Whether you run a small business or are an individual working on your own projects, it’s important to be familiar with best practices and common mistakes when dealing with unpaid invoices.
A late payment can ruin your business relationships, damage your reputation and lead to even more unpaid invoices down the road if it goes unaddressed.
However, unpaid invoices are often preventable, and there are steps you can take to avoid unpaid invoices altogether, or at least to get them paid faster than usual.
There are eight common mistakes that small businesses make when it comes to unpaid invoices that you should avoid in order to manage your unpaid invoice risk as effectively as possible.
Make sure you know how to avoid the following eight invoice errors when dealing with unpaid invoices so that you always get paid on time and keep your customers happy too.
Mistake #1 – Waiting Too Long
Many business owners wait too long before they send a reminder invoice. Two weeks after you’ve shipped an order, it might not even be on your customer’s radar anymore. If you don’t reach out soon after, they might decide that they were expecting a final shipment and that there must have been a delay, so they won’t notice when you send them another invoice.
That’s why you should send a reminder invoice as soon as possible so that your customer will know they still owe you money. Two weeks after shipping the order is ideal, but one week is acceptable if your customers are quick payers. If they’re not, don’t wait any longer than one week. After that, it’s too late, and your payment will be delayed even further.
You can also set up automatic reminders that will let you automatically email invoices at regular intervals, like once per month, so your clients never forget about their outstanding balance again.
Mistake #2 – Not Verifying The Address Before Sending An Invoice
Always double-check that you’ve got your client’s mailing address right before sending out an invoice. A significant cause of unpaid invoices is a simple mistake in one letter or number, making it difficult for clients to get their hands on your bill. Not verifying the address can highly risk the payment.
To avoid this:
- Verify that you have your client’s mailing address right before sending out an invoice.
- Ensure that it is correct and double-check it against a recent purchase order or another form of written communication from your client.
- If you do not have a physical copy of their address, call them and ask for it again.
Avoiding simple mistakes like typos in billing information can help prevent unpaid invoices from happening in the first place and reduce the chances of getting unpaid.
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Also Read: Why is an Online Invoice Software Better than Downloadable Invoice Templates
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Mistake #3 – Sending Invoice By Email With No Signature
An emailed invoice is easy to ignore and even easier for your customer to throw away accidentally. Be sure that you include your company’s information so that it is clear who sent it. To make an official invoice, sign it so that it cannot be ignored or easily discarded. If you are working with a partner or contractor, be sure to have their sign as well. This will help ensure that both parties are aware of their responsibilities.
Sending signed invoices through email helps you to follow up on unpaid invoices and make sure that your customers are aware of their payment obligations. If a customer does not pay an invoice, it is much easier to follow up with them if they have already agreed that they owe you money.
You can also use digital signatures when sending an invoice in order to ensure that your customer cannot create any dispute. In some cases, a business may consider building a referral program and include a request for a referral or recommendation on their invoice, and send reminders via email.
Make sure that your company’s information is included on all invoices, including your address and phone number. Also, include any other contact information such as an email address or website where your customer can reach you if they have questions about their invoice or payment terms. Text changes: Also, include any other contact information such as an email address or website where your customer can reach you if they have questions about their invoice or payment terms. In this stage, it’s important to setup DMARC and ensure that data about the payment that you share via email is secure from phishing and other security threats.
Mistake #4 – Not Following Up With The Big Customers
If you have a big customer who owes you a huge amount of money, it’s essential to make sure he pays up. It can be easy for them to forget about their debt, especially if you don’t remind them regularly.
You should contact your customer at least once every two weeks until they pay off their debt. A great way to do so is by sending an email or phone call reminding them of their unpaid invoice and asking when they plan to pay it off.
This will help ensure that your business receives payment as soon as possible and prevent any late fees from being incurred by either party.
If your customer is trying to get out of paying their debt, you’ll need to send a formal notice informing them that you will take legal action if they fail to pay. If they fail to follow through with payment after receiving such a notice, you can take legal action against them and receive the payment.
Mistake #5 – Not Giving Proper Notice
Not giving proper notice can be a costly mistake. If you don’t remind your business partner about their obligation to pay you, they might just forget. Or, they might assume that you forgot, or that it wasn’t important enough for them to follow up on. You want to make sure they know precisely when and how much is due.
Even if you have an informal agreement, it’s a good idea to create a reminder for them of when invoices are due and remind them about any late fees that might apply. If nothing else, write down your payment terms in an email and attach them as a reminder that they can print them out.
This will help you stay on top of your cash flow and ensure that all your bills are paid on time.
Mistake #6 – Slow Payment Terms
Have you ever gotten a late payment or a payment on an invoice over 30 days past due? If so, you’re not alone. Almost 60% of businesses have reported at least one instance of slow payments.
It’s a vicious cycle because late payments often lead to invoices going unpaid, which will lead to even slower payments down the road.
The best way to break out of that cycle is by shortening your payment terms for your customers. Shorten them as much as you can without compromising your cash flow, and then monitor closely for any signs of problems so you can act quickly if necessary.
If you currently offer a 30-day payment term, try reducing it to 20 days or even 15 days. You might be surprised at how quickly it can improve cash flow and help you pay off invoices faster!
Mistake #7- Not Keeping Track Of Every Expense Incurred On Behalf Of A Client
Not keeping track of expenses can lead to an unexpected and unpleasant shock when it comes time to send out an invoice. While it may seem trivial, small business invoicing is no joke.
If you are a small business owner, you know that every penny counts, and any expenses should be accounted for. If you’re using online invoice software, then tracking your expenses will be as easy as clicking a button on your computer or mobile device.
Such software helps you keep track of your expenses and streamline your invoicing process. You can also use online invoice software to send out payments requests so that clients can easily and quickly pay their bills via an online portal or mobile app.
When it comes time to send out an invoice, you have to select a client from your list and click send an invoice. It’s that easy. Online invoice software makes small business invoicing quick and convenient for both parties involved in a transaction.
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Also Read: Things to Look Up Before Purchasing A Billing Software for Small Business
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Mistake #8 – Not Keeping Track Of Your Unpaid Invoices.
If you don’t keep track of your unpaid invoices, it will be difficult for you to follow up with clients and remind them about their outstanding balances. Keeping a record of all your unpaid invoices allows you to send reminders when necessary easily. It also helps ensure that your company stays on top of its accounts receivable so that you can focus on growing your business.
Moreover, it’s essential to record all unpaid invoices because they can be used as leverage in your negotiations with clients. For example, suppose you have been sending reminders about an unpaid invoice for several months and a client still hasn’t paid you. In that case, you can send them a final reminder saying that if they don’t pay by such-and-such date, then you will have no choice but to file a complaint with your state attorney general or small claims court.
This is especially effective when dealing with small businesses that may not want their customers or suppliers to know that they have trouble paying their bills on time.
Invoicera Best Online Invoicing Software
Invoicera is the best online invoicing software that helps you send professional invoices, track time and expenses, and get paid faster. With a free invoice template library and time tracking features, it’s easy to start sending professional invoices from your computer or smartphone in minutes.
Invoicera’s online invoicing software allows business owners and entrepreneurs to quickly create and send professional-looking invoices. They can also manage their clients’ payments in a single location, helping them stay on top of cash flow, so they don’t have unpaid invoices piling up.
All in all, Invoicera is an excellent tool for small business owners and entrepreneurs. It is simple, easy to use, and inexpensive. If you’re looking for online invoicing software that will help you save time, stay organized, and get paid faster, then try out Invoicera today!
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Conclusion
You should always make sure that your unpaid invoices are correctly calculated and sent. Improper calculations could lead to an invoice being too high or too low, and either way, no one wants that.
These simple cash flow mistakes can hurt a company if they go unnoticed over time and cause them to lose money in areas where it shouldn’t be lost. Be sure you’re not making these eight common cash flow mistakes when calculating and sending out your invoices.
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