BluePay is pleased to bring you this valuable information from Due, a new BluePay partner specializing in helping business owners to pay and get paid faster.
Billing or invoicing customers seems fairly straightforward. Essentially, you tally up your time or work on a project or total the cost of their order, put it in a document, and send it to the customer so they can pay for their services or products.
While it seems easy enough, the problem is that numerous mistakes are still made by businesses in this billing process either due to a lack of knowledge or attention to this time-consuming task. However, billing does deserve your complete focus because without these invoices, you can’t pay yourself, your team, or your bills.
I’ve analyzed over 1+ million invoices and learned a thing or two about getting paid. It’s doesn’t always happen. It hurts, but in most cases it’s avoidable.
Here are 15 mistakes businesses we as business owners make when billing our customers, and how to fix it:
- Forgot to create payment terms: Without a defined set of terms of payment, there is no recourse for getting paid. After all, you didn’t tell your customer when payment is actually due or what fees they’re subject to when it’s not paid by that date. These terms are also important in the event of a collections company getting involved. If the terms weren’t clearly defined, it will be more difficult to collect what’s owed to your business. Make sure you develop a template that includes payment terms on each bill or invoice you issue.
- Skipped having an agreement form or contract: You may think that since you are a small business or a freelancer, a contract with customers isn’t necessary. However, when and if problems arise, you can’t reference a physical document that clearly outlines instructions and or timelines. Having a written agreement in place can also serve you well should you need to address any legal or non-payment issues.
- Disregarded any special arrangements between you and certain customers: You might have forgotten that you promised a special client a certain discount or started charging an old client your new rates when you told them they could stay at the older rate. This can upset your clients and put a damper on that relationship you worked so hard to develop. Again, having an agreement in place might help you remember these special arrangements. Additionally, you can use an electronic billing system that offers a way to include these features as part of your customized invoicing template for that particular client.
- Left off important details from the bill: If you don’t provide your customers with specific task by task details, namely all the information regarding what you did to earn that money, you will surely delay the payment process. Use a customizable, electronic billing system that allows you to easily provide task by task details of your work so that you clearly define what the bill covers. Also be sure to have information on there that includes your contact information, where and how payment can be made, and other details like a Social Security Number (SSN) or Employer Identification Number (EIN).
- Didn’t track your time effectively: You could be losing valuable revenue just by having poor time tracking habits. The worst habit is to estimate your time worked. If your clients question the amount of time as well, you don’t have any record that you can use to verify your claim. This may further delay payment. Instead, consider implementing time tracking software that can provide details to account for your time in a way that ensures you get paid properly for every minute you worked.
- Waited to invoice: The longer you wait to send the bill, the longer it’ll take to get paid. Customers tend to forget about you once you finish their project, so there’s a huge downside in delaying. In addition, a client will almost never volunteer payment. Best practices suggest that you should always issue your invoice as soon as you finish a project because this, in itself, automatically increases the likelihood that you will get paid quicker.
- Left off a numbering system: When you don’t use a number system for your invoices, you may not be able to track what’s been paid for and what hasn't. Numbering also helps your customers keep track of paid and pending invoices as well. To ensure both you and your customers know where the payment schedule stands, be sure to add a numbering system to your invoices. You can do this manually or use an electronic billing system that includes its own automatic numbering system.
- Didn’t proofread your invoices: Sending out inaccurate bills to customers’ means you’ll have to issue a new one. This just adds unnecessary time to the payment process. The extra 10 minutes spent proofreading your invoice may save you two or three weeks in payment delays. Make sure to always include information such as customer name, location, amount, details and payment instructions like bank account numbers. Online invoicing software allows you to save clients, which automatically adds the majority of important information.
- Didn't follow up on unpaid invoices: Of course you are busy or maybe you are afraid to contact the customer to ask for payment. Either way, not following up on what you are still owed is a big mistake. You can easily start by sending a few friendly reminders, any reputable client will actually respect this process. Many online invoicing software solutions provide automated reminder systems that kick in when you forget to send these reminders yourself.
- Avoided late fees: Perhaps you are afraid that you’ll lose customers by charging late fees, but you need to focus on the fact that you’ve done the work or delivered the goods, thus you deserve payment. Plus, don’t assume you will automatically lose customers. If you do, maybe they weren’t worth it anyway, since they weren’t willing to pay you in a timely manner. When you do employ interest fees, you can actually be retraining a customer’s bad behavior and they may quickly learn to start paying you on time. It produces a sense of urgency in customers and helps you determine which customers are really worth keeping.
- Didn't use incentives: While there is negative reinforcement, like fees, you can also turn to positive reinforcement, like an incentive for paying on time. By not adding incentives, you may be missing out on creating a deeper relationship with your customers that can go a long way to retaining them whether they pay on time or not. Customers like to be rewarded for choosing you regardless of how and when they pay. Plus, you can encourage early payment that increases your cash flow by providing a discount, future bill credit, or a gift card. You may find even greater results with this positive reinforcement than any fee-based strategies. Building strong customer loyalty will always increase cash flow in the long run.
- Didn't provide enough payment options: It’s a mistake to limit the type of payment options you accept because you could be alienating a lot of potential customers. Instead of just taking paper checks, consider an electronic billing system that allows you to take mobile payments, online payments, and peer-to-peer payments.
- Wasn't polite: It sounds obvious, but many businesses do not come across as polite because they don’t use basic etiquette where they say “thank you” or use “please.” It’s an easy thing to do and offers a big return since customers still like to be on the receiving end of good manners.
- Still relied on paper billing processes: There are still some businesses and freelancers that continue issuing paper invoices, which can get lost and add weeks to the prospect of getting paid. Rather than assume that an electronic billing system is not in a budget, you may want to check into the wide array of free or low-cost online invoicing and payment platforms now available that also provide a way to create even more professional-looking invoices.
- Didn't market or upsell to your clients via invoice: It’s a mistake to think a bill or invoice is just for letting your customer know it’s time to pay you. It’s actually a marketing and communication tool that you can leverage to get in front of your customer. For example, you can add coupons or coupon codes, include information about new products, or offer a survey to learn more about what your customers or clients want or need. You can also brand your invoice with a logo that reinforces your overall brand presence.
There are a lot of mistakes that can happen when sending a bill to customers, but there are just as many opportunities to fix those mistakes or avoid the mistake in the first place. Just begin changing your invoicing one client at a time and soon all of your invoicing will be done online with a greater likelihood of success.