Best practice invoicing

Your invoicing process is critical to getting paid.Keep cash coming in the door by implementing best practice invoicing techniques.

Controlling the rate in which you are paid is not always easy to enforce but there can be some relief by implementing the right invoicing processes. To keep cash coming in the door effective invoicing, as part of your broader credit management processes, is key.

The first and most important step is making it as easy as possible for your customers to pay you. Accounts payable officers deal with a large number of invoices everyday so you want to ensure information in the invoice is complete and arrives at the correct destination.

Research conducted by Dun & Bradstreet has previously shown that payment delays are often the result of administrative errors and in most cases can be avoided. Twenty-three percent of firms have indicated they had paid accounts late because they did not contain a purchase number. A further 12 percent said the invoice was sent to the wrong address and 20 percent didn't pay because they never received the invoice in the first place.

Making sure invoices are correct and getting on top of any errors quickly can go a long way in ensuring you get paid. Here are our top four tips for implementing the right invoicing techniques:

1. Invoice quickly

The sooner your customer receives the invoice, the sooner it will be paid. Ideally, the invoice should arrive with the customer while the job is still front of mind and before the end of their payment cycle.

In most cases, if you miss the client's payment cycle you will have to wait an additional month, or more depending on their payment run, to receive the funds you are owed. A practical solution is to dedicate a couple of hours a week to the task. This will ensure invoicing is completed regularly and will provide you with time to follow up on any late payers.

It may also be worthwhile using an electronic invoicing and payment system to make this process easier. This option comes with many benefits. By delivering your invoices via email it reduces delivery times and allows you to send
the invoice directly to the payer.

A read receipt will also eliminate the 'it must have been lost in the mail' excuse as you are notified when the email was opened. In addition, Dun & Bradstreet research reveals that Australian businesses prefer to be contacted about an account by email and many consumers share the same preference.

If you decide email is the right choice for your business, it is recommended that you send your invoices in a tamper proof format such as PDF. Getting your invoices out the door in a steady and constant stream will help to ensure that you have a regular flow of money coming back in.

2. Include everything

Prompt payment has a lot to do with the quality of your invoices. If your invoices don't include all the required information or are difficult to read, chances are they will be put aside, thus delaying payment. Firstly, there are a number of inclusions an invoice must contain to be compliant with the Australia Tax Office (ATO). These include:

  • your business name
  • your ABN
  • date of invoice
  • "Tax Invoice" if you are registered for GST or "Invoice" if you're not
  • invoice number
  • purchaser name (and address or ABN for purchases over $1000)
  • description
  • GST exclusive amount
  • GST amount
  • GST inclusive amount

In addition to the ATO requirements, there are a range of things you can do to make your invoices easier to handle. Remember that the invoice number, due date and total amount due should be the most easily identifiable details on the bill.

Also consider:
- Layout - is the font difficult to read? Do your invoices look cluttered or messy? Are your invoices so small they will get lost in a pile? If you answered yes to any of these questions, you need to review your layout.
- Contact details - if there are any questions or disputes your customers need to know how to contact you.
- Payment details - offer a number of payment alternatives so it is easy for your customers to pay. Provide details of how to make each payment on the invoice. For example, if using direct deposit you should include your bank details or for cheques include your postal address.

Before you send an invoice to your customer print it out and make sure it includes everything that is required and that it is set out in an easy to read format. This will help make the payment process as painless as possible.

3. Invoice correctly

Make sure your invoices are accurate. It takes unnecessary time and resources to raise credit notes and re-issue invoices - it also stalls the payment process. Eliminate the chance of this occurring by making sure you get your invoices right the first time.

You should also endeavour to address your invoices to the correct person. Broadly addressing invoices wastes time as the account gets pushed around your customer's business before landing on the desk of the responsible person.Therefore it's in your best interests to have the name of the person who needs to see the invoice - this could be the accounts payable office, the authorising manager or the person who first placed the order.

4. Disputes

Implement a system that allows you to sort out disputes as they arise. By settling disagreements as quickly as possible you will reduce the amount of time the payment is withheld. There are four things to remember when attempting to resolve a dispute regarding debts owed:

  1. Be clear and logical - make sure you are clear and consistent about your position during all discussions - changing your story will only be counter-productive.
  2. Organise your documentation - document everything, including dates and times of any correspondence. This will provide you with evidence if the problem escalates.
  3. Identify your stance - be clear about what you want and make sure you find out what you customer wants. If you don't, it will only lead to more confusion and drag out the process.
  4. Show respect - be calm and respectful of your customer's point of view. You won't get anywhere if your discussions are aggressive and ideally you want to maintain the option to continue doing business with the customer.


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