Whether you manage a small business or work on your own projects, it's critical to understand best practices and common errors when dealing with unpaid invoices. If left unchecked, a late payment can ruin your business relationships, harm your reputation, and lead to even more unpaid invoices down the line. Unpaid invoices are often preventable, and there are actions you can take to avoid unpaid invoices entirely, or at least to have them paid faster than usual.
These are the most common mistakes that small businesses make when it comes to unpaid invoices, and they should be avoided if you want to manage your unpaid invoice risk as efficiently as possible.
When dealing with unpaid bills, make sure you know how to avoid these invoice mistakes listed below so that you always get paid on time and keep your customers satisfied.
Excessive Waiting
Many business owners put off sending a reminder invoice for far too long. Two weeks after you dispatch an order, it may have dropped off your customer's radar. If you don't reach out right away, they may conclude that they were anticipating a final shipment and that there must have been a delay, and they won't notice when you send them another invoice.
That is why you should send a reminder invoice as quickly as possible so that your customer is aware that they still owe you money. Two weeks after the purchase is shipped is preferable, but one week is fine if your customers pay immediately. If they aren't, don't wait more than a week. After that, it's too late, and your payment will be further delayed.
You may also set up automated reminders to email invoices at regular intervals, such as once a month, so your clients never forget about their due balance.
Address Not Verified
Before sending an invoice, double-check that you have your customer's correct mailing address. A small error in one letter or number is a major source of unpaid invoices, making it difficult for customers to receive your bill. The payment may be jeopardized if the address is not verified.
To prevent this:
- Before sending out an invoice, double-check that you have your customer's mailing address correct.
- Check that it is accurate and compare it to a recent purchase order or other written communication from your customer.
- If you don't have a physical copy of their address, call them again and request it.
- Avoiding basic errors like typos in billing information can help avoid unpaid bills from occurring in the first place and minimize the odds of being unpaid.
Invoice Without Signature or Notes
An emailed invoice is simple to overlook and much easier for your customer to toss away by mistake. Make sure to add your company's details so it's clear who sent it. To create an official invoice, sign it so that it cannot be easily disregarded or deleted. If you're working with a partner or a contractor, get their signature as well. This will assist in ensuring that both parties understand their roles.
You may also include digital signatures when mailing an invoice to ensure that your customer cannot file a dispute.
Ensure that your company's information, including your address and phone number, is included on all invoices. Include any further contact information, such as an email address or website, where your customer may reach you with queries regarding their invoice or payment conditions.
No Follow-Up
If you have a huge customer who owes you a large sum of money, it is important that they pay the bill. It is possible for people to forget about their debt, especially if you do not remind them on a frequent basis.
You should contact your customers every two weeks until they pay off their debts. Sending an email or phone call reminding them of their outstanding debt and asking when they plan to pay it off is a wonderful way to do so.
This will guarantee that your company receives payment as soon as possible and will avoid either party from incurring late penalties.
If your customer is attempting to avoid paying their debt, you must issue them a formal notice notifying them that you will take legal action if they do not pay. If they do not pay after getting such a notification, you can initiate legal action against them and receive the money.
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No Proper Notice
Failure to provide early notice might be an expensive mistake. If you do not remind your business partner of their payment responsibility, they may just forget. Alternatively, they may believe that you forgot or that it was small enough for them to follow up on. You want to make certain that they understand when and how much is due.
Even if you have an informal arrangement, it's a good idea to send them a reminder when invoices are due and any late fees that may apply. At the very least, put out your payment conditions in an email and attach them as a reminder that they may be printed.
This will help you stay on top of your financial flow and ensure that all of your invoices are paid on time.
Lengthy Payment Terms
Have you ever received a late payment or payment on an invoice that was more than 30 days past due? In this case, you are not alone. Almost 60% of businesses have reported at least one incidence of late payments.
It's a vicious cycle since late payments frequently result in unpaid invoices, which leads to even slower payments later on.
Shortening your payment terms for your customers is the easiest method to break out of that pattern. Reduce them as much as possible without jeopardizing your cash flow, and then attentively watch for any symptoms of trouble so you can move swiftly if required.
If you now provide a 30-day payment period, consider shortening it to 20 or even 15 days. You may be astonished at how rapidly it may enhance cash flow and help you pay off invoices.
Client Expenses Incurred Not Being Tracked
When it comes time to send out an invoice, failing to keep track of the expenses might result in an unexpected and unpleasant surprise. While it may appear to be a minor flaw, small business invoicing is no laughing matter.
If you operate a small business, you understand that every penny matters and that all spending must be recorded. Tracking your spending will be as simple as pressing a button on your computer or mobile device if you use online invoicing solutions.
This type of system helps you keep track of your expenses and streamline your invoicing procedure. You can also use online invoicing services to send out payment requests, so that clients may pay their bills conveniently and swiftly using a web portal or a mobile browser.
When sending an invoice, choose a client from your list and click "Create an invoice. It's really that simple. Online invoice solutions make invoicing for small businesses simple and convenient for both parties engaged in a transaction.
Not Recording Unpaid Invoices
It would be tough to follow up with customers and remind them about their outstanding balances if you did not keep track of your unpaid invoices. Keeping track of all overdue invoices allows you to swiftly issue reminders as necessary. It also helps you keep your business's accounts receivable in order for you to focus on building your business.
Furthermore, it is critical to keep track of any outstanding invoices since they might be used as leverage in customer negotiations. Assume you have been sending reminders about an overdue invoice for several months and the customer has still not paid you. In such instances, write them a last reminder, stating that if they do not pay by such-and-such date, you will be forced to file a complaint with your state attorney general or small claims court.
This is especially useful when dealing with small businesses who do not want their customers or suppliers to know that they are having difficulty paying their invoices on time.
Best Online Invoicing Solution by Blinksale
Blinksale is the ideal online invoicing solution for sending professional online invoices, tracking invoicing progress on a dashboard, and getting paid faster. With a simple invoice template and modern features, you can immediately start generating professional invoices from your computer or smartphone.
The online invoicing solution from Blinskale enables business owners and entrepreneurs to rapidly generate and distribute professional-looking invoices. They can also handle their customers' payments in one place, allowing businesses to remain on top of cash flow and avoid having unpaid invoices pile up.
Overall, Blinksale is a great tool for small business owners and entrepreneurs. It is simple, straightforward, and affordable. If you're searching for an online invoicing solution that will help you save time, stay organized, and get paid faster, sign up for a free trial of Blinksale now!
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Conclusion
You should always ensure that your unpaid invoices are calculated and delivered accurately. Improper calculations might result in an invoice that is too high or too cheap, which no one wants.
These basic cash flow mistakes may harm a business if they go unchecked for too long, causing it to lose money where it shouldn't. When calculating and sending out invoices, be sure you're not doing any of these eight typical cash flow errors.
That's everything for now.
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