Invoice collection can truly make or break a business because customers making late payments slows down every part of your workflow.
Smooth invoicing and payment collection allows cash flow to stay in the positive and your business to keep innovating and providing to your customers. Without positive cash flow, the line between Healthy and At Risk is very small, with a rapid inclination towards being at risk the longer you stay with negative cash flow.
Invoice collection mistakes on the business’ side play a huge part in late payments and slowed cash flow.
According to Sharespace Digital, 61% of late payments are caused by incorrect invoices.
There’s a lot you can do as a business owner to ensure that you’re not making common invoice collection mistakes and slowing down your collection processes. Let’s take a look at 12 of the top invoice collection mistakes that are slowing down your business.
#1 Invoicing Too Slowly
Procrastination never pays off!
Be sure to send out invoices as soon as possible. As soon as the work is done or delivered, send the invoice to help both you and your clients stay organized. Waiting too long to send out an invoice means that it will sink deeper and deeper in your client’s mind, and they will be less likely to immediately pay it when they eventually receive it.
#2 Not Being Specific
All the details should be present on your invoices:
If there’s even one small piece of information missing, your customers may end up being confused, contacting you for more information, or delaying their payment further.
#3 Making Tiny Mistakes
You should proofread every invoice before it’s sent out to your customers.
Similarly to the problem with missing information, incorrect information can equally cause delayed payments.
A spelling mistake or misplaced comma can easily cause your invoicing processes to be halted for days or weeks.
#4 Inaccurate Advertising
Your customers should already understand the credit terms that you offer, and the ways in which they are able to pay.
If your advertised terms are confusing, you may end up with not only a delayed payment process, but also unhappy customers and complicated financial relationships.
#5 Not Being Flexible
Offering as many online payment options as possible is a simple way to help your customers pay more quickly and easily.
If you’re not flexible, your customers may need more time and have to put more effort into paying. If your payment methods are as simple as clicking a button, they won’t have many excuses to not pay on time!
The easier it is to make a payment, the faster the payment will be made.
#6 Not Being Persistent
A quick reminder or an automatic follow-up email a few days after sending out an invoice can help customers make their payments quickly.
Reminders are not only a great way to get clients to pay, but they’re also an essential element of keeping your customer relationships healthy.
#7 Not Offering Incentives
Why offer incentives?
Incentives for early or on-time payments help clients want to pay their invoices. Not only this, but clients love incentives! These are a fun and simple way to strengthen client relationships while also avoiding late payments.
More customers will want to keep coming back to work with you when they’re reaping some rewards.
#8 Not Clarifying Expectations
Before the work begins, and before the invoicing process begins, it’s crucial to clarify how and when you expect your customers to make their payments.
If you and your clients have different ideas about payments terms, it’s highly likely that neither of you will end up satisfied.
Take some time to ensure that both parties are on the same page before it gets to that.
#9 Not Updating Enough
Updating your databases is necessary for organization and bookkeeping purposes, but it can also play a part in getting your invoices paid on time.
If there’s a changed name, address, or person in charge of accounts receivable, you need to know!
Otherwise, more than one invoice may end up sent to the wrong place.
#10 Not Increasing Your Efforts
After sending reminders and following up with your clients, what else can you do?
A common mistake is to just give up, or just keep sending friendly reminders.
However, after a long enough period of time, it’s crucial to increase your efforts, follow up more frequently, and become more aggressive if necessary.
#11 Not Being Friendly
When you send your first invoice, a simply friendly and courteous message can actually increase the chances of getting paid promptly!
A simple statement of thanks or a friendly reminder to pay by a certain date can remind your clients that you’re not against them, and strengthen your relationship with them.
#12 Not Breaking Everything Down
Every invoice should provide a detailed breakdown of exactly what your client is paying for. Break down the price in an itemized list, detailing the terms and details of everything included on the invoice.
This step ensures that your clients don’t have to take more time to make revisions or double check the invoice. Not to mention, it also helps to build trust between you and your clients. This breakdown proves that there are no sneaky charges or extra fees hidden inside their invoice.
By avoiding these 12 invoice collection mistakes, you will be able to put your business in the best position to get paid on time, every time. Many of these mistakes simply come down to not using an automated invoicing system like InvoiceSherpa.
61% of late payments
Posted on November 30, 2020
