How to process an invoice and get paid on time
You need to know how to process an invoice if you want to be a step closer to having a successful and thriving business. Invoices are issued by your business to your customers and they will trigger the payment for the product or service you have supplied. Make sure you get this process right to increase your chances of getting paid on time.
OK, ground rules first, and this comes down to good housekeeping. Don’t dilly dally with your invoices (forgive the official terminology but this is an important point).
When you’ve made the deal and the product is on its way, get your invoice out. The longer you delay, in effect you are giving your customer increase in credit terms.
Bear in mind that it’s not regarded as fair to send out an invoice which is backdated. You might have the date when the deal was done on your invoice, but until the customer receives it, the days don’t usually start counting.
Make sure your invoice looks professional
Create an invoice that looks professional and provides the person receiving it with all the information they need to know. Remember, many companies have a department that is one step removed away from the person who made the buying decision.
On occasion, they can be hard to contact and harder still to establish a working dialogue. It’s not the case of: “Hey Bob, you know my invoice, do me a favour and pay it this week would you.” It’s more a case of sending an email to a nondescript office, home of the purchasing ledger, which could even be on another continent.
So don’t give them an excuse to delay payment and say it’s your fault for not supplying them with the correct details, or not doing it in the correct fashion (i.e. doing it in the way they want). And don’t argue if they have rules and systems that irritate you. At all times, be professional and play the game.
What needs to go on your invoice
There are a number of things that you have to include on your invoices. Ensure they feature these basic components before you take the step to process an invoice:
- your company name
- your trading address
- the point of contact (your name and how to get hold of you, should there be a query)
- what your customer bought (a description – don’t forget, the buyer may not receive your invoice, but just be asked to sign off the amount)
- who ordered the goods (this is not mandatory but it can help)
- an invoice number (your file number, for easy reference)
- the date (don’t forget this, it’s vital)
- the way you want to get paid (another hugely important element but one a large number of people forget)
- credit terms (i.e. payable immediately, or within 7, 30, 60 days, etc)
- the amount you are charging
- your bank details (very important if you want to receive the money)
- any stage payments
- is VAT applicable
In short, include everything that the receiving party might need to process your invoice. Don’t give them the opportunity to say: “Hang on, you missed that key point out and now we’ll have to delay payment until the next run.” Believe me, the list of excuses can be endless and sometimes quite creative.
This will give you the best chance to get paid on time and reduce the chances of being paid late or you needing to chase an unpaid invoice.
One final point. Most invoices are sent by email these days and again, following good housekeeping rules, make very sure the email address is correct and that it has arrived safely (check with them that they have received the invoice. If they don’t get it, they won’t process it).
Be quick when you process an invoice
And here’s a good tip: convert your invoice, if you’ve prepared it as a Word document, to a PDF. Some companies won’t accept Word documents – it’s worth checking with them to be on the safe side – so always send it out as a PDF. This protects you and them, because PDFs can’t easily be altered and what you see is what you get.
To be fair, most companies are very helpful about their systems and they are not out there to trick you. Work with them and also stay in touch too – don’t see your invoice as a stranger, stay friends with it.
Paul Donno, managing director of 1 Accounts, says: “When processing your invoices, you have got to be quick. Don’t delay processing your invoices. There are a lot of businesses out there that leave their invoice processing until the end of the month by doing that and if you’re giving 30 days, you could almost be giving 60 days credit.
“So, get software in place and get the process of running an invoice right, so raise a quote, or an estimate, and then convert that into an invoice. Certainly use the online tools that are out there, the online accounting software. There are many good tools out there and you can also send invoices through your smartphone – it’s really easy.”
Don’t forget your bank details on your invoice
On some of the mechanics, Paul says: “I would also make sure on your invoices is basically your name and address, how to contact yourself, what it is you are actually selling to somebody and the amount you’re expecting to be paid.
“And really importantly – and a lot of people forget this – put on your bank details, or the easy way you can get paid, so your Stripe details, GoCardless details, or any other form of quick payment systems.
“There are a lot of barriers coming down now on how to get paid quickly so use the tools that are out there.”
Dom Makin, aka The Dogfather, runs a dog boarding and dog day care centre that operates in London. Originally from Wiltshire, his background was in advertising, a sector in which he worked for 16 years before he changed direction and went into dog walking.
On how invoices are processed for his business, he says: “We process invoices by using a very clever system that calculates everything, up to the last day of the month. And on the last day of the month, all my clients are sent invoices. We do bulk invoicing.”
The key thing here is that Dom is on top of his invoicing and uses a system that ensures they are issued on time and without a fuss. This is the benchmark.
Thursday, April 16, 2020
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