• 4 MIN READ
How to Ensure an Invoice Gets Paid on Time
June 27, 2023
Creating invoices and getting them paid on time can be a challenge. Some say that these are some of the tough issues every business faces from time to time. If you receive money late, your cash flow, payment of bills and production may be affected. So, you need to take steps to ensure that you get paid on time.
In this guide, you’ll find out exactly what an invoice is, what it reflects, what it is used for, and why you need it. We’ll also show you a secure invoicing process – these documents have a clearly defined structure. Fortunately, there are now programs that can help you automatically create and fill in these documents, which will save you a lot of time.
What Is an Invoice?
An invoice is a document that confirms that goods have actually been shipped to the customer or that services have been rendered and indicates the value of the products. The seller issues an invoice to their customers, requesting payment for the goods or services provided. This document is presented to the buyer either before or after the transaction and creates an obligation for the buyer to pay.
Invoices serve as a legally binding agreement between the seller and the buyer and cannot be cancelled or removed from sales records from an accounting perspective. If your company is registered as a VAT (value-added tax) payer, it is compulsory for invoices to be drawn up following the HMRC VAT invoices rules.
What to Include in an Invoice
There are specific requirements you must follow when invoicing and taking payment from customers. Let’s look through these elements:
- A unique identification number – you must assign an invoice number to each invoice to comply with the regulatory requirements. These requirements include a reference number, which is especially useful when discussing payments and sales invoices with accountants.
- Your company’s details – specify your business name, address, and contact information. If you have a limited company or LLP, you should give your registration number and address as required by Companies House. If you are self-employed, you should give your first and last name and the business name under which you operate, if applicable.
- Your customer’s details – specify the company name, contact information, and address of the customer you’re invoicing. In certain situations, it may be beneficial to identify other individuals, such as your contact with the organisation or the person who led your project.
- A clear description of what you’re charging for – state what items were sold and charged for. Include the name of the product or service, quantity (or time for services) and rate (per item or per hour).
- The dates – include the date the goods or service were provided (supply date) and the date the invoice was raised.
- The amount being charged – specify the amount(s) you what a buyer to pay to you (mention all the charges, if there were several) and the total amount owed. If you ship physical products, include the costs you paid for that.
- VAT amount – include the value-added tax, if applicable.
- Payment terms – provide various payment options to your customers, including monthly instalments or discounts (it’s up to you). Include the specific due date for payment according to your requirements and preferences, ranging from immediate payment upon receipt of the invoice to up to 30 days.
How to Ensure an Invoice Gets Paid on Time
When the work is already done, chasing payment is gruelling. We have gathered five tactics you can use to get your money into your account as fast as possible and deal with late payments:
1. Set non-negotiable payment deadlines
Before you start working with your client, make sure that both parties have agreed on a specific deadline for the delivery of the work. To ensure clarity and eliminate any potential confusion, explicitly state these due dates in your emails.
2. Offer several payment options
Increase your chances of receiving timely payments by offering clients different payment options suitable for their businesses. These could include bank transfers, credit cards, PayPal, or even cash. This allows clients to choose the most convenient method.
3. Request a deposit in advance
To establish trust and build relationships with clients, it’s beneficial to ask for an upfront payment before starting work. Although some small business owners may have reservations about this practice, asking for an upfront payment is an effective way of demonstrating your commitment and professionalism. If your client invests in a relationship with you through pre-payment, it provides you confidence and allows you to focus on doing high-quality work.
4. Apply late payment penalties
You can include late payment penalties when your customer is overdue. This will be an incentive for them to pay on time. This scheme ensures that you will be compensated if the payment is late.
Although you may not feel comfortable imposing penalties on customers, you shouldn’t feel guilty. You have fulfilled your duties and are entitled to receive payment. Set clear terms and expectations in advance and send timely reminders as the payment deadline approaches.
5. Set email reminders
You have the option of scheduling reminders in your calendar to keep track of invoice due dates. In this case, you can balance aggressive behaviour with friendly reminders to help customers stay organised. It only takes a moment to set up, but email reminders can significantly impact your ability to make/receive timely payments rather than delaying them.
6. Use invoicing software to automate the task
Cloud-based accounting software is easy to use and can allow you to issue invoices promptly. And with Payrow, you can create and send invoices directly from the app and automatically receive notifications when payment is received.
Control your outgoing and incoming payments with Payrow’s free customer invoicing software. It offers several features:
- Create invoices for all your needs
- Make professional invoices and send them to individuals or companies
- Customise your invoices in two clicks: add your logo and change other details
- Edit your invoice information, headers, and other columns
- Get professional-looking invoices in seconds
Simplify your business process and reduce the time you spend on boring administrative tasks with Payrow.
Avoid These Common Invoicing Mistakes
Occasionally, you’ll encounter customers who are not punctual when it comes to payment. While knowing how to draw up an invoice is important, making sure that payments are gathered on time is even more important to maintaining your cash flow. To help you avoid payment delays, here are some common mistakes to look out for and ways to fix them:
Failure to Submit Invoices on Time
Timely invoicing is the key to timely payment. Don’t wait for your customers to ask for an invoice. It is your responsibility as the business owner to initiate the process. Remember, your customers are busy, and it’s not their job to remind you.
Sending Invoices to the Wrong Person
Don’t waste time by sending invoices to the wrong recipient. They may ignore the email or forget to forward it to the right contact person, and you’ll be left to wonder why the payment hasn’t been received. To avoid this, gather the relevant contact information at the beginning of your relationship with the customer.
Billing Errors and Miscalculations
Invoices often include several items requiring payment, which increases the chance of calculation errors that can ruin the entire document. Taxes and levies are another common area prone to miscalculations.
Forgetting to include them on an invoice usually results in you having to make changes and resend the invoice or, worse, incur costs yourself. Double-check your invoices before sending them to customers, and consider using an online invoicing tool to avoid errors.
Using vague language can be confusing. Clearly state the terms of payment on the invoice. Make sure that product descriptions, prices and quantities are described clearly, without any ambiguous wording. This leaves no room for misinterpretation and minimises the probability of payment delays.
How to Provide Customers with Invoices Using Payrow
An invoice is an itemised list that shows the goods or services you have provided to your customers, the total amount payable, and the way they can pay you for these goods or services. You can easily send an invoice via Payrow.
To send an invoice to your client:
- Click on the “Invoices” tab in the main menu of your Payrow Business account.
- Click the “New Invoice” button at the top of the screen.
- Add or select the customer you need.
- Select the appropriate currency.
- Add the product(s) to which the invoice relates and click “Continue”.
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