invoice-invoicing

Chapter 5

Setting Up an Invoice & Invoice Etiquette

Author: Bhaval Patel

Learn to Make an Invoice & Invoice Etiquette

As a small business owner, there are different ways to suggest to your client to make an invoice payment so that you get a fast payment for the service you render and also attract new offers from existing customers.

You should choose payment options that will benefit your business, and they should be listed on all the invoices you create. This reduces miscommunication between you and your customers.

Here are the different payment options:

These are several payment methods your business can accept to receive payment for services you render. Listed below are some of the payment methods common with small businesses.

Setting Up an Invoice & Invoice Etiquette

  1. Cash

Cash is one of the least secure payment options and is one payment method some business owners can’t do without. If you operate a brick and mortar store, for example, cash is one of the preferred payments for your business, since there are no extra charges and processing time.

Cash payment is prone to theft and loss, and companies that accept cash payment are likely to audit their taxes often. There’s less paperwork attached with cash, and you have to report an amount of $10,000 and above to the revenue service commission.

  1. Check

This is another means of making payments for small businesses. Checks are less prone to loss and theft and are readily accepted and deposited than cash.

Although, checks are not secure too as the depositor may release a bounced check if their account balance is insufficient. Bounced checks can affect the business owner and lead to debt. Some checks take too long to get cleared, so you have to be patient to access your money.

  1. Credit Cards

This is one of the simplest means of making payments, and it comes with higher security measures. Credit card payment requires the business owner to first set up an account through a service provider or merchant bank. You will be charged a fee for every transaction made into the account when you accept a credit card payment.

  1. Bank Transfer

This method is also known as ACH credit transfer; with this, you can order a direct transfer from your customer’s account into your business bank account. You’ll have to supply your customers with your banking details for them to make a bank transfer, such as the account number and routing number.

This payment method is one of the simplest means of accepting payment for your service, as it is free and fast. It is one of the most secure options too.

  1. Online Payments

Payments can be made online either with debit or credit card, and it allows customers to pay their invoices fast and safely. To get paid through online payments, you need to set up a payment gateway online like Stripe or PayPal.

You can accept payments through your accounting software if you have a cloud-based accounting solution. Payments made online are quickly processed, and as the receiver, you get paid in your business account within a few working days. Your details and that of your client is secured, and each payment attracts a charge.

  1. Mobile Payments

Mobile payments are an easy option for most businesses and are widely used, especially among contractors, engineers, and on-site workers). To receive mobile payments, you need first to have a payment reader.

The payments are processed on the mobile app and are fast.  You’ll receive the money in your bank account within days, and it also attracts a transaction charge for every payment made.

  1. Automatic Payments

Some clients pay a fixed amount on an agreed date, and these payments can be accepted automatically through recurring payments. It is fast and safe too.

With the customer’s consent, their account is charged a fixed amount on an agreed date that can be weekly, monthly, or every quarter of the year. Automatic payments can be accepted through accounting software and online payment gateway.

Choosing Your Preferred Payment Methods

Every available payment option for small businesses has its pros and cons. Before choosing, you have to research each payment method and select the ones that will benefit your business and the customer. You’ll find these considerations helpful to decide what payment methods fit your business.

Choosing Your Preferred Payment Methods

  • Cost:
    while you’re analyzing each method of payment, focus on the cost you need to take it up for your business. Card transactions always attract a charge each time you accept a payment. Also, additional costs tagged with the payment method should be considered. A payment method that requires hardware will attract more cost.
  • Security:
    it is crucial to consider the safety of your payment method before using it. This is essential for you and your customers. Cash Payment has a high risk of loss and theft and is considered a low-security method of payment. Online payment, on the other hand, has a high-security level and comes with encryption to secure your client details and make sure that you get paid.
  • Convenience:
    the ease of making payments without encountering delays is underrated until you have a little issue making a deadline payment.  Every payment method has its level of ease. To make check payments, the depositor has to visit the bank to deposit the check, after which a hold will be placed on the payment. With this, you don’t have access to your cash immediately. Online payment only requires the customer to enter the necessary details for the money to be deposited into your account within a few days.
  • Client Preference:
    Your clients’ choices should be considered when you’re selecting your payment method. You can start by asking what payment method they prefer to use when you have a meeting with them, or you could draft a survey for them to answer via email on how they wish to pay for your service.

Steps To Take When A Customer Won't Pay For An Invoice

Every small business owner, consultant, and freelancer has had an encounter with a client who does not like to pay on time for different reasons. This can set the business back and can cause the sole proprietor to run into debt due to negative cash flow. In most cases, you find it difficult to honor commitments or meet your own deadlines.

It is unprofessional and doesn’t speak well of your business when you have to come up with excuses for your employees because your customers haven’t paid you. This will also dent your reputation in the business world.

On the other hand, threatening and angrily forcing a client to make an overdue payment is not the best for your business. You may end up getting nothing. You also don’t want to be seen as a stubborn businessman who frustrates customers.

Steps To Take When A Customer Won't Pay For An Invoice

Sometimes, acting cool can convince your customers to make a quick payment for your service that being caught up in a heated argument with the client. Follow these procedures on how to make your customers come through on their payment for service rendered.

  • Make a Phone Call

If a payment is past the agreed date, reach out to the client on the phone, in a polite manner. It is easier to read and ignore emails than phone calls. Calling to ask the client to issue a check is better. Pay attention to details while hearing the client’s reason for not being able to pay on time. The best thing you want to hear is that they forgot the due date for payment.

If the client is having financial issues according to their explanations, you can offer convenient means of payment, like paying a certain amount weekly or monthly. It is also recommended that you exercise patience for a few weeks in some cases where the client is deemed trustworthy. They will appreciate your gesture and compassion, and will always remember that they have to pay you until they pay in full.

You’ll get the money easily this way and even strike more deals than resorting to violence.

  • Send A Letter

If phone calls don’t resolve the issue or the client is too busy to pick up your call,  you can try sending a letter. A letter is a more official means or passing game a message than calling. You should document the letter in the event you have to forward the case to a court of law.

Your letter to the client should be written in a polite manner, without directly blaming them. It should be detailed and contain the list of services or products they owe you for, and how you have been trying to get them to pay.

If the money you’re requesting them to pay is a huge sum, you can negotiate for payment in installments. It is better to get part payment than nothing. The following month or the next time you write to them, you can request for more money out of the remaining that is yet to be paid.

  • Take Legal Action

Involving a lawyer in the case will help the issue have legal standing because the client will have to pay up before further actions are taken against him/her. A letter from your lawyer may just be the right one to hasten them to pay up or get sued.

You should take legal action if you are aware that the client has the means to fulfill their contractual obligations.

Retrieving debts in small courts should be direct and do not necessarily require the service of a lawyer. If the debt is bigger than a small court, you can hire a lawyer in a higher court.  You definitely need a lawyer in a higher court to stand for you and defend your case against the debtor. You should consider the amount of money you’ll spend to get the service of a lawyer for the length of time the case will be in court.

Before you try these options, be informed that the payment period should be overdue. In most cases, late payment is a result of forgetfulness or a mistake.

According to Waldorf, you should first draw the customer’s attention by asking if they’re satisfied with the service you have rendered them before discussing any other issue.

If the client is trying to delay the payment by claiming they lost the invoice or they need to go through the whole cost in their record to get the exact amount, you should send them an updated invoice of the project immediately. This will eliminate any excuses, even if you’re aware that the client has the original copy.

If they still refuse to pay up the debt, you should listen to what they have to say. Maybe there’s something wrong with the service you supplied, or they are not financially buoyant to pay at the moment.

  • Enlist External Help

If your continuous attempts to convince the customer to pay falls on deaf ears, then you need to call on a backup. You will find these three alternatives useful to get back your money.

  • Factoring Services

Whenever you are short on cash and a customer is not ready to pay up the debt, you can try a factoring service. A factoring service will assist you in getting money while you wait for the customer to pay you. It is as simple as selling your receivable accounts to another company for an agreed percentage of the accounts’ value.

The company will pay you some money as advance within a few days of buying and will help you get your money from the adamant customer. After this, they deduct their service charge and send you the balance.

Do not mistake factoring service for a collection agency. Before a factoring service reaches an agreement with you, they have to run a check on your customer’s credit history. The charges will increase if you use multiple customers’ invoices. In the long run, you may not profit from the factoring service.

  • Collection Agencies

A company that helps you recover a debt is called a collection agency. They specialize in recovering debts of at least more than 90 days. Their job is to take over the customer from where you stopped and apply tried and trusted tactics to help you recover your money from the individual.

  • Attorneys

Filing a lawsuit against an adamant customer may not be the best thing to do, because the money you’re spending to file a lawsuit may not be recovered, especially if you’re running a small business.

If the money you’re trying to recover is substantial and the client ignores you or a collection agency, you could try involving a lawyer according to the initial agreement on the invoice. If hiring a lawyer is the next thing to do, seek an attorney to help put you through.

Invoicing Etiquette for Small Business Owners

Sometimes it is a hard task to get the client to pay, compared to completing the job. Tracking overdue payments and telling the client to do the right thing is not so easy. At times, you feel you have been deceived. There can always be a way to get your payment from customers like this. With a working invoicing etiquette, your clients can abide by the rules to maintain a good relationship by paying the bills before it gets late.

You are going to benefit more from it by gaining the customer’s trust and also build a lasting relationship with them.

Invoicing Etiquette for Small Business Owners

Here are a few helpful tips to employ:

  • Use The Best Software for Your Business

Your invoicing game should be strong, and when dealing with every client, to achieve this, you need a reliable online invoicing software. The software will be responsible for taking care of financial and invoicing demands. One of the best invoicing software for small business owners is MixBit.

Iit has been designed to help your business improve by generating and sending out invoices, and also help you with necessary follow up on any client that is issued an invoice to pay on time. With custom made invoicing software for small businesses like this, your communication skills and professionalism with customers will get better.

  • Set Clear Terms and List Your Services

When customers receive an invoice from you, they shouldn’t be surprised to see what wasn’t discussed beforehand in it. An invoice sent should contain what the client is expecting, like the total amount they are to pay, and the due date as agreed upon by both parties. This will help you avoid disputes in the future when all the terms have been stated clearly.

Your cash flow will not be interrupted, as well. In the invoice, the most important thing to include is the cost of service you’re supplying them. An invoice with costs unaccounted for will make the client assume that something is fishy, and they may not be eager to make the payment on time. Sometimes, this act may breach the trust you have built.

  • Create And Stay By Your Policies

Changes in policies and company laws may cause clients not to trust your services as they used to. Everyone loves a smooth process when there are set protocols, but these protocols are not meant to be changed impromptu. Sudden policies will confuse your customers.

If you need to change a law in your terms of services, the client should be notified before you send them an invoice. This little act goes a long way to show them how professional you are in your dealings. You must also make sure that your contact information appears in all the invoices you send out, as it helps to resolve small issues quickly.

You can customize your invoice template with online invoicing software. An ideal invoice should contain all your company’s necessary contact information (including phone numbers, business address, email address, and mailing address), and business logo. Your customers can easily reach you through any of those means if there’s a need to do so.

  • Make Payment Convenient For Your Customers

The best way to make your clients pay for your service on time is by making it easy for them to pay whatever amour their bill is. When a client sees the only available option to pay as a stressful one, they feel reluctant to pay, and this may sometimes lead to overdue payments.

Online payment is one of the easiest and safest means available as your client can pay wherever they are. Some online invoicing software have various gateways for online payment. They can also help you translate the invoice into your client ‘s preferred language. With these unique features, you will stand out among other competitors, which will definitely make the client trust you more.

  • Be Courteous In Your Dealings

While you’re dealing with a client, you have to do so with courtesy. Being polite and honest is one of the keys to securing yourself a long-term client. With politeness, you will pay attention to the client details and go the extra mile in making them satisfied with your service. Leaving a good first impression will make a customer want your service more.

Also, be thankful to your client when you finish negotiating.

  • Ask for Advanced Payment Upfront for Large Projects

Working on big projects is always a good experience to help you improve your expertise. Although,  you’ll have to take your time in executing it and be efficient through the course of the project. In a situation like this, you are free to ask your customers for an upfront payment. The amount you’re demanding should be invested in the same project, and this will help you move faster with the project.

To keep track of all upfront payments you’ve received from your client, you should send them an invoice of already-made payments and remaining balance. You can also forward them credit notes through the invoicing software. Invoicing software is efficient in computing costs and drafting out estimates for clarity sake. MixBit Invoicing software is an all-round program that helps you manage multiple tasks and keep track of every other business involved.

  • Politely Follow-up For Payment Due

Sending invoices is not the only thing you should be good at, as there’s more to sending an ideal invoice. It is your duty to track the sending progress of the invoice, whether it has been sent, received, or has been viewed by the client. You should remind the client about the due date for the payment so that they won’t forget. You can set an automatic reminder for every due payment so that they can be sent to respective clients. With this act, clients will appreciate your professionalism.

Your journey to becoming a successful business person will peak if you take each of the aforementioned steps. Depending on how you take the steps, you’re either getting closer to your dream or edging away if you don’t stick to them. Every small business needs time, hard work, and smartness to get to its peak. With the right tools at your disposal, you’re easily going to achieve your ROI.

Invoicing software is one of the important tools you need to work smartly as it saves time and wasted energy. You can track and manage transactions from a dashboard. Small business etiquette is useful to help set your relationship with clients in the right way. Etiquette also helps your client trust their jobs with you and can also help clients refer you to their colleagues in the same business.

Invoicing with MixBit Invoicing Software

MixBit Invoicing software is an invoicing and billing solution that rolled out in 2020 with the most comprehensive features available on the internet, as well as the Invoicing industry.

It can also be defined as an invoicing software that helps business owners monitor and control several business processes, manage expenses, draft an invoice in a custom made template, follow up invoice progress, and also be useful for financial reporting.

Invoicing Habits That Can Make or Mar Your Business

Among the responsibilities required of a business owner, the most important assignment you have is invoicing. Cash flow in your business is bound to be unsteady without proper invoicing.

You need cash to keep the business growing, and open to long term offers and when the cash flow is affected, you need to look into your invoicing process. Invoicing is not only limited to making money from the goods and services you provide, but it also goes beyond that. A good invoicing process will represent your business in front of your customers and can boost the relationship between you and them.

If you send a harsh message to a customer requesting payment in an authoritative manner, you will get paid, but you’re not likely to work for the customer again. Evaluate your invoicing habit to help your business grow

  1. You Forget To Bill Your Clients

What does this mean? You don’t bother about clients making payment sooner or later, and you feel too relaxed.

As a business owner, you’re making a costly mistake if you act this way. Not reminding your client of the payment they have to make is a sign that you care less about the service you render them or the goods you’re supplying them. To the client, it means you’re not professional enough, or you don’t deserve to get paid in due time.

In order not to affect your business cash flow, you need to take invoicing seriously so that your client won’t toy with your money.

  1. You Never Follow-up On Late Payments

What does this mean? You do not care whether you get paid or not.

While you’ve made invoicing the most important thing, it is more important that you follow up on late payments invoices that are due. There are times when invoice payment is overdue, and if you’re not trying to convince the client to make the payment, they won’t take you seriously.

As a sole proprietor, your role is to keep reminding clients of late payments so that your cash flow doesn’t get affected. You should be polite when reminding clients about the payment they forgot to make, either when you’re making a phone call or sending an email. You can pay them a visit if they’re not too far away. Invoicing software will automatically notify clients about late payments.

For the client to take you seriously, you have to be professional enough and immediately keep track of late payments. In most cases, the client may have forgotten that payment is overdue; it is left to you to remind them from time to time. If the client is refusing to make the payment, you can take further actions by charging them to a small court.

  1. You Follow-up Too Much

What does this mean? You’re extremely intensifying.

When you try to follow up on late payments, you shouldn’t be too pushy or act as a collection agency. Some clients won’t find it friendly if you keep pestering them multiple times in a day. They may get annoyed and see you as a desperate person. Such behavior can make a client postpone the payment date when you continually ask them for payment.

You are not wrong for following up on late payments, but you should do it moderately.

  1. You Require a Down-payment.

What does this mean? You’re trustworthy, committed, and reliable

Business owners that demand an upfront payment are known to be very professional at what they do. Sometimes the percentage of payments may not be equal, but you can request down payment to start the job. A client sees such a business owner as a committed worker and will likely do more business with such a person. Down payments put you on a safer side if the client refuses to pay the balance.

  1. You Request The Payment-in-full.

What does this mean? You do not trust the client.

This is a fair practice, especially if you have dealt with different clients. You don’t want to be deceived by the client when it is time to send an invoice.

Some clients may get the signal that you don’t trust them, and would not like to do business with you next time, the same way you can’t work with who you do not trust.

It is better to research a client if they’re new prospects. If you still don’t trust your findings, you should start by requesting down payment.

  1. You Bill Once The Project Is Completed.

What does this mean? You’re trying to be smart.

This is also a fair practice if you’re dealing with a tough client. You’re even right for sending them an invoice once you complete the job successfully.

If the invoice is sent immediately after you have completed the project, the client may think you’re trying to overcharge them. That is the first thing that comes to mind, even if that’s not why you’re sending the invoice instantly.

Another scenario is when you send an invoice immediately, your invoice may not sync with their billing cycle, and you’ll have to wait until they are loaded with enough money to pay you. If you are caught up with clients like this, the best option for you is to reach an agreement with them before you begin the project.

You should both agree on a weekly payment as the case may be, or you can sync their payment cycle with yours to get paid in full when they receive a new payment.

Pro tip:

If you use invoicing software, you can set an automaton date that will automatically remind the client of a pending payment they have to make.

  1. You Don’t Use Invoicing Software

What does this mean? You are inexperienced in your business field

In this modernized world, not having an online invoicing software will set your business back. Invoicing software will help you create invoices with custom made templates and help you keep track of every pending payment.

Your business will have an edge if a client sees this level of professionalism in your invoice. If you still buy the idea of generating manual invoices, your client may not take you seriously up till when the payment is due.

Nowadays, many online invoicing software comes with different payment options that allow the client to choose the most convenient payment option when you send the invoice. You can also set due dates for recurring payments so that when a client fails to make a payment on the date, you’ll be notified. They are cloud-based solutions that allow business owners to manage invoices from any location.

  1. You Don’t Have A Written Agreement.

What does this mean? You’re too trusting

If all humans are trustworthy, there wouldn’t be a need for any written agreement. A documented agreement will help you and the client work under certain rules that have been read and clarified. If you have terms of payment for your business, the client has to agree with them for proceeding. A written agreement can help you take action legally against a customer that breaches your laid down laws.

Be aware that there’s no need for complex verbiage when formulating a written agreement between you and your client. It just has to pass a clear message to the client explaining your terms and conditions.

  1. You Rely Mainly On Automation.

What does this mean? You’re lackadaisical and pleasing

You do not have to rely on automation before demanding payment of services.

At times you do not have to rely on automation as this may affect the tour cash flow if you’re managing funds at the time. You should always remind the client to make a payment when they are less busy. Automation will only work on set dates, and as a small business owner, you don’t have to wait for that all the time if you have too many clients owing you.

You can send emails or talk to the clients on the phone to remind them of their due payment.

  1. You’re Not Using Your Invoices As A Marketing Tool

What does this mean? You’re not building trust and relationships.

An invoice is one of the most important tools for your small business and should be utilized to the maximum. Every time you make use of an invoice, you should make it effective with different marketing strategies. When you issue an invoice, you can create a discount awareness, sell other skills you’re good at, and share useful information with clients.

Your business can move far with these little efforts, and you don’t have to run paid ads all the time to gain public attention. The invoice you issue out is a massive tool if only you know how to use it well.

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