Invoicing Best Practices 101
Everyone likes to get paid. The easiest way for a business to get paid is to invoice a client. However, starting an invoicing system or even creating an invoice can be a daunting task. After reading this blog, you will learn about invoicing best practices including what is on an invoice and the best invoicing software.
What is an Invoice?
An invoice is an itemized document that is presented to clients for goods and services rendered. It differs from a receipt in that a receipt shows that a payment has been made while an invoice shows that payment is needed.
Invoices allow a company to account for any payments due or if they are outstanding. This assists with keeping correct records and will help with financials in the event of an audit or if any investors have questions.
Parts of an Invoice
When drafting your invoice there are several key items that should be there for best invoicing practices before it goes out to a client.
Having dates on an invoice is an important piece of information not only for you but for the recipient of the invoice. Dates let people know when the invoice was issued, and what it is for. There should also be a due date listed on the invoice so people know when payment is due so they don’t incur late fees.
A clear invoice number, also called a reference number, corresponds with a customer’s account and can identify a specific transaction. Invoices should be a unique number, not used for anything else. This also helps billing and collection departments easily find outstanding payments or if someone was double-billed and follow up with them.
Most invoicing systems will have a program that will automatically create an invoice number so you don’t have to manually make and remember them.
A clear description gives the client more information about what the payment is for and gives them paperwork for their records. It can show what service was provided and can be as detailed as you wish.
Make sure to address the invoice to a specific person in the company, preferably the person who will be paying the invoice or the name on the account. Then it will go to a specific person and not just a department. Your invoice is less likely to get lost and more likely to be paid on time.
One of the most important items to include on an invoice is payment information—how does someone pay their invoice?
Some items you should include are:
- The total amount due,
- The terms of payment (if there are any)
- How someone can remit the payment
- Cash, check, credit card, or electronic payment like PayPal or Venmo
Another item to clearly spell out is what the late fees are and when they apply. Then there won’t be any surprises for the client on what will happen if they are late with payments. Also if they balk at paying extra charges, then you have documentation that they were informed of the late fees and procedures.
Branding distinguishes your product from any other. Visual branding references include company colors, specific fonts, and your logo.
Using your branding helps inform the client who the invoice is from so they know where to send their payment. It also shows that it is an official document from your company and not a scam.
Best Invoicing Practices
In summary, there are a few things to consider when sending your invoice:
- Send your invoice in a timely manner
- List the sent date and due date
- Be sure the invoice is clear and has all the necessary information
- Check for correct billing addresses and contact information
- Include clear payment terms
- This includes late fees and different payment methods
- Create a system to keep track of outstanding invoices
- Always follow up with clients about their invoices
Best Invoicing Software
There are a variety of programs that offer an invoicing option for users and all follow best invoicing practices. Every program operates differently so it is good to thoroughly research each one to find the best fit for your company. Each one also has different plans at different prices so there are options for any budget.
QuickBooks Online is one of the best-known cloud accounting software and is good for small business accounting. A feature of QuickBooks is it allows you to create custom invoices for your clients.
You can also opt to receive real-time alerts from the app. You can send an invoice from the app, see when the client views it, and you can get notifications when the invoice is paid. You can also send automated payment reminders to clients so you can avoid late payments.
Sage is a business platform that offers several different cloud-based accounting systems designed for small and medium-sized businesses. Several of the options incorporate an invoicing option.
You can create invoices online and send them to your customers in seconds. You can also automatically track invoices and easily check your records. Sage partnered with Stripe to set up card payments directly from your invoices. When your customer accepts the quote or estimate, you can easily convert it to an invoice.
Sage offers eight different free invoice templates that you can download and customize to fit your needs.
Bill.com is cloud-based accounting software that automates financials for small and mid-sized businesses. Manual invoicing is a slow process, Bill.com allows you to easily automate invoices. Clients can use the payment portal to send money via credit cards or ACH payments.
There are several professionally designed templates so you can easily customize your invoice to include a logo and better reflect your brand. You can also choose and organize specific fields on invoices to suit your needs. Then you can save the custom templates for future use.
Another feature is you can automatically send recurring invoices and payment reminders, so clients will get invoiced on time and you can avoid late payments.
It gives clients the ability to approve, pay, and sync payments by having the accounts receivable and accounts payable in one platform.
Bill.com software easily syncs with QuickBooks and Sage as well, helping make your accounting more efficient.
Working with a Powered by Centri Expert
Committed support for your business while you work to accomplish your goals is essential. Having a professional advising you on invoice processing automation is one less thing for you to worry about. At Powered by Centri, you can enjoy the benefit of having a dedicated point of contact who will help you determine the best invoice system for your team and be able to provide invoicing tips.