For a small business, getting paid on time is a top priority, especially since the percentage of invoices paid on time is down to a meager 29.1%.
One of the easiest ways to improve your on-time payment rate is to use email invoicing software, leading to a 35% increase in this metric.
Of course, there will always be late payers, but such software should have the option of automated payment reminders, ensuring that your customers don’t forget to pay you for your product or service.
We’ll explain the process of sending an invoice using such software in detail to help you understand what goes into it. Then, you’ll be able to decide whether it is something you can use in your everyday invoicing process.
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Start your billing process by finding a suitable invoice template for your business.
The first option of invoice creation is to create your own template. You’ll have to start from scratch and design it to look professional, which can be a challenge if it’s not something you’re familiar with.
You can also find an invoice template online and download it, as many sites offer them for free.
Pick one that suits your needs and includes all the elements you need for the perfect invoice. Otherwise, you’ll omit critical information and won’t get good feedback from customers.
The point is, you have to find a template that includes the necessary data and use it for each invoice, editing only the information about the customer and the products or services in question.
If you use billing software, you’ll get templates with it, so you can edit them and send your invoices directly from the software.
That way, you won’t have to find an invoice template online, download it, edit in a program, and then upload it to an email or print it and ship it to the customer.
Skipping this step benefits you since manual invoice creation leads to 3.6% of all invoices containing errors.
Another great benefit of using such software is consistency, which is vital when doing business with other companies.
Your invoices should always offer the same information to the customer. If you switch between templates downloaded from different sites, you may accidentally omit some data, which shows a lack of consistency.
When writing your invoice details, name each product and service individually for better clarity.
Otherwise, your customer might be confused as to what exactly they’re supposed to pay for. After all, this might not be the only invoice they will receive that day or even that hour, so you have to make sure yours is as detailed and precise as possible.
If you list each product or service and provide details, the customers are more prone to remember the specifics.
Of course, don’t forget to list them in a way that’s easy to read and understand. By this, we mean that you shouldn’t only list item codes that you use internally. Such codes won’t mean anything to the customer and will only confuse them.
Sometimes, you may need to use the item code for accounting purposes, but make sure to also add:
- The item or service name
- A description of the sold item or provided service
- The price of the item or service
- The number of items or services
The product and services part of an invoice is its most important aspect. Without this part, you can’t calculate the total sum owed, i.e., the invoice wouldn’t make sense. So, pay special attention when listing your items and the related details.
In the item description, write down any detail that makes it easier for the customer to differentiate between that item and the other ones you offer.
For example, if you sold the customer an educational trip, don’t just list the asset as “trip.” Instead, write down the time and date of the travel, duration, location, and any other unique features that set it apart from the rest.
Then, list the price per item. After that, note the quantity you sold, as this helps you with the next step.
After you’ve listed the price and quantity of items, you need to calculate the grand total.
Of course, you’ll multiply the price with the quantity, but your work doesn’t stop there. You also need to list and add in any discounts you may offer, obligatory taxes, and any fees that apply to that specific purchase.
The discounts listed in this section shouldn’t be those you offer in case the customer pays within a limited amount of time, just like the fees shouldn’t be the ones you’ll add in case the customer doesn’t pay within the given deadline.
Instead, these discounts and fees are the obligatory ones that the customer will have to pay either way.
If you want to give an incentive for your customers to pay on time or even earlier, you can add a note to your invoice and explain the terms.
Most companies choose to offer a 1-5% discount in case of early payment and a 10% late fee if the customer doesn’t pay within 30 days.
Both these conditions serve as a deterrent to the late payment, but you shouldn’t add them to the grand total if you don’t know when the customer will pay.
After writing down the item details and calculating the total, you should add any other important information.
- Your company name
- Your company contact details
- Customer information
- Invoice creation date
- Payment terms and conditions
- Payment due date
You may think some of this information isn’t that important, but if even one of these points is missing, the customer may have difficulty understanding the invoice, and you want to avoid this.
Here’s why: 42% of companies reported they were late with payments and missed out on the offered discounts because specific data was missing on the invoice.
Therefore, if you want to decrease the number of late payments, include any information that can help the customer understand the invoice better.
For example, if your invoice doesn’t offer any company data, the customer may be confused about who they are paying or who to contact if they have a question.
You also shouldn’t forget to note the due date. Instead of using terms like “NET 30”, spell it out for your customers by stating the exact day and date of payment. That way, there can be no misunderstandings about the pay-by date.
On top of all of that, don’t forget to include the terms and conditions. Explain how your customers can pay and what discounts or fines apply to their payment, so they know exactly what to expect.
Send the invoice as soon as possible to increase your chances of getting paid on time.
Late payments are becoming a big issue, especially in recent years. The pandemic brought on many negative consequences for businesses, including an increase in the number of late payments.
According to an Atradius study, 43% of invoices were not paid on time in 2020, and 4% had to be written off.
Therefore, you can expect that almost half of your invoices just won’t get paid on time, and you’ll have trouble collecting your debts.
An excellent way to prevent late payments is to send the invoice as soon as you deliver the final product or service. If they’ve just received them, the customers won’t have trouble connecting the product or service to the invoice.
If you opt for doing all of this manually or offline, it will be challenging to create, check, print, and send the invoices to customers as soon as possible, every time.
Besides, it will take a while until your customers receive the invoices, and you can expect it to last even longer if you don’t offer digital payment methods.
A way to combat this issue is to use billing software that lets you edit a template in a couple of clicks and send automatic invoices directly to your customers, who will receive it in a matter of seconds.
At this point, you’ve done everything you could to create and deliver a detailed invoice to the customer. But what if they simply don’t pay?
As already mentioned, late payments are expected since over 40% of invoices aren’t paid on time. However, this doesn’t mean that you should just accept the fact that you won’t get paid almost half of the time.
Quite the contrary, you should remind the customer of the invoice before the due date arrives.
Let’s say your due date is 30 days from the invoice creation date. You can remind the customer of the payment a week before the due date, which still leaves them with plenty of time to pay.
Then, you can send a reminder on the day of, reminding the customer that they can still pay you without getting a late payment fee.
In case they still don’t pay, you can send them a reminder a week after the due date, now adding the late fee to their invoice and total amount.
Reminders work: 21% of invoices are paid after the first reminder, 20% after the second, and 32% after the third.
However, are you really going to send three reminder emails per each unpaid invoice manually? That’s too complicated. Even in this case, billing software is the best solution.
Some companies add a fine with each week of late payment, while others do it each month.
Decide on the best strategy for your company, add it to your terms and conditions, and explain it to customers before sending the original invoice.
After that, you’ll be sure that the customer is aware of the consequences of not paying their invoice.
After receiving the payment, always thank the customer for doing business with you and paying the invoice.
This leaves a great impression and makes the customers feel valued, but it also helps you retain customers.
A large majority (91%) of customers said they are more likely to do business with a company that values them, which is exactly what you are showing by taking the time to thank your clients.
Moreover, if you offer your customers such a personalized experience and don’t make your emails sound robotic, the chances of retaining them increase by 60%.
It will be hard to write a personalized thank you note to every customer who pays you, but billing software can help you with this task and save you time.
If you use software like Regpack, you’ll be able to create a short but sweet thank you email and set up an email payment trigger.
So, whenever a customer pays, the system will automatically send them the thank you note, inserting their data and thus performing the activity on your behalf.
In other words, if you use invoicing software, you’ll be able to send thank you emails to clients regularly and, therefore, directly impact your customer retention rate without doing any manual work.
The sooner you invoice a customer, the faster you will get paid.
However, since the late-payment rates have risen in the last couple of years, you have to find a way to create an invoice that will incentivize customers to pay sooner.
Billing software is the perfect solution as it lets you:
- Create your own invoice and add as much personalized content as you wish
- Automatically send invoices
- Send automated payment and late payment reminders
- Create and send customized thank you emails
All of these points help you offer a better, more organized, and personalized customer experience.