What Your Invoicing Habits Say About You as a Business Owner
Out of all your responsibilities as a business owner, there’s nothing more important than invoicing. Without invoicing, you won’t be able to get cash to flow into your business. Without that cash, you won’t be able to grow your business — let alone keep the doors open for very long. Invoicing, however, is more than just getting paid for the goods and services that you provided. It can also shape the relationship that you have with your clients. Think about it for a second. If you emailed a client saying, “Hey, pay that $500 right now or else!” How do you think that client would respond? Even if they pay you ASAP, I highly doubt they’ll do business with you again. With that in mind, it’s time to consider what you’re invoicing habits say about you as a business owner.
You forget to bill your clients.
What this seems to say about you: You don’t care when, or if, you get paid.
This is hands down the worst mistake that a business owner can make. Forgetting to bill your clients is an indication that you don’t care when, or if, you ever get compensated for the services or products rendered. Furthermore, it can show the client that you’re not a professional who deserves to be paid on-time.
If you want to be taken seriously as a professional, while also improving your cash flow, always make invoicing a priority.
You never follow-up on late payments.
What this seems to say about you: Getting paid isn’t that big of a deal to me.
Even if you’ve made invoicing a priority, it’s still imperative that follow-up on any past due invoices. After all, there will be times when an invoice hasn’t been paid by the due date. Not being proactive shows that getting paid isn’t important to you.
As a business owner, it’s your responsibility to follow-up on late payments. This may involve a kind (but firm) email, phone call, or visit if they client is in your proximity. Remember, the longer you wait, the less likely that the invoice will get paid. If you use invoicing software, it will automatically send your clients late payment reminders.
Again, if you want to be taken seriously as a professional, and not an amatuer that can be pushed over, follow-up on late payments immediately. In many cases you’ll find that there’s actually a good reason why the client didn’t meet the due date. However, if the client doesn’t respond, you may have to take actions like taking them to small claims court.
You follow-up too much.
What this seems to say about you: You’re desperate.
At the same time, you don’t want to harass your clients multiple times a day. You’re a business owner and not a shaddy collection agency.
By hounding your clients for a payment, you not only are annoying them, you’re coming across as desperate. And when you appear desperate, you’re giving the client more leverage to skimp on a payment.
This doesn’t mean that you should be complacent. Definitely follow-up on late payments, but don’t go overboard.
You require a down-payment.
What this seems to say about you: You are committed, reliable, and trustworthy.
Requiring a down payment is actually common practice among business owners. Whether if it’s 50/50 or broken into thirds, this reassures the client that you’re a committed to completing the project. Additionally, it shows clients that you’re a pro who knows how to effectively run a business.
As an added perk, down-payments give you an influx of cash to pay your expenses while working on larger projects. It also softens the blow if a client bails on a payment.
You request the payment in-full.
What this says about you: You don’t trust the client.
To be fair, this can be another practice when dealing with exclusive, high-end clients. As a result, it ensures that you don’t get played when it’s time to invoice these clients.
However, it can still be a risky move on your part. By requesting a payment in-fill prior to the start of a payment sends a signal to the client you don’t trust them. And, would you work with someone that you don’t trust?
If you’re unsure about a new client, do some research to make sure that they don’t have a bad reputation. If you’re still not positive, then a better option would be to ask for a down payment.
You bill once the project is completed.
What this seems to say about you: You may be trying to pull a fast one.
Again, this isn’t completely out of the norm. I mean, when else are you supposed to invoice a client then?
Here’s the concern. If you invoice the client the instant you’ve completed a project, they may suspect that you’re trying to overcharge them. Even if that’s not the case, that may be the impression that they get.
Another issue with sending out a bill immediately after completing a project is that it may not sync with their billing cycle. In other words, if they pay their bills on the first of every month, and you send out an invoice on the seventh of the month, you’re probably going to have to wait three weeks before the bill is paid.
To prevent any delays in payment, discuss and agree-on payments terms. For example, if you prefer to be paid weekly, then make sure the client knows this before the start of a project. You could also sync your payment cycle with theirs. So, if they pay invoices on the first of the month, then that’s when you would invoice them.
To ensure that you don’t forget to invoice on a specific date, use automation to send out the invoice automatically on that date. If that’s not possible, because you bill by the hour, then make a note in you calendar to create and send the invoice on the day before. For example, if you expect a payment on the first, send the bill on the 30th or 31st.
You don’t use invoice software.
What this seems to say about you: You’re inexperienced and new to the game.
In this day of age, this is can be seen as inexcusable.
Instead of manually creating invoices, online invoicing software come with templates that allow you to quickly create and send invoices electronically. You can even brand them by including your logo. As a result, you’re showing the client that you’re an experienced, professional who has made invoicing a priority.
Sending invoices speeds-up the payment process since it eliminates snail mail. And, most invoicing solutions come with multiple payment options so that the client can pay the invoice using their preferred payment method.
As if that weren’t enough, these type of invoicing solutions allow you to set-up recurring payments and will “ping” clients when they miss a due date. And, since they’re on the cloud, you can manage your invoices whenever and wherever you like.
You don’t have a written agreement.
What this seems to say about you: You’re naive and too trusting.
In a perfect world you wouldn’t need a written agreement. Unfortunately, that’s not the world we live in.
Having a written agreement protects you and your business since it lays out essential payment terms. Then both parties have written notice of how a payment is expected. This not only eliminates any surprises when the bill arrives to the client, it can also be used if you have to take legal action against the client for an unpaid invoice.
Keep in mind that a written agreement between you and the other party doesn’t have to be overly complicated. It can be a simply one-page document that explains the scope of the work and payment terms and conditions.
You rely too much on automation.
What this seems to say about you: You’re lazy and not personable.
As mentioned several times, automation comes in handy when it comes to billing. However, you can’t rely on automation to completely manage your invoices.
Let’s say that a client had a medical emergency, is experiencing a medical emergency, or is on vacation. You can “ping” that client all you want when the bill is past due. In these cases, that’s not going to make them pay that past due bill.
Instead, you may have to personally send them an email or give them a call to find out what’s going on. If there’s no response, you may have to contact their assistant or colleague.
The point is, automation definitely makes life easier. But, there will be times that you’ll have to reach out to clients when there’s a billing concern.
You’re not using your invoices as a marketing tool.
What this seems to say about you: You’re not concerned about building loyalty.
Believe it or not, your invoices make for an effective marketing tool. This can be simply by saying “thank you,” sharing a link to helpful content, offering a discount or referral program, or up-selling your additional services or products.
Whatever method you choose, it’s a surefire way to strengthen the relationship with your clients and obtain word-of-mouth recommendations.