Small business owners and entrepreneurs often find it challenging to create an invoice. Even when they do manage to put one together they may find they aren’t being paid as quickly as they believed they would be. These frustrations are typically because some aspect of the invoice creation process was overlooked.
It isn’t surprising that so many people find creating an invoice to be a challenge. It isn’t something that is taught in most schools and people typically don’t learn to do it until they have an active need to do so. Fortunately, free invoice templates can eliminate much of the hassle involved in creating an effective invoice.
Contact and Payment Information
One of the most important things to include on any invoice one sends is the full contact information of both the person being invoiced, but also the person issuing the invoice. There should be no confusion on the part of the client as to whether the invoice was meant for them.
Similarly, if they have a question about a charge or how to submit payment, they need a viable way of contacting you. At a minimum, the contact information should include the name of the contact person and the businesses involved, mailing addresses, telephone numbers, and email addresses.
Payment information may seem an obvious inclusion into this list, but a surprising number of people forget to tally the total and include it at the end of the invoice. Take the time to review the invoice and ensure you have included the total amount due and how the client can send the payment to you.
Itemized Expenses
Another common issue is failing to itemize each charge. Clients need a record of what they have paid for in order to keep accurate accounting records and to make itemization at tax time easier. If you only include the total amount due, they may put the invoice to the side to contact you for additional information at a later date rather than paying it immediately.
In order to prevent this, give a detailed explanation of each charge. This will look differently for different types of goods and services. A writer may need to list each article that was written while a shop keeper might need to include each sweater sold. Someone who works hourly would need to list the number of hours worked each day or the number of hours worked on each project depending on the arrangements made with the client.
Payment Terms
Some studies suggest that smaller businesses must wait longer to receive payments than those that operate at a larger scale. While there are multiple contributing factors, one of these is likely due to poor invoicing procedures such as poorly defined payment expectations.
The importance of including payment terms on the invoice cannot be overstated. The client should be told exactly when the payment is expected to be paid in full, if partial payments are allowed, where the payment should be sent, and what the consequences of late payment include. This can all be summed up in a few succinct sentences but leaving off any portion of this may result in people paying invoices late or neglecting to make a payment at all.
Conclusion
If you find your business is suffering from a cash flow problem, the first step is to review invoicing methodology for any weak points and address them immediately.