How to Prevent Costly Invoicing Errors From Sinking Your Business
In terms of keeping the funnel for your cash flow properly lubricated, few functions of accounting are more key than invoicing. One of the perennial problems in this area is that most businesses don’t have strong ideas about how to optimize their accounting systems in order to set profits at maximum effectiveness.
If you hope to build a thriving business with a solid financial backbone, you should seek greater clarity with regard to this area.
How to Stop Making Costly Invoicing Blunders
Invoicing errors can be costly on many fronts. Most often, they lower cash flow and suppress your profitability.
Even more than that, however, errors create mistrust and confusion between your firm and its clients. Bad invoicing might not sink your operation right away, but it’ll erode it, slowly but inexorably, from the inside.
Here’s how you can stop making so many costly mistakes in this vital function of accounting.
1) Use a Standardized Invoice
Stop getting cute with your invoices. There’s no need to customize invoices by client or industry, and no benefit to doing that.
Use one standard invoice for all your clients and you’ll reduce confusion across the board. This makes it easier to track information, explain the terms, and reconcile accounts.
Feel free to optimize your invoices if you desire, but make sure each one takes a unique reference number, date of issue, and clear description of goods or services. There’s no need to be succinct.
It’s better to go into greater detail than necessary so there will be less chance of confusion when you have to go back and review an invoice six weeks or months into the future.
2) Digitize Invoicing
There’s no excuse for using a manual invoicing approach in today’s business world. Whether you’re sending 10 invoices a month or 1,000, electronic invoicing is the answer.
When invoices are digitized and transactions occur electronically, your accounts payable resources are freed up to focus on strategic, big-picture activities (rather than time-consuming administrative tasks that don’t really move the needle). With the right solution, you can automate everything and add more value to your bottom line, while simultaneously communicating a more professional message to your clients.
3) Itemized Services
Though you clearly need an invoice format that fits your company’s needs, it’s also necessary to take your clients’ preferences under advisement. Itemizing services on your invoice with care will help you accomplish both.
Most clients may not require a full itemized breakdown, but some will. It may be necessary in order for them to track, record, and report various expenses with accuracy.
If you make a habit out of itemizing everything, regardless of the client, you’ll spend less time going back and forth with your customers over potential discrepancies.
4) Proper Invoicing Etiquette
There’s nothing more embarrassing for a company than to come off as inexperienced and unprofessional. But if you don’t have a concrete plan for invoicing, this is the vibe you’re likely to give out.
There are common and accepted ways to invoice — an etiquette, if you will — and if you violate these norms, clients may mistrust you. For example:
- Make sure you submit invoices on the proper timeline.
- Always send the invoice to the right person. (If you aren’t sure who this is, double-check!)
- Show some courtesy in your verbiage. Phrases like “Thank you for your business,” or “Please make payment by…” are simple yet effective.
If you’re unsure of what proper invoicing etiquette might be, you should study and mimic what other firms in your industry are doing.
5) Third-Party Auditing
You’re in the business of selling graphic design services, leather goods, customer service software, or whatever your specialty might be. You’re not in the business of accounting and invoicing.
Yet you spend hours every week stressing over time-consuming administrative tasks … and still don’t get everything 100 percent right. Sometimes the best thing is to admit that you can’t do it all.
Third-party auditing can improve your invoicing and accounting accuracy without having to dedicate more person-hours internally. You’ll gain access to an industry professional who knows what he or she is doing and you can rest easier at night, knowing you aren’t missing anything obvious.
Take Control Of Your Cash Flow
It’s impossible to maximize cash flow and profitability without perfecting your invoicing strategy. From how and when you invoice to the ways in which you organize your records and communicate with clients, every detail must be covered with the bottom line in mind.
What’s one change you could make this month?