I’m sure you all think, “of course I should care about invoicing – it’s where the money comes from”. Unfortunately, a lot of businesses only seem to care about the money coming in part, not so much the actual invoicing process. Which is understandable, but ultimately unhelpful.
The problem is that if you don’t care about the process, you’re likely to make mistakes and give your clients a poor impression. If you’re not concerned about it, nobody else will be. That leads to inaccurate payments being received and not being noticed. It leads to late payments, non-payment, and an inability to pay your bills because funds haven’t come in yet.
The solution is somewhat tedious for most of us, but developing an invoicing process is essential.
You need to create a regular invoicing schedule which your clients understand. Have a regular and enforced payment due date. Follow-up promptly on unpaid invoices. And, if it’s a problem for you – create a process for forwarding long outstanding payments to a debt recovery agency.
By taking control of your invoicing and making your process clear to clients they will be more likely to pay promptly.
It’s also important to be sure you’re covering your legal requirements. The Australian Tax Office has certain requirements for what must, and must not, be included on an invoice. For example, if you’re registered for GST (that is, you pay BAS) your invoices should be called a Tax Invoice. If you’re not registered for GST, they should just be called Invoice.
You can find more information on the ATOs requirements here and here. However, if you’re unsure about anything, it’s worth contacting your accountant or the ATO for clarification. You’re unlikely to have any repercussions for an honest error, however deliberately doing the wrong thing will result in the ATO taking action against your business.
So, a quick checklist to start an invoicing process for your business would include:
- Create an invoice template that includes all the information you need to have on an invoice.
- Decide how you’re going to create and track invoices. You can use:
- an accounting package (Xero, MYOB etc.)
- an invoicing package (i.e. Zoho Invoice)
- a Word template
- an Excel spreadsheet
- When you’re going to invoice – put this in your client agreement
- What your trading terms are (how long people have to pay, what payment methods are accepted). This should also be in your client agreement and on your invoice template
- When you’re going to follow up, immediately an invoice is overdue, 7 days after due date, 30 days etc. Whatever you decide, it’s important that you do follow up every time.
- What happens to long outstanding payments. For example, you may halt work pending payment in full, charge a late fee, require a deposit for future work
- How long before you’ll send an account to collections.
Once you’ve got all of this sorted out, you’ll find that your clients are more likely to respect your invoices and pay promptly.
