Emily Coltman, FCA for Simply Business writes: Invoicing is one of the most important parts of running a small business, but it can also be a big hassle - especially if you’re a fledgling startup and not used to the process.
So how can you avoid getting bogged down in the nitty gritty of creating and sending invoices and chasing up late payers, so you can spend more time focussing on other areas of your business?
Emily Coltman FCA, Chief Accountant to FreeAgent - who provide a multi award-winning online accounting system for small business owners and freelancers - gives her top tips to improve your business invoicing.
Look professional - and be true to your brand
When you create your invoices, it’s vitally important to make them look as smart as possible. After all, if you’re sending a customer something that looks cheap and amateurish, they may not be inclined to pay you as quickly as they might do for a more professional-looking request for money.
Add your logo to your invoices and make sure the amount that is owed to you is as clear as possible, but also think of how the colours and wording of the document reflect your brand. For instance, if you’re a copywriter and pride yourself on using plain English, don’t include a lot of legal gobbledygook on your invoice - either keep that for the terms and conditions, or better still, have a friendly lawyer translate them into plain English for you.
Keep it legal
Your invoice is a legal document, so make sure it’s correct, and make sure it complies with the VAT requirements if you’re registered for VAT, and also with company law rules; if your business is an LLP or limited company, the invoice must show the business’s registered address and number, and if it shows the names of any members or directors, it must show all their names. The good news is that if you use an online accounting system such as FreeAgent, all this will be done for you.
Think of the numbers
HMRC’s rules are that invoices must have “unique sequential reference numbers”. You don’t have to use the same sequence across your business though, so you could, for example, use a different sequence for each customer or even for each project.
Choose your pricing structure
There’s nothing legally to stop you asking your customers for a deposit, or even full payment, upfront before you do the work. This not only confirms your customer’s commitment to the project, and is kinder to your cashflow, but also it spreads the financial risk between you and the customer. If the customer doesn’t have to pay until after you’ve done the work, and then vanishes or refuses to pay, you no longer have the leverage of stopping the work - because it’s been completed.
If you’re worried that you might lose customers if you ask them to pay up front, consider offering a money-back guarantee to customers that aren’t happy with your service.
Be clear about your payment terms
You should have already told your customer about your payment terms before you carried out any work for them, but it’s still important to include this information on your invoice too.
If you’ve set a 30-day payment period and expect your invoice to be paid before that deadline, include this information on the document and make it as clear as possible so that your client doesn’t miss it. Likewise, if you’re planning to impose any late payment charges or penalties, then you should also make this as clear and prominent as you can - so that your client is reminded of the need to pay you promptly.
Chase up invoices quickly
Make it a habit to do your bookkeeping once a week - and invoice no less frequently than that. Ideally, send your invoices as soon as you’ve done the work (assuming your customer doesn’t pay you in advance, of course). That way, not only is it one less thing for you to worry about, but your customers will hopefully pay you sooner!
Also try to make it as easy as possible for customers to pay you by including payment details, such as your bank account information or an online payment link, either on the invoice or in the covering email. And if you’re using a specific invoicing system to help you create and send your invoices, check whether it will allow you to set up automatic reminder emails to chase late payers. This could help save you even more time.
Get a technology boost
Don’t forget that you don’t have to do your invoicing on your own from scratch. If you can afford it, could you invest in specialist invoicing or accounting software to make the process easier?
This could be particularly useful if, for example, you’re going to be sending regular invoices for the same amount to the same client (e.g for a monthly retainer) and want to create recurring invoices that are sent automatically. Or if you’re including multiple expenses and want to quickly and easily attach digital copies of the expense receipt to your invoice. And if you want a client to pay you quicker, you may be able to attach a link to an online payment option like PayPal or Stripe to allow them to pay you at the click of a button.
Do your homework and check out the options first to see which system works best for you and your business’s requirements. It may help save you hours of admin and hassle in the long run.
Invoicing is a critical part of any business’s admin, because without invoices your customers won’t know how much they need to pay you - and without any money coming in, your business is unlikely to survive for long!
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