5 Invoicing Mistakes That Can Break Your Business

Invoicing is fundamental to almost all businesses. It’s the bridge that leads you to your money; the ticket to your business’ financial success and sustained operations. And yet, despite the importance of this process, many companies still have inefficient invoicing procedures, which often result to confusion, frustration and, worse, cash flow shortages. These are situations that no business would ever want to find themselves in.

Now, what can companies do to ensure their business survives and stays healthy? Steer clear from invoicing errors, of course! Here’s a list of the five common invoicing mistakes you should watch out for and ways to avoid them.

1. Not having backup files

data backup

Picture this: your office computer, where all customer records and invoices are stored, crashed and now all the files are gone. Luckily, you’ve produced hard copies of all documents in advance and locked them in your filing cabinet. But in a sudden twist of apocalyptic fate, your office building was ravaged by fire, turning all that’s left of your records into ashes.

The scenario might seem unlikely. Nevertheless, the lesson is obvious – without backup files, your ability to invoice clients for goods or services rendered can be destroyed, leaving you penniless. This is why importance of prioritising backup and recovery of data cannot ever be ignored. Consider saving backup copies of your invoices in multiple computers or in the cloud.

2. Sending clients incorrect figures

Next to receiving low quality goods and services, being billed incorrectly can be one of the things that irks customers the most. If you undercharge clients, you don’t only waste their time but you also risk incurring losses in your end. On the other hand, if you overcharge them, they probably won’t be too pleased with you, as well.

At the first instance, they may dismiss it as a clerical error, but if it happens repeatedly, clients may view you as incompetent and as someone who’s trying to squeeze them for more money. You wouldn’t want to earn this kind of reputation, would you? Thus, to avoid this, make sure you have a reliable accounting system that lets you add up your invoices automatically and prevents duplicates.

3. Not including description of goods or services delivered

One factor that holds up payments is when a business fails to include an outline of the goods or services they have provided to a client in the invoice. This can cause misunderstandings and can delay the settling of invoices as clients would obviously want to verify first what they’re being billed for and whether the goods or services have already been paid for or not. If you want to avoid this scenario, always make sure to add a short description for each item on your invoice. This speeds up the payment process and clears up the confusion.

4. Not specifying payment terms

Not specifying payment terms in your invoice can be an ingredient for disaster. Some clients may assume that your invoice is not a priority and decide to pay whenever they feel like it, making your cash flow suffer. This is often the reason why a lot of companies choose to factor invoices of slow-paying clients to cover the gap of late payments. While being paid on time and on terms is still the best way to sort out one’s finances, invoice factoring or debtor factoring has no doubt saved a lot of businesses experiencing cash flow problems due to late paying customers.

So if you want to maintain a steady and healthy cash flow, aside from having a reliable invoice factoring partner, it’s important that you detail how (by cheque, cash, bank deposit) and when payments should be made (within 7, 15, 30, 60 or 90 days) in your invoice.

5. Sending invoices to the wrong customer

photo credit: miguelb

Have you ever experienced that ‘oops’ moment where you sent the wrong invoice to the wrong customer? Not only does it reveal how much or how little a client is paying you, it also makes you look unprofessional and may even jeopardise your client relationships and negotiations. To prevent and eliminate such an embarrassing situation, switch to an automated invoicing system that ensures the right invoice is sent to the right client.

Whether it’s due to human or technical error, invoicing blunders definitely have big consequences for your business in more ways than you think. So to avoid all the stress and confusion, be sure to have a solid and efficient invoicing system in place.