You’ve done the work, and now it’s time to get paid. Enter invoicing.
Invoices are a fact of life for any business owner. Whether you sell goods or charge for services, invoicing is the process by which your business gets paid. Invoicing also serves a number of other, related duties, some of which can prove invaluable for bookkeeping, project tracking, and tax purposes. Here’s an overview of invoicing for small businesses, from what to do before sending an invoice to how to follow up to make sure unpaid invoices get paid.
Why Do You Need to Invoice?
Businesses rely on invoices for a few key reasons, most of which also serve to build trust with your customers. First and foremost, an invoice lets your customer know it’s time to pay for goods and services rendered. Second, keeping tabs of what goods and services changed hands, when it happened, and how much was paid, is critical to businesses and, often, customers for tax purposes. Third, invoices show proof of purchase and delivery, protecting both parties in case of a dispute, or for warranty claims or attempts to return goods for a refund. And finally, tagging your invoices with customer reference numbers creates a record of your relationships, which can be used down the line for everything from cross- and upselling to creating a customer loyalty program.
Invoices are also easy, low-key ways to boost your branding, marketing and customer service efforts. We’ll come back to that in a moment.
Before You Invoice: Quotes and SoWs
Agreeing on the price and terms of a deal before work begins can save a lot of headaches later. A quote or statement of work (SoW) outlines exactly what you’re expected to provide, how much you’re getting paid for it, and when both the work and payment are due. Also known as a proposal or estimate, this document serves as both a working outline of the project and a written agreement that you and your customer can refer to should any disputes arise down the line.
Whether you call it a quote, SoW, proposal, or something else, this document should be drafted, agreed upon, and formally submitted to your client before any work commences. It should also include these elements, at minimum:
- What goods and/or services will be provided by you.
- When they’ll be delivered.
- How much your customer will pay for them, and how payment will be paid.
- When payment is due.
Quotes can go a long way towards establishing good working relationships with clients by laying out all of the money-related details up front so everybody knows what to expect before getting into the work itself. Quotes also help protect both parties should disputes arise over any aspect of the project scope or payment terms.
The Details that Make a Good Invoice
Invoices obviously need to include the basics we outlined above. A few simple additions, however, can uplevel your invoices to serve multiple purposes without much additional effort on your part.
- Branding Brand your invoices with your company name, at minimum. Consider adding a small logo and tagline to your invoices and other communications, to emphasize your brand identity and values.
- Contact Info Make it easy for customers to contact you. Include your address, email address, phone number, and even Web and social media information on your invoices.
- Reference Numbers Establish a simple numbering system to keep track of which documents go with which customers and projects. Tag quotes and invoices with a customer number and individual invoice number to make it easier for you and your customers to refer back to them down the line.
- Payment Terms Specify the terms of payment due on each invoice, even if you’ve already agreed to them with your customer before work began. Get familiar with common payment terms including PIA, Payment upon Receipt, and Net. Let customers know what forms of payment you accept, and any additional fees associated with processing credit cards or other payment types.
Automate Your Invoicing
You should be doing all of your invoicing on the screen, not on paper. Paper-based invoicing costs more time, money, and resources than electronic invoicing. Template-driven invoices delivered via email are easy to set up, easy to use, and fast and cheap to deliver (No paper! No stamps!).
That said, invoicing software can be a small business’ best friend, thanks to automations that handle invoicing, follow-ups, and acknowledgements for you while also tying into your back office systems. Getting set up with the right invoicing system can save you time and money while also cutting down on errors and keeping your customers up to date with timely invoice-related communications.
Don’t Be Afraid to Follow Up
Tracking down unpaid invoices isn’t fun, but it’s a lot better than not getting paid for goods and services you’ve already delivered. Following up on unpaid invoices is part of doing business, and it’s nothing you should feel afraid or nervous about.
Automated invoicing tools can send reminders to customers at specified intervals after an invoice has gone past due. Often, a reminder or two is all it takes for a customer to pay any outstanding bills. But should you need it, you can also set your system to let you when it’s time to reach out to the customer personally.