 Be personal
Whenever you can, add a personal touch to your invoices.
Make sure you reach out to the right contact–addressing them by name–not just a company or department. Minding your P’s and Q’s can also pay off. Adding a thank you note is shown to result in faster payment and increased likelihood of repeat purchases.
Do your best to stay on brand. A customer purchase is a show of support, so make sure your invoices match the company brand they know and love. Show off your logo and use a color scheme that matches your business colors.
Of course, invoices are financial documents so they should maintain a sense of professionalism, but don’t be afraid to break out of the suit and tie when you need to!
Keep in mind, improving your invoicing will also improve client relations. When your billing is organized and clear, you’ll be able to build a relationship of trust with your customer, leading to long-term value on both sides.
#3 Go digital
This may seem like a no-brainer in today’s world, but surprisingly, there are still a lot of people sending paper invoices. Not only does this slow the payment process, but it often precludes the option of digital payment.
Using an invoice template, with saved line items, can help you to create and send payment requests in a matter of seconds. You are more likely to get paid faster when you send invoices via email. Some invoicing companies even offer mobile apps so you can send invoices right from your phone!
At ZipBooks, we’ve also found that customers who have the option to pay by credit card fill invoices 14.6 days earlier. Many invoicing solutions integrate with online payment processors (like PayPal or Square) for free or for a low percentage fee.
Take advantage of solutions that manage your billing and bookkeeping all in one place.
#4 Incentivize don’t penalize
It’s common practice for companies to penalize late payments. For some companies this works, but I always prefer the positive approach.
After all, if a customer isn’t in a rush to pay your invoice, don’t expect them to be in a rush to pay your late fee.
Instead, offer incentives for early-paying customers. Local businesses like dentists and contractors often give customers a same-day discount. While a 10% discount is generous, you can start with something small like 1-2% off if paid within the first 10 days.
If you can’t afford that kind of cost upfront, consider offering a discount on a future purchase instead.
#5 Automate as much as you can
Automating billing may sound scary, but I promise it’s not. Automation is the norm in business today and it actually improves the experience for both customers and business owners.
In fact, customers are probably already receiving automated emails for their electric bills, internet payments, etc. They will be grateful for the reminder that an invoice is waiting for them and you will be grateful to have one less thing to worry about.
Use your digital invoicing software to set up automatic recurring billing, late payment reminders and receipt processing. Invoice automation will help you to simplify your business–saving you time and making you money.
Get Paid Faster
Remember those small improvements (even something like adding a professional logo to an invoice) can make huge differences for your customers and for your cash flow.
When you’re running a small business, invoices simply can’t be left unpaid. This hurts your bottom line and sets a poor precedent for customer relations. Invoicing should be personal and professional, powerful and automated.
And, of course, if the product or service you’re offering is so good that it’s irreplaceable, your client will make it a priority to pay you!
Jaren Nichols is Chief Operating Officer at ZipBooks, free accounting software for small businesses. Jaren was previously a Product Manager at Google and holds an MBA from Harvard Business School.