Just the Facts: Creating Better Invoicing for Your Business
Invoicing is as necessary to business as it is getting paid. While it can be a hassle, there’s no way around the fact that generating invoices, keeping up with them, and getting them right the first time can make receiving payment easier.
Fact One: It’s An Invoice! It’s a Bill! It’s Both!
You just finished the job, and the customer says, ‘bill me now, and I’ll pay you cash.’ Do you hand over a bill? An invoice? Can you afford to wonder the difference while time is of the essence and cold, hard cash is on the line?
According to InvoiceSherpa, an invoice and a bill are the same, although each word comes from different origins. ‘Invoice’ comes from the Sixteenth Century French word ‘envoyer,’ which means to send. ‘Bill’ comes from the Medieval Latin word ‘bulla,’ meaning sealed document.
While invoice and bill may be two words for the same thing, there is semantics in play between them. That means, the sender or business produces an "invoice," while the person at the receiving end refers it to a 'bill.'
Fact Two: Standards? Yes. No. Wait, Maybe?
Perhaps you’ve heard that there’s a ‘standard invoice’ business should use. You may have even looked it up online, only to learn that what’s standard may vary quite a bit.
Confusing? Not if you consider that an invoice built to your standards is what’s best for you. That said, an invoice that includes these specifications outlined by cleartax can help facilitate billing and prompt payment:
- A header with ‘invoice’ clearly visible on it
- Your business logo, name, address, and contact number
- Name and address of the purchaser
- Invoice number that’s unique to the purchase
- Description of services rendered, or products sold by line item, including quantity and price
- Additional fees and taxes
- Total invoice amount
- Advance (if any) already paid)
- Amount due for payment
- Accepted payment methods
- Net terms or any special billing considerations
The key takeaway is that your invoices should leave nothing to question so that the person who receives them understands what was purchased and how to pay for it on time.
Fact Three: Net 30 or Not
One of the finest lines a business can walk is the line between being paid at the time of purchase and being paid eventually. And even these parameters have some gray areas, especially when it comes to invoicing.
For instance, on time for a contractor plumber might mean at the time of service, whereas it might mean within 30 days for an industrial plumbing business. So, when it comes to your business, what works best?
According to theblueprint, there are good reasons for allowing customers to pay in 30 days. It can grow your business faster because it doesn’t exclude potential customers who may not regularly have cash on hand.
It also accounts for larger businesses with established payment processes that take time. And in these cases, it gives you the opportunity to offer early payment discounts, a win for both sides if you’re pricing correctly.
On the flip side, giving customers a month to pay can create cash flow problems for you, an issue you can address by offering early payment discounts. However, there are no guarantee customers will take you up on your offer, and if they do, the discount cuts into your margin.
When you reduce payment terms to 10 days or due at the time of service, this may lessen any cash flow issues. However, this can only happen if a customer agrees to these terms.
Fact Four: You Can Automate and Save Time
At the beginning of this piece, we referenced the hassles of invoicing. We didn’t mention (until now) that there are software solutions that make it far easier for business owners to invoice and stay on track.
According to this profile on Nerdwallet, you can choose from options that best fit your needs, whether you’re looking for an overall invoicing solution, something free, software that’s best for hourly workers or freelancers, or something that’s part of an overall accounting program.
When choosing, Nerdwallet encourages you to ask yourself if it meets specific needs. These may include scalability, if you intend to grow, ease of use for you and your clients, the ability to integrate with any existing software you use, and whether the cost is right.
Fact Five: A Fact of Business Life
Until a better method is established, invoicing is here to stay. While it’s a detail that can easily be marginalized in the face of other administrative duties, doing it right is the key to getting paid.