Your company may do excellent work, have dedicated team members and serve a great group of customers, but if its invoicing function isn’t performing properly, you won’t be in business for long.
Invoicing is foundational for any company. The process also requires accuracy and timeliness. Get it wrong, and you won’t get paid or you’ll get paid late for your products or services, which really impacts your cash flow. And when you don’t get paid, you can’t compensate your employees or cover your overhead.
Errors in the invoicing process can also stir up customer suspicions about your business practices. Repeated errors will raise these potential red flags even higher and force your customers to rethink whether they want to do business with you (or not).
The good news is that there are steps you can take to reduce invoice errors and instill a high rate of confidence within your customer base.
6 Invoicing Problems and Solutions
If invoices aren’t getting to their intended recipients, they’re not going to get paid. And if you’re using net 30 payment terms with your customers—and you don’t receive automatic confirmations of receipt—then it may be a month or more before you even realise that the invoice is missing. This can significantly impact cash flow, not to mention force you to start the invoicing process all over again.
Avoid this problem by using financial software that not only automatically mails or sends invoices directly to the right person in your customer’s accounts payable department, but that also alerts you when the invoice has been opened and viewed. Make sure the correct email address is associated with each customer’s account and that you regularly check for “unviewed” invoices. That’s a signal that they’re not being received or reviewed. Look for an automated system that can be set to flag and alert you when invoices have gone unviewed for a certain period of time.
While the language used on your invoices may be clear enough to you (we performed X job in exchange for X number of dollars), your customers may view that messaging through a different lens. This can lead to confusion over invoices, and it’s especially problematic if you are selling multiple different products or services to the same customer, and invoicing them multiple different times.
Circumvent this problem by being as clear as possible with your invoicing language and format and by using the original purchase order (PO), job quote or other documentation to come up with your descriptions. By making the invoice as simple to understand as possible, the approval process will go more smoothly because both the accounting department and the approver understand exactly what they’re paying for.
If you want your invoices to be paid on time and without the need for additional human intervention, they have to be accurate. When the data that customers require to be able to process invoices is missing, there’s a good chance your payment will fall to the back of the line until someone figures out the problem.
For example, instead of simply using “upon receipt” as a due date, be very specific about exactly when an invoice is due. That will help your customers manage their own payment schedules without having to guess at when an invoice is actually due. Note any discounts or incentives for paying early as well as late penalties and types of payments accepted.
Having consistent, updated data across your systems is crucial, which is why it helps to have an enterprise resource planning system (ERP) to tie it all together. Your automated system should flag these types of issues for you, or you can review them by hand to ensure all fields are filled in with logical, relevant information. Either way, have a process in place to thoroughly review invoice data before hitting “send.”
Errors in the Invoice
Mistakes happen. Maybe you forgot to itemise the services that team members performed, or perhaps you didn’t realise that your customer needed its purchase order printed on the invoice in a specific way. Maybe you charged twice for the same product or service, or perhaps you put the decimal point in the wrong place—effectively turning that $1,000.00 service into a $10,000 obligation.
You can minimise or eliminate invoice errors by using an automated financial platform that does the math for you, alerts you when form fields are left vacant and incorporates customer-specific requirements, like that required PO number. If you’re managing invoices manually, be sure to double-check your math and ensure that all fields have been filled out before sending.
By taking this “last look” at your work, you’ll be able to significantly reduce the number of remittances delayed due to invoice errors.
Recurring Invoice Mistakes
As mentioned, incorrect pricing, inaccurate math, missing payment due dates and other oversights can all lead to payment delays that no company can afford. When these mistakes happen over and over, they lead to mistrust within your customer base. When a finance person must take the time to circle back and figure out the problem, determine how many cycles were affected, calculate the necessary adjustments and make sure it doesn’t happen again, you’re costing that client a lot of time. Even when errors are unintentional, you could damage the relationship or even lose that customer.
To prevent recurring mistakes, dig down and figure out the root causes. One-off fixes are simply wasting everyone’s time. For example, if your automated system is pulling pricing information from a database that hasn’t been updated in six months, pull the plug on issuing invoices until the database can be refreshed. Or, if your manually generated invoices are prone to math problems, double-check each one before sending. Having a happy customer that pays promptly will be well worth the extra time spent.
Wrong or Missing Contact Information
Most companies have a specific email box or employee to receive all incoming invoices. Larger companies may have multiple people handling this task across various corporate divisions. If your invoice doesn’t get to the right person, there’s a good chance it lands in the “lost letter pile” of invoices that never get paid. If you weren’t expecting to get paid until 30+ days after sending out the invoice, it will be at least a month before you catch the problem.
Solve the issue proactively by confirming—and reconfirming—the correct recipient for your invoices, knowing that there may be multiple different employees assigned to your account, depending on the diversification of your products and services. Also realise that people move into new positions or leave companies altogether, so review and update contacts on a regular schedule, say every six to 12 months.
If you’re making any or all of the invoicing mistakes outlined in this article, think about how these seemingly minor errors are impacting your cash flow and bottom line. Perhaps more importantly, consider how they are negatively impacting your customer relationships. By taking the advice outlined here, you can sidestep many of these issues, improve your customer relationships and run a more profitable organisation.