After providing their products and services, businesses can’t wait to issue an invoice to their clients to inform them that payment is due. However, many companies often focus on the money and pay little attention to the actual invoicing process. They may ignore the little details that could make the transaction smoother and easier for them and more importantly, the customers.
The invoicing process creates an interaction point between a business and its customers. In the modern business world, the customer experience journey is a huge factor in deciding whether a customer is happy with your product, service, or brand. More essentially, if they will become regular customers. That’s why every touchpoint must reflect and reinforce the brand’s promise and reputation and invoicing is a golden opportunity to do just that.
It can be difficult to enjoy the repetitive and sometimes tedious process of invoicing, but we’re here to make things easier for you. And your clients!
What Is An Invoice?
An invoice is a commercial document issued by a seller to a buyer, identifying a transaction with details of products or services supplied and their cost breakdown. In other words, an invoice shows what was sold or supplied and how much is owed and due.
The primary purpose of an invoice is to record a transaction or a sale. It legally demonstrates a client’s obligation to pay a company for its services or goods. They can also use invoices in case of overdue payments and take follow-ups with a legal approach.
An invoice is also a valuable accounting tool. Obtaining invoices is important for the company to keep a trail of payments, sales, and stock levels, therefore allowing companies to prepare different types of financial statements such as balance sheets, cash flow statements, etc.
What Are The Different Types Of Invoices?
There are many variations of the invoice in the commercial world. However, these are the main 6 types of invoices that are commonly used.
Pro forma invoice
A pro forma invoice or a preliminary bill of sale is issued when a business wants to provide the client with an overview of the estimated time and cost of the work to be completed. It is also often used to ensure both parties understand and agree upon the products or services sold.
A commercial invoice is used for foreign trade. It is used as a customs declaration in the sale of goods that are exported across international borders.
A credit note is a document issued when a buyer wants to return goods due to damage or mistakes from the seller.
An interim invoice or a progress bill is used for billing on large projects including multiple payments. Interim invoices help small businesses maintain their cash flow while working on big projects over long periods of time.
Recurring billing occurs when a business automatically collects an agreed payment at regular intervals of time.
A retainer invoice is created to collect advance payment for products or services given by a company. Therefore, a retainer invoice is like a form of prepayment. When the work is finished, it will be used for reconciliation.
15 Must-have Invoice Best Practices
Understanding how invoicing can affect your customer’s journey and satisfaction, we will list 15 best practices of invoicing below that your business must have.
1. Make timely invoices
Nobody likes to wait. Neither you nor your customers. However, some SMEs still have a tendency to pile up their invoices and send them in batches later. This delays the cash flow and makes it difficult to keep track of individual invoices. Find a suitable invoicing software to send out bills as soon as work is completed or products have been delivered. Issuing prompt invoices also gives customers an urge to pay their outstanding bills on time.
2. Simple is best
Design your invoice templates with simplicity in mind. A perfect invoice should include only relevant information and be clearly worded. . Don’t choose quirky fonts (even if they’re your favorite!). Think about your customers. Paying money is a serious business so make your invoices easy to read.
3. Avoid inconsistencies
One of the easiest ways to prevent any disputes and mistakes with billings is to use digital software. However, if you still manually issue invoices, always double check the client’s information. Make sure the products are listed and charged with the agreed prices. Careless errors can leave a negative impression on your clients and create doubts about your competence. If you can’t get the little things correct, how can they put trust in you and your business?
4. Strengthen your brand image
The final step of a business transaction, invoicing is where a business can score points with its customers. Your company logo should be highly visible. However, keep it separate from the invoice content. Remember rule number 2 above!
Align your invoicing template and wording with the company’s marketing strategy and the brand promise. Every small detail like this adds up to the holistic experience of a customer’s journey with your company.
5. Build a relationship with your customers
Maintaining regular communication with your buyer is critical to a healthy client relationship. Not only can you create a cooperative atmosphere, but you can get an idea of which invoicing and payment approaches they prefer. Being assertive and subtle can help you get paid on time and also improve your customer service.
6. Use E-invoicing
Dealing with bills can be a hassle already, not to mention having to worry about paper invoices getting lost in the mail or being destroyed before being paid. That concern vanishes with electronic invoices. Electronic invoicing, also called e-invoicing, is the method of billing a customer online rather than the traditional mail. Not only does it save you time and money, the two most important things, electronic invoicing also eliminates many unnecessary steps such as manual data entry, cross-examination, etc.
And once you try out this new way of invoicing, you will definitely wonder why you didn’t do it sooner!
7. Provide different payment options
Today, your customers have more payment options than ever before. Make sure your business supports the right payment options for your customers by offering them traditional and alternative payment methods. Electronic payments are a primary payment option for millions of people, with many consumers making payments via mobile devices. Being flexible with payment methods can show that you’re trying your best to make things easier for the customers. It also quickens the payment process which absolutely is your ultimate goal!
8. Kindly remind your customers
Although you may be up to your neck with so many customers, don’t forget to follow up with them so that you can get paid faster. Keep track of the due date for each customer and send out a reminder a few days before to let them know it’s nearly time to pay. Remember to keep a friendly and professional tone to avoid causing disturbance to your customers. Or even worse, sound threatening. Sometimes, you may find that your customers want to delay payment. This situation calls for a calm head. Undertake risk assessment, then come up with the best solution for both your customer and your business.
9. Keep your invoices in one place
Store all of your invoices in one centralized place, an app, or software. This guarantees that you can have access to any invoices that have been issued by your business. Having an accessible and organized billing history also helps you to go back and see if all invoices were handled correctly. This system is also useful to avoid common mistakes that many businesses make such as issuing a revised invoice after the initial one.
10. Automate the invoicing process
The invoicing process can be tedious and sometimes troublesome if you still opt for a fully manual method with many repetitive steps. It not only takes up a lot of time, but also increases the chance you make mistakes. Say goodbye to that with automation. You don’t need to sign up for any software company to reduce the manual work. Just be creative and take advantage of any available tools that you have. For example, spend some time designing templates on Microsoft for different kinds of invoices. It can be tough if you’re not familiar with the technology. That’s when hiring a third party to solve the problem can be a good idea. It’s worth it!
11. Offer early payment discount
What can be a more efficient way to encourage early payments than offer early settlement discounts. This practice is already widely used in the market. For instance, a business can offer a 2%10 net 30 arrangement. It means the customer will get a 2% discount on the purchase only if the payment is received in full within 10 days after the date of the invoice. If this early settlement isn’t met, full payment is expected within 30 days. Some companies go further and offer a 5-10% discount for a 10 or 15-day settlement period.
12. Send a ‘thank you’ note
Another tip for customer service and to increase their satisfaction is to send a well-designed ‘thank you’ note after receiving the payment. It shows that your business cares and appreciates its customers. It also shows thoughtfulness and helps nurture the partnership. Remember to suggest future cooperation and let them know that you’re always available to offer any assistance for previous or future projects.
13. Be clear of the due date and terms of payment
These two details are really crucial to prove that both parties are on the same page, so don’t ever forget to include them in your invoices. Sometimes, if you don’t have a specific discussion with your client about the due date and terms of payment, it’ll automatically follow the legal payment practice in your country. However, keep in mind that payment restrictions change from one country to the next. So be very careful and clear about the payment deadline and terms to avoid any unwanted misunderstandings which can affect your receiving payment on time.
14. Use recurring invoicing (if can)
As mentioned above, recurring billing occurs when a business automatically deducts an agreed payment on a scheduled time. If you have a regular or even a monthly client, ask them to allow you to set up an automatic payment for recurring invoices, which ensures you always get paid in a timely manner.
15. Periodically review your invoice system
Invoicing system relates directly to the cash flow of your business, therefore you need to take good care and periodically check if it is functioning well or if there are any errors that need fixing promptly. It is common to have a few clients who are late on payments, but if the majority of customers miss due dates then the core issue must be in the invoicing system. Make sure to be aware of any faults in the system so that you can improve not only your internal monetary procedure but also your customer’s experience.
An efficient invoicing system does not need to be complicated. Keep it simple and convenient for your customers. The smoother the invoicing process is, the easier it is for you to manage your company’s cash flow, especially when you start getting more clients and need to issue more invoices each billing period. Investing resources in your invoicing system can pay off in the long run.
After all, your invoice is just not a piece of paper. Spend time and effort on making it look great. It might be the end of a project, but don’t let it be the end of a relationship with your customer.