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Examples and Helpful Suggestions for Invoicing
As a small business owner, you have many different responsibilities and one of the most important, but sometimes most frustrating, is taking responsibility for your accounts receivables. In order for you to maximize cash flow, your customers have to make their payments on time, and this starts with you actually billing them.
By executing some of these best practices for invoicing and modeling your invoices off of these small business invoicing examples, you will be well on your way to speeding up the process of getting the cash you need. Before we start on the best ways to invoice, let’s jump into actually creating your invoices.
Small Business Invoicing Examples
1. Standard Invoice
This is a basic invoice that can be of use for any transaction in the present or future, with a few simple changes. Generally, it will have the invoice number (we’ll get into this in the second section), company name, address, contact information, items purchased, costs, etc. Check out our example of a basic invoice below.
2. Progress Invoice
If you’re in an industry where your work stretches over a long period of time, you will probably want to use this invoice once in a while to show progress to have customers pay you in increments in order for you to cover your business’s current costs, such as payroll. However, it is not very often that a customer will pay before a project is complete, so factoring might be a great option if you are in an industry that would want to use progress invoicing, such as construction.
3. Pro Forma Invoice
The pro forma invoice gives the customer a general idea of how much products and services will cost. It is a basic estimation and can be seen as an affirmative statement from you to your customer that you are committing to that product or service around that particular price. It is not recorded as accounts receivable or payable because it is an estimated amount.
If you can measure a project you’re working on by specific requirements, rather than duration, for example, you can benefit from fixed-bid billing. This type of invoicing can be done before or after the completion of a project.
If you aren’t sure how long a project will take for you to complete (creative work for example), time-based billing could be right for you. If this is done correctly, you can even get the rate down to the minute.
6. Debit Memo
A debit memo is an informal type of invoice. It is fairly uncommon and mostly used by banks or financial institutes; however, it can be useful if you’re trying to adjust your billing by a certain increment ($100 out of $10,000 for example). Instead of issuing a debit invoice though, many businesses simply reissue the invoice with the amount adjusted. This mainly comes down to personal preference and how you want to record your invoices and money.
7. Credit Memo
A credit memo (credit invoice) is to show the amount that you owe your customer. Ideally, you would want this to be negative because it’s used when you would issue a refund, for example. It can also be of use for discounts or to correct a billing error if you overcharge and under-deliver in other words.
Best Practices for Small Business Invoicing
Now that you understand the different types of small business invoices, here are some tips for invoicing that will help you get your customers to pay faster and improve your cash flow.
Keep invoices organized.
This should be pretty easy as a business owner. Simply implement a number system for invoices so you know exactly what invoice, goes to what customer, when it was issued, etc. Not only will this help keep you organized, but it will also keep you on the same page with employees who may handle invoicing now or in the future.
Simplicity is key.
Your customers don’t want to see your impressive (or so you may think) design skills and new logo on an invoice. They want to be able to easily see what their charges are, how much it will cost and when they need to pay it. The easier it is for your customer to figure this out, the faster they’ll complete the payment without any questions, getting you your money faster.
Widen your payment horizons by offering options for your customers to be able to pay online, over the phone and through the mail with a paper check. If you offer the option to pay electronically or even have the capabilities to accept debit/credit cards, you won’t have to wait for slow-paying customers to mail a check. If they are in control of their payment type, they might use your service repeatedly because of the convenience you give them.
Be upfront and formal.
When you take on a new client or customer, let them know your payment policies written in a document. If your customer knows before you even start the project or service when they are to pay, there are no excuses for the delay when the time comes. Let them know how much you charge for a late fee and when they can expect it after they receive an initial invoice from your business. Have both you and your customer sign the contract before you begin working so each of you will be responsible. It also shows how organized you are with your business and gives an extra inch of trustworthiness.
If your customer doesn’t meet the expectations of the payment terms, make sure you follow up. You don’t want to be rude or ruin a relationship with a customer, but you do need to get the money you deserve because as a business owner, let’s face it, you definitely need the money sooner than later. We’ve all missed due dates before, and whatever the excuse is, a gentle reminder to your customer that they need to pay their invoice will go a long way. Maybe they simply forgot and they’ll complete the payment immediately after you reach out with a nudging email!
Slow paying customers not only test a business owner’s patience, but it can affect the success and livelihood of your business. Check out our tips on getting customers to pay their invoices to you faster. If you are still waiting for slow-paying customers, don’t want the burden of invoicing or could simply use the cash now, see if factoring is right for you.