The good news: outstanding invoices mean you have money headed your way. The bad news: it takes you far too long to send out the invoices.
Believe it or not, invoicing can be a major challenge for small businesses. It can be a major time drain. And if you don’t have an effective invoicing system in place, you’ll spend far more time trying to find old invoices than you ever do in generating new ones.
Why is invoicing so tough? Consider the following:
- 27% of small businesses admit they have trouble creating and sending invoices, according to HubSpot research.
- If you have problems with invoicing, inaccurate invoices may be to blame. 61% of late payments are due to inaccurate invoices.
- Even when you send invoices on time, you need a system to handle what happens next. 37% of all invoices in the U.S.—well over one-third—are paid late.
Invoices shouldn't be difficult. They should happen easily, automatically, and accurately. So why do so many small businesses run into trouble? More often than not, it’s because they ignore some of the lessons you’re about to learn. And if you'd like to read a full guide to invoicing management, we've got you covered over here.
Tip #1: Automate What You Can
Unless you have a career in invoicing, most of us don’t get into business to become invoice experts. We don’t want to spend our days sending reminders, researching new invoicing systems, or digging through old invoice reports to resolve customer issues.
The solution: automation. The more you can automate, the better.
It’s true that you can automate a great deal of the process by hiring a full-time bookkeeper to join your team and take over the grunt work of invoicing. But given the invoicing infrastructure that’s possible in the digital world, there’s no reason you should have to pay a full-time employee to handle one aspect of your business. That’s especially true when there’s so much you can make automatic about your current invoicing system:
- Automate invoice reminders. Reminding someone that an invoice is overdue isn’t a pleasant task—even if your small business needs the money. When you search for an invoicing system to use, make sure that it includes automated reminders so you never have to lift a finger to nudge a client or customer in the right direction.
- Use invoicing software that lets you create customer profiles. The less manual data entry you have to do, the better. Your invoicing software should be capable of using a customer profile to fill in the data each time—email, address, etc. Consider this a “semi-automatic” solution for invoices, but a great way to save time.
- Accept payments automatically. With some invoicing systems—such as PayPal—there’s an extra step. You’ll accept the money to your PayPal account first. Then, you’ll move that via direct transfer to your bank. Using other services, like Wave, you’ll notice the money (sans transaction fees) passing right through to the bank account you’ve chosen.
Not sure which invoicing services allow for automation? In addition to Wave, consider the following invoicing software:
Your best bet is to browse their respective features and see which invoicing software features the automation you most need. But chances are, you’ll find most modern solutions have the ability to plug in automation to take work off your hands.
Tip #2: Choose an Invoicing Platform that’s as Easy On Customers as Possible
You don’t like invoicing. Guess what? Your customers don’t like the process either—especially since they’re the ones pulling out the company credit card.
It’s always a good business practice to reduce “friction.” Friction is the resistance a customer or client feels at the point of purchase. For example, adding a pack of chewing gum as an impulse purchase on a $100 load of groceries is a low-friction ask. But if your invoicing software requires a customer to look up their bank, call Switzerland, and hire a team of accountants just to make heads or tails of it, that’s a problem.
In fact, online retailers know that when it comes to cart abandonment, a high-friction process is usually to blame. One thing customers hate to do is sign up to a website just to make a payment—they want to click and be done with it.
In some cases, you can choose invoicing software based on your own experience. If you’ve ever had to pay a service invoice and were impressed with how easy it was to make your payment, call that business up and ask them which invoicing platform they used.
Failing that, here are some important traits to look for in your invoicing software:
- Payment method. As ironclad and standardized as your invoice system may be, don’t forget that customers will have different preferences. Some may prefer to give you Net 30 terms for your work. Others are happy to pay with a company credit card as soon as they receive an invoice in their inbox. If you want to ensure that your customers can pay on time, choose an invoicing platform that accepts all sorts of payment options. Let the customers pick how you get paid while your invoicing system does the work of accepting.
- Ease of use. Try signing up for a free trial of the invoicing software and sending yourself an invoice. Is it easy to click and pay? Are there additional hurdles that don’t need to be there? And if there are, does the software make it possible to remove those hurdles?
Tip #3: Keep Your Invoices Simple
A simple invoice is a clear invoice.
Unfortunately, small businesses tend to think that a thorough invoice is a clear invoice. And while a thorough invoice is important, you really don’t have to include much in the invoice to ensure all the information’s there:
- An invoice number
- Name and address of the customer
- Name and address of your company
- The goods/services being transacted
- The price of said goods/services
Sometimes, there might be other requirements for your internal records—or for your client’s. For example, some clients may require you to include a purchase order so they can reference those when it comes time for them to file their taxes.
But when you add these all up, you’ll discover that an invoice really doesn’t have to look like a copy of War and Peace. It can be a relatively simple, straightforward document.
Thankfully, most modern invoicing software automatically sticks to the essentials. But it’s worth poking around your available invoice templates until you find one that includes all of the information you need—and none you don’t.
Tip #4: Consider Adding Late Fees into Your Contracts
One of the most stressful aspects of invoicing is that you’re worried about money. Any client who delays the timing of an invoice can essentially delay your paycheck.
Writing late fees into your contracts shouldn’t set off any alarm bells with clients. After all, they’re expected to pay on time. Including a clause that mentions late fees is a perfectly valid way to go about your business and ensure prompt payment.
While you’ll want to avoid being onerous with these fees--$1,000 per day on a $100 invoice might be a bit steep—you should make it clear that it’s much, much simpler to pay your invoice when it’s due.
How does this save time? Simply including this in every one of your contracts helps ensure that clients know they’re expected to pay on time. It’s a small investment of time to set up your contracts—and potentially a lifetime of having clients respond to invoices within reasonable time frames.
Tip #5: Set Recurring Invoices (When Relevant)
Many of your best clients are going to be those clients who come back for return business. It only makes sense to optimize your invoicing system so that these recurring payments are as easy to handle as possible.
The fastest way to do it? Set a recurring payment—often on a weekly or a monthly basis. Depending on your individual situation, it may be easier to set longer-term recurring invoices so that your client isn’t constantly filling out invoice information. If you have an established relationship with the client and know you can trust them, you can usually wait for a longer period before invoicing—just to keep things simple.
Tip #6: Set Up Alerts for Late Invoice Payments
Ideally, you’ll be able to view your late invoices from a dashboard within your invoicing software. But let’s be honest: you don’t necessarily log in to that dashboard every day. There might be outstanding payments you’re not aware of. Even more importantly, there may be pressing invoices that need to be paid—and it’s better if you know about those sooner rather than later.
The way to ensure you’re on top of things is to set up alerts for late invoice payments. This isn’t as easy as it sounds. You don’t want to receive five alerts every day because there are five invoices that are overdue, for example.
But you do want to stay on top of things. Here are some potential options:
- Give your clients a grace period. Clients are people, too. They’re sometimes busy. They sometimes overlook an email and honestly miss it. Give them a grace period after an invoice is submitted so that you’re not hounding them for an unpaid invoice after a few hours.
- Give yourself some time to review. You know the situation: you sign up for a new service (like invoicing software), but you receive so many alerts in your inbox that you start to tune them out. This defeats the point of having an alert in the first place. Instead, schedule a review after one week to see if your settings feel right.
- Hire a virtual bookkeeper to track late invoices. If you have a pair of eyes on your late invoices, then you don’t have to worry about setting up alerts in the first place—you can have someone whose job it is to check these for you and alert you when there are problems. More on that in the next tip.
Tip #7: Work with an Experienced Virtual Bookkeeper
Even if you don’t plan on holding a virtual bookkeeper on your staff long-term, you can always hire one when it comes time to update your invoicing software.
Hiring a virtual bookkeeper can sound a bit intimidating at first. Your numbers, after all, are your business. Handing them over to a virtual bookkeeper can feel a bit like handing the keys to a valet.
But, like a valet, a bookkeeper can save you a lot of time. That’s especially true if you onboard them into the invoicing software you adopted. It’s easy to add a user, give them the appropriate permissions, and have them stay on top of things while you focus on the business at hand.