The invoicing process shouldn’t just be another item on your to-do list. It’s pivotal to your bottom line – every business needs consistent cash flow to offset bills and various expenses.
While many small businesses send out invoices, not all do it correctly. It’s not uncommon for customers to receive a sloppy invoice that’s hard to follow. And it’s not uncommon for a small business invoicing process to run on an inconsistent schedule. When it’s tough to determine what they’re being charged for, when to expect an invoice, or how they should pay, customers won’t feel compelled to make it a priority.
That’s why we’ve compiled a few of our tips to simplifying and streamlining your small businesses invoicing process. Our goals for your business: Get invoices out the door faster. Start getting paid sooner rather than later.
Organize your invoicing process by utilizing tools to generate branded invoices and keep your records in one place.
With the right invoicing tools, all the necessary information will be readily available when it comes time to start the invoicing process. Plus, you won’t mistakenly leave out any minor charges.
Today, it’s more important than ever to brand your invoices with your logo and company colors so your clients know who the bill is coming from. They’re getting an influx of noisy requests to their inbox every day, so brand recognition will make you stand out and get paid faster than the rest.
Some tools like Xero, Stripe, and ChargeOver can even help you generate recurring invoices. And your customers enter their information directly, so there are no potential liability issues for you. These tools also ease the dunning process, meaning that even as your customers’ credit card information is ever changing, you’ll have an automated process in place to sort out these details with the cardholder in advance. No more getting hung up on collections due to old credit card information.
Carefully consider what types of payment you want to accept.
If you’re not already, we highly recommend accepting credit cards. It’s typical to have a merchant fee of 2-3%, but if you have 2%/10 net 30, that turns out to be the same amount.
Plus, it’s easier for your customers to pay on time with an online option. Think of all the follow ups you won’t need to remember. All of the admin and collection costs you’ll save! That just might carve out some resources for you to get back to your core business – imagine that.
Be savvy with your payment terms.
Customers tend to pay late, so it’s best to set up terms to help you get paid as quickly as possible (and sooner than you need the money). The 3 common types of payment terms are on demand, net 15, and net 30. (Read more about what these terms mean in the FAQ section below.)
You can also consider offering a discount if an invoice is paid early. Larger companies such as Fortune 500 and 5000 will expect a discount. We recommend offering a 2% discount for paying within 10 days on net 30 payment terms.
If you happen to be working with Fortune’s top 10 companies, they could have payment terms as far out as 45 to 90 days.
PRO TIP: Be careful with these types of payment terms – waiting this long for payments can make it hard to run your operations.
Don’t put off sending an invoice.
Waiting to send an invoice not only compromises your cash flow but could force your customer to do some tough reconciling of their own. Make it a routine to generate new invoices on a regular schedule.
Let your customers learn your invoicing pattern, too. Pick a day of the week or month, and stick to it. When customers know when the invoice is coming, it’s likely they won’t be caught off guard, and in turn, you’ll be able to predict their payment trends.
Monthly is the most common increment of time to invoice your customers, but make sure you’re invoicing for the following month – rather than in retrospect – so you avoid cash flow issues.
Long story short, your goal with invoicing is predictability.
Establish a routine for follow ups.
We can’t stress enough how important it is to create a built-in collections process. Having this procedure in place will save you time, headaches, AND money. Automate your follow-ups so you don’t leave money on the table.
Getting customers to settle their invoices is a critical objective for small business owners. By adopting a proactive approach with invoicing and collections, you can rest assured that you’ll have the capital to keep scaling your enterprise.
PRO TIP: Reach out with the method your client prefers to use. If they’re an avid emailer, shoot them a reminder email. If they like to hop on the phone to talk through things with you, call them to follow up on the invoice.
For more tips and tricks related to outstanding invoices, check out our blog post How to Follow Up on an Outstanding Invoice.
Looking to hand over your invoicing process? Don’t hesitate to find time to talk. We’re ready to help you help your business succeed.
Invoicing Process FAQs
What are 3 different types of billing terms?
- On demand – As soon as you send the invoice, the payment is due.
- Net 15 – The payment is due 15 days after sending the invoice.
- Net 30 – The payment is due 30 days after sending the invoice.
Net 15 is the most reasonable and what our team at Acuity most frequently recommends for our clients, although net 30 is most common. Some vendors, even at net 15, might assume they have 30 days to pay the invoice – so go ahead and implement net 15 to cash in on the early birds.
Is invoicing the same as billing?
Essentially, yes. An invoice is sent out as a request from a client for services. It includes a record of the goods/services provided, how much the client owes, and when their payment is due.
What is a PO invoice and non-PO invoice?
In this context, PO stands for “purchase order.” The difference between these two types of invoices therein lies the type of purchase that was made.
So, a PO invoice should include the purchase order number and details of what the customer is purchasing. It’s a fairly simple, direct invoice.
A non-PO invoice is used in the case of indirect purchases. It does not have a purchase order number and has not been pre-approved. This type of invoice is also known as an expense invoice.
What are the elements of an invoice?
While there are a lot of variations of an invoice, we recommend these 7 elements for an effective invoice:
- Branded header (Scroll up for more information on the importance of branding on an invoice)
- Date of transaction and date due
- Your business’ basic contact info (Name, address, phone number)
- Invoice number (Each invoice needs a unique order number to differentiate it from the rest)
- Goods or services sold, outlining items, price per unit, quantity, and fees/taxes
- Total amount due
- Payment link* (See below)
*Earlier, we recommended accepting credit cards for invoices, but we want you to take that convenience and ease a step further. We recommend including a payment link as a consistent element in your small business email invoices. This will make it even easier for you to get paid on time and reduce the hassle of follow ups from collections.
One of our partners at Acuity, NetSuite, has simple tools for sending email invoices that include payment links so that your customers can pay invoices straight from their inbox.
NetSuite also offers PDF and HTML templates for invoices to simplify your business’ invoicing process. When in doubt, though, you can also do a quick Google search of invoice examples! They’re pretty standard and easy to create.