5 Invoicing Mistakes That Can Cost You Big Money Over Time
A business is likely to face invoice-related issues at some point or the other. Common mistakes in invoicing can cause payment delays and confuse customers or land up businesses in legal disputes. Hence, businesses need to perform invoicing in an accurate and timely manner to maintain a positive cash flow and their reputation.
It’s not uncommon to find clients delaying their payments unless sellers send constant reminders. As a result, companies often have a lot of funds locked in the form of unpaid invoices. Fortunately, businesses can opt for invoice discounting from reputed fintech companies such as KredX and use their unpaid invoices to get quick access to working capital.
So, what are these common invoicing mistakes that companies continue to make?
Let us find out about them below.
5 Common Invoicing Mistakes That Businesses Should Know About
Read along to find the prominent errors in invoicing and suitable solutions to resolve them:
Using Manual Invoicing System
Though manual invoice processing is time-consuming, prone to errors and outdated, many SMEs (Small and medium enterprises) continue to use traditional accounting methods. Many do this to avoid extra costs, but invoicing mistakes inevitably crop up, resulting in inaccurate invoices.
Automating the invoicing systems can be a game-changer for small companies. It saves costs on labour and printing and mailing expenses while ensuring accurate data. Additionally, having invoice accounting software saves the time of essential employees, allowing them to focus on other important work.
Nowadays, even small businesses can switch to cloud-based systems without incurring a huge expense. With cloud-based invoicing, one can:
- Set up recurring payments
- Send regular payment reminders
- Automatically send or receive payments
- Back up invoices on the cloud
- Track and manage invoices
Sending Incorrect Invoices To Clients
Invoicing mistakes can happen even with all steps taken to avoid them. For example, one can mistype the customer’s name, contact information or the charges for a product/service. However, such mistakes can easily make clients lose a lot of money.
Take, for instance, a simple mistake like misplacing a decimal point in entries can exponentially increase a client’s debt obligations. When these mistakes happen repeatedly, clients become impatient and begin to distrust concerned sellers/businesses.
Also, businesses have to employ financial experts to look at the particulars, figure out what went wrong and make sure it doesn’t happen again. Finally, one must double-check all manually entered information and cross-check with the client before sending the actual invoice.
Furthermore, with simple invoicing mistakes being so costly and time-consuming, one can permanently lose their big clients. Fortunately, businesses can easily minimise or eliminate such errors using automated financial platforms.
Having Unclear Terms And Conditions
Businesses need to make sure their organisation has concrete policies before issuing any invoices. Also, before carrying out a trade, the owner should decide things such as the company’s payment terms, credit offered late payment penalties, and return policy.
Not establishing terms and conditions before issuing bills is a common invoicing mistake that can cause legal disputes in the future. Properly made invoices should have a product/service description and a detailed breakdown of charges on services/products. This is a way to let customers know what exactly they are paying for.
In addition, one can add the following information to ensure clarity to their clients.
- Date of delivery
- Payment schedule
- Method of payment
- Contact information
- Information on applicable taxes
- Description of the services/products
Being Inconsistent With The Payment Date
Many small businesses have the unfortunate and costly habit of sending their bills on different dates every month or even forgetting to send them. Sometimes, bills can get delayed due to unforeseen situations, but it’s important not to repeat such mistakes. Such a practice often leads to a cash flow crisis and strains available working capital.
If a company often forgets to send invoices, they will not be paid for their products or services offered. Moreover, even if one has an ideal business and client, the invoice recipients will not send reminders to their creditors. Hence, if a company doesn’t perform its responsibility, it might lose money on a regular basis without being aware of it.
The right solution to this is to have fixed, pre-assigned dates for payments. Using invoicing software sends timely reminders automatically and proves useful in removing payment-related inconsistency.
Not Taking Extra Steps To Promote One’s Brand
Last but not the least of mistakes is passing on the opportunity to use invoices as a brand promotion tool.
If a business wants to make a good impression on its clients, it can use the invoice as a branding tool. In fact, a professional-looking invoice could prove to be an excellent means of brand recognition.
To create a recognisable invoice, make sure to include the company logo and brand colours. In addition, double-check to see that there are no spelling or grammatical mistakes.
Businesses making these invoicing mistakes can save money and retain client loyalty by implementing certain changes. For example, they can use premium accounting software, train their staff in the best invoicing practises and follow up on clients making late payments to contain recurring mistakes.
However, most businesses will find it inevitable to have some unpaid invoices. Regardless, with fintech companies such as KredX, businesses can avail of invoice discounting services to boost their working capital.