15 Invoicing mistakes to avoid with your small business

For any small business, having a steady stream of income is vital. Yet, many small businesses make common invoicing mistakes that can negatively impact their cash flow and client relationships. In this post, we’ll uncover 15 common invoicing mistakes that can impact your small business, and show you how to avoid them. By following these tips, you can ensure your invoices run smoothly, get paid on time, and keep your business on track for success.

The impact of invoicing mistakes on small businesses

A simple mistake on a sales invoice might seem like a minor inconvenience, but it can have a larger effect on your business:

• Delayed payments: Incomplete or incorrect invoices can delay payments, leading to cash flow problems. Imagine having to pay bills with money that hasn’t arrived yet!
• Strained client relationships: Mistakes can make you appear unprofessional and damage trust with clients. After all, if they can’t rely on you for accurate invoices, can they rely on you for other aspects of your work?
• Wasted time: Fixing mistakes on invoices takes precious time away from other important tasks, like growing your business or serving your clients.

Let’s explore the simple ways that we can avoid these things happening:

15 Common invoicing mistakes small businesses make

Small businesses and freelancers, who often rely on project-based income, are particularly prone to errors while invoicing. Here are 15 common errors to watch out for:

1. Incomplete invoices with missing key details

A clear and detailed invoice is essential so that your client has all of the information they need to pay you on time. Don’t forget important information like you and your client’s business details, an invoice number, due date, tax rates and payment terms. Remember, an invoice is an official business document that should be complete, accurate and professional. Using a professional invoice template can help ensure you include everything necessary when invoicing both local and international clients. 

 2. Limiting the ways clients can pay 

Although you may have a preferred payment method, this may not be the most convenient option for your client. Traditional forms of payment like direct bank transfer or wire transfer can be slow and come with hefty fees. Consider payment through a user-friendly invoice app like Bookipi that streamlines your invoicing process. The easier it is for clients to pay, the faster you will get your money.

3. Sending it to the wrong person

It’s happened to the best of us! Always double-check the recipient’s email address before hitting send. Sending an invoice to the wrong recipient is a common mistake that can lead to delays in payment and oversharing confidential information with the wrong person.

4. Not setting clear payment terms

Having open-ended payment terms may stop you getting your payments on time. Always clearly state the due date for payment on your invoice along with the date the invoice was issued, and any late fees that may apply. Here’s a quick guide on how to send invoices that ensures you cover all your bases.

5. Not following up on late payments

Don’t be afraid to follow up on late payments politely but firmly. It’s important to ask for payment in a professional and respectful manner to maintain a good relationship with your client. Early and consistent follow-up can significantly improve your chances of getting paid on time.

6. No contracts or late fees

Contracts and late fee terms protect your business from any disputes that may arise. Having a contract in place outlines the scope of work, payment terms, and any potential late fees. This helps to avoid misunderstandings and ensures you’re compensated fairly for your time and expertise.

7. Sending invoices late

This is one of the most common mistakes in invoice processing. The sooner the invoice goes out, the sooner you get paid. Don’t wait until the end of the month or after the project is complete to send your invoice. Establish a system for sending invoices promptly to keep your cash flow consistent.

8. Inconsistent invoice formatting

Maintain a consistent format for your invoices. This makes them easy for clients to understand and reduces the risk of errors or confusion.

9. Forgetting about description details

Don’t just list generic descriptions like “consulting services” or “web design.” Provide clear and concise descriptions of the services or products provided. This helps clients understand exactly what they’re paying for and reduces the risk of disputes. It also helps with your own bookkeeping so that you can easily track which projects or services you completed and when. 

10. Not proofreading carefully

Typos and errors on your invoice can make you appear unprofessional. Take the time to proofread your invoices carefully before sending them out to your clients. Spell checkers are helpful, but a human eye is essential for catching everything.

11. Not offering multiple currencies

If you work with international clients, consider offering the option to pay in their preferred currency. This can make it easier for your clients to pay, and shows that you’re accommodating of their needs. Whether they opt to pay in your home currency, their local currency, or a neutral third party currency that you both agree on, the best option depends on your business, your client’s location, and your risk tolerance. Discuss this openly with your client to find a mutually beneficial solution.

12. Neglecting tax implications 

It’s crucial to understand and comply with any relevant tax regulations when creating your tax invoices. If you’re unsure about tax requirements, consider consulting with a tax professional who can make sure all of your tax activity is above board.

13. Forgetting the power of branding

Like all of the other parts of your business, your invoice is a reflection of your brand. Incorporate your logo and brand colors and fonts into your invoice template to create a professional and memorable visual identity. This small touch not only makes you stand out, but can build trust and recognition with your clients.

14. Not keeping copies of your invoices 

Always keep copies of your invoices for your records. This is important for accounting purposes and resolving any disputes that may arise. Electronic copies are convenient, but it’s also a good idea to keep a physical copy for backup purposes.

15. Not offering partial payment options 

Consider offering the option for clients to make partial payments, especially for larger invoices. This can improve cash flow for both you and the client, making the payment process more manageable. You can specify terms for partial payments in your contract or include them directly on the invoice.

By incorporating these tips into your invoicing process, you can avoid common invoicing mistakes that can stop you getting paid on time. Remember, smooth invoicing practices contribute to a healthy cash flow and a thriving small business.

Accurate time tracking: ensuring fair and transparent invoicing

For freelancers or small businesses who bill by the hour, accurate time tracking is crucial. Here are some tips:

• Use a time tracking app to record your hours worked for each project. This provides a clear record of the time you’ve invested and ensures your invoice accurately reflects the work completed.
• Clearly outline your hourly rate in your contract. It’s important not to leave your rate up for negotiation after the work is done. Be upfront about your pricing from the beginning to avoid any confusion and disputes.
• Be transparent with clients about any additional fees that may apply. This could include rush fees, travel expenses, fees for extra revisions, or any other costs associated with the project. By being upfront about all potential charges, you can maintain trust with your clients and avoid any financial disputes down the road.

By accurately tracking your time, communicating clearly with clients about your rates and fees, and using a clear and detailed invoice format, you can ensure your invoices are fair, transparent, and more likely to be paid promptly.

Overcoming late payments: strategies for prompt payment follow-up

Even with the best practices, late payments do happen from time to time. Here’s how to handle them:

• Set up automatic reminders: Many invoice apps like Bookipi allow you to set up automatic payment reminders. These customizable reminders can be emailed to clients at predetermined intervals after the due date. They serve as gentle nudges that can significantly improve your chances of receiving prompt payments.
• Send friendly follow-up emails: A well-worded email reminder can often nudge clients to pay their outstanding invoices. Although emails can be effective, they can be time consuming. Automatic reminders are the best option for many businesses.

Invoicing doesn’t have to be a headache. By avoiding these common mistakes and implementing efficient practices, you can ensure your invoices are clear, accurate, and get you paid on time. Bookipi is the preferred invoicing tool by freelancers and small businesses alike. Our user-friendly platform helps you track payments, send automated overdue reminders and even integrates with secure payment gateways.

Check out these other small business bookkeeping tips that can help you effectively and efficiently manage your small business finances.