An invoice is a lot more than a piece of paper that states a billing amount. From the consumer perspective, it’s evidence of a transaction that lists items that were bought, along with the total sum of the payment.
From a business owner’s perspective, an invoice is a record or sale that’s an invaluable tool for accounting. These invoices help businesses track of sales, keep a check on cash flows, and avoid repetition and redundant entries.
Let’s talk about some of the most common invoicing mistakes that small businesses make—and what you can do about them:
Not sending the invoices on time
Even if you have a good relationship with clients and are okay with being paid late, don’t forget to dispatch the invoice immediately. This is a common mistake that business owners make. The more you delay your invoices, the less likely the client is to pay you on time. If your company has liquidity problems, this could be a fatalistic mistake that leads to a closure in the long-term.
The waiting game is also a problem because it affects the accuracy of bookkeeping. As per the matching principle, you should record transactions the day they’re incurred. If you wait for the client to pay the amount, you might be understating or overstating your revenue. Timely invoices serve as reliable proof of transactions and sales. They allow you to update the books as soon as the purchase takes place and stay on top of accounting processes.
Missing out on important details
One of the many purposes of an invoice is to avoid confusion at the time of bookkeeping. Let’s say you have a client that’s a frequent buyer. If they purchase items from you every week, you can’t skip important details such as the date and time of purchase.
An invoice with all the right information helps you categorize accounting data and process it easily. If you have only mentioned the month and not the exact date, it may be hard for you to categorize the revenue accordingly.
Some of the most important details that your invoice should contain are the total payment amount, the due date to pay, details of installments, and any additional terms and conditions.
Also, be sure to mention the full name of the company, along with the address, so it’s easy for the client to find the location in case they want to drop the payment off in person.
Not automating the payment
We can’t emphasize how important this is.
Here’s what can go wrong if your invoices are paper-based:
- Too much paper-based data which is difficult to manage and store. If you’re a small business, you might not have enough cupboard space to pile up heaps of receipts.
- Wastage of paper and resources
- Manually written invoices can be easily misplaced. If you don’t have carbon copies, it may be hard to reconcile purchase data at year-end.
- Manual invoices are also more prone to errors.
- The process is very time and effort-intensive. The same can be invested in doing something more meaningful.
Of all the business processes that need to be automated, invoices are on the top of the list. The best way to do so is to invest in reliable accounting software like QuickBooks. Through QuickBooks, you can not only generate invoices electronically but can also email them to the client then and there.
Since the software is cloud-based, there is no need to print the data and waste paper. All the invoice data is saved on the data servers that are owned by the vendor. So technically, you don’t have to pay for the infrastructure costs either.
With QuickBooks, you can also set up automatic invoices for recurring customers. If a client has a fixed order that they order every month, you don’t have to generate separate invoices every time. This way you could save up on time.
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