Newly self-employed professionals sometimes rush into the invoicing phase without thinking about how they want to approach it. After all, by the time you get to invoicing, the hard part of the project is done. But if you aren’t invoicing correctly, or if there are glaring holes in your process, it could end up sabotaging your career—or your reputation.
Why Invoicing Matters
We tend to see invoicing as an afterthought, but it can affect your business in several key ways:
- Payment influence. Invoices are the gateway through which you’ll receive payment. Screw this up, and your payments will be late—or may not arrive at all.
- Reputation. Your invoices also serve as a form of brand communication. How you present your company through invoices can significantly alter your reputation.
- Efficiency. Invoicing takes time, and if you spend that time inefficiently, it could cut into the total productivity of your business.
The Top Invoicing Mistakes
So what are the top ways contractors and entrepreneurs inefficiently handle this process?
1. Inconsistent formatting.
If you aren’t formatting your invoices in a consistent way, you’ll face several consequences. For starters, it will be harder for you to conduct a repeatable process, since you’ll have to adapt each time you start a new invoice. And if your clients get multiple invoices in different formats, they might see you in a less professional light. The best way to resolve this problem is with a consistent invoice template, which will serve as a backbone for all the invoices you’ll create in the future.
2. Missing or excessive line item descriptions.
When you invoice, you should have a line item for each significant product or service you’re charging for. If you aren’t using these line items at all, your customers might be confused about what they’re actually paying for. On the other hand, if you write multiple paragraphs to describe each line item, your invoice will quickly become clunky and hard to read. The solution is a middle ground, with one to two sentences of descriptive text for each product or service.
3. No employee training or knowledge.
If your business has employees, you should have them trained on how to create invoices. Even if you’re all working from the same template, it’s likely that two individuals will operate using a different process—unless they’re trained to execute the same procedure.
4. No documented invoicing process.
You can’t expect your employees to be perfect, and you can’t expect your invoicing process to remain the same indefinitely. That’s why it’s important to document your invoicing process with a formalized guide. Explain exactly when to send invoices, how to format them, and what to do if and when they’re paid.
5. Missing or minimal options for payment.
How is your recipient supposed to pay this invoice? You need to make it easy for your clients, or they will delay or avoid paying you. The best way to handle this is to provide multiple payment options, including credit card payments, ACH debit payments, and other forms, then describe how to initiate each of those payment types (briefly). You should also clearly explain when the invoice is due; standard terms of payment for new engagements are 15-day and 30-day terms, but you can alter these depending on your relationship to the client.
6. Unprofessional delivery.
You can also harm your reputation if you aren’t delivering invoices in a professional manner. Depending on what type of business you’re dealing with, sending them at automatic intervals or in PDF format over email are ideal. If you aren’t sending invoices promptly, or on a consistent schedule, it can make your business seem disorganized.
7. No follow-up process.
What will you do if your client doesn’t pay your invoice, in full, by the deadline? If you don’t have a follow-up process in place, you could miss out on the payment, and potentially set yourself up for exploitation in the future. Make sure you formally document your ideal process, including email scripts for how to address missed payments, and a series of escalating actions to ensure you get paid.
Correcting for these mistakes, or proactively ensuring they never happen, is a good way to improve your invoicing process, but it’s never going to be perfect. Keep looking for new ways to improve and consider hiring an accountant or other financial professional to help you draw up a system that works.