If your business has ever needed to hound a client to get paid your rightful due, well, you’re absolutely not alone. Anywhere between 1 in 10 and 4 in 10 invoices are paid late, depending on which side of the pond you’re on or which study you choose to read.
Even today, I sometimes wake up in a cold sweat screaming “Net 15!” as I shake off yet another nightmare about my lean freelancing days. In fact, the smaller your business, the bigger the impact a single late invoice can make—so it’s incredibly important to get your invoicing right. While many late payments are out of your hands, we at Sunrise often see some basic mistakes that can make a big difference in your payment schedule.
Let’s start with the most important to-do’s when it comes to good invoicing.
Invoicing best practices
Pre-invoice is best invoice
It’s a very zen concept: the best invoicing happens before invoicing at all. Namely, you must lay out specific payment terms in your contract. Since a contract is legally binding, when you have the payment terms in writing and signed off by the client, you have recourse if—or when—a payment is late.
The contract is where you should hash out your time-to-payment, payment methods, and any late fees that may be incurred. Without this agreement in place, it will be difficult to hold your clients to any payment schedule or standard. Make it easy on your future invoicing-self by agreeing to a contract before any work begins.
Also, if all else fails, having a signed contract with payment terms in place can help you in legal arbitration. No one wants to go that route, but it’s better to be prepared.
Keep It Simple, Professional
K.I.S.P. isn’t as good of an acronym as K.I.S.S., but it’s more apropos here. Your invoices should always be simple and professional to give your business the best chance of being paid on time. We’ve seen invoices sloppily written in the body of emails, sent as complicated Excel spreadsheets, and even conveyed in a text message. These are not good looks for a business.
Your invoices should, at minimum, consist of a clean, professional PDF file (Microsoft Office has plenty of simple templates) and should include all the necessary information for your client—and nothing else. This includes:
- Your name and company name
- The client’s name and company name
- Invoice date & invoice number
- Time period this invoice covers
- Payment due date
- Itemized list of services/goods completed
- Payment methods & remittance information
It’s also a good idea to brand your business via your invoice: you can include your own logo or your company’s color scheme. This way, as soon as your client sees it, they’ll immediately know it’s from you without even having to read the text.
More methods for moolah
If you’re still only accepting physical checks in 2021, you might also want to upgrade from your dial-up modem. By increasing your payment options, you make it easier for clients to pay you. The fewer hurdles to payment, the faster and more reliably your invoices will be paid on time.
Popular payment methods include ACH bank transfers, Paypal, Venmo, Stripe, and debit/credit cards. While the fees associated with each method may dictate which your business will offer, keep in mind that you’re paying for convenience: the fees associated with accepting credit cards, for example, may be offset if it helps even one client pay on time.
Nudges don’t hurt
The most common payment deadline is usually 30 days from the date of the invoice you send, known as net 30. More recently, due to the speed of digital payment options, net 15 is a popular choice for freelancers and invoices for smaller amounts.
Your business should make it a regular habit to send invoice reminders before they are due. A gentle email reminder 7 days before a net-30 due date (or 3 business days before a net-15) can go a long way in mitigating late invoices. After all, your clients are also people with busy schedules, and your invoice might have just slipped through the cracks.
Get paid, mark paid
When you do get paid, be sure to mark the payment as complete in your ledger immediately. It’s extremely unprofessional to send out an invoice reminder—or worse, a late-payment notice—when said invoice has already been paid. Making sure your own bookkeeping is up to date can save you from much embarrassment, and even an angry client.
Invoicing worst practices
The dreaded 90-day net
Net 90? This is never a good idea. No invoice should take 3 months to pay, outside of a government contract. Because it’s human nature to perform accounting at the last minute, a 90-day payment cycle means you will be seeing the money on day 89—if you’re lucky. Set your invoice deadline to net 30, max, to make sure you always get paid in a timely manner.
Billing, oh, whenever…
If you can’t invoice on schedule, don’t expect to be paid on schedule. Many small businesses send out invoices long past the end of completed work or the end of the month. Even for monthly contracts, we’ve seen businesses send out invoices on the 26th, then the 2nd of the next month, then the 29th of that same month. There’s no consistency to when these invoices are issued.
To make it as easy as possible for your clients to pay on time, be sure to send out invoices as close to the same time each month as possible. Set a calendar reminder on the last day of every month to do your invoicing, if not a day before. For one-off gigs, send out your invoice as soon as the work has been completed.
Imagine if you opened your credit card statement to discover that you spent $4950 in December, with no line items for the various Funko Pops and Fabergé eggs you purchased. Would you remember each item? Likewise, sending an invoice without any line items is bad practice for any business.
Invoices that don’t include this level of detail can lead to payment delays, especially when the client has to painstakingly review the various goods and services that add up to the final amount. Avoid this trap by being meticulous about cataloging your completed tasks on the invoice itself.
Automate your invoicing
Even with all these tips in mind, invoicing can still be a pain to get right. There are other aspects beyond the scope of this article that your business also has to consider: archiving past invoices, reconciling with your bank account, setting up recurring invoices, and creating multiple invoice templates for different clients.
That’s why Sunrise has made easy, automated invoicing a top feature—and we’ve even made it free to use.
We’ve made it simple to issue recurring invoices that are clean and professional, with all the necessary details automatically included. You can even upload your company’s logo, add multiple payment options, and integrate Sunrise with your bank account—making paid invoices appear automatically in your bookkeeping.
Whether you choose an automated invoicing solution like Sunrise or not, always keep in mind these best (and worst) practices to help your business always get paid, right on time.