4 min read
Welcome back to Back to Basics - a refreshing revisit of some of the core foundations of credit control. This week we're continuing with the fantastic series The 7 Habits of Highly Effective Invoices, to revisit and refresh on the basics of how to get invoices paid on time. Over the coming weeks, we’ll continue to explore a new habit from the series each week.
Last week we looked at laying solid foundations with the terms and conditions on your invoices. This week we dive into Habit 4: Be all present and correct.
An invoice has one purpose, and one purpose alone: to get paid on time.
At Chaser, we’re nuts about getting invoices paid on time. Welcome back to The 7 Habits of Highly Effective Invoices, our series on the most valuable things an invoice can do to get paid on time. These are taken from our Founder & CEO David Tuck’s experience working as a Finance Director and Accountant.
Habit 4: Be all present and correct
Think of your invoice as a team of individual components. They are all pulling together to help the team achieve its quest to get paid on time. We talked previously in Habit 2 about starting with the end in mind and making sure your invoice includes full and accurate payment details. Now they are definitely the star, the Diana Ross of your invoice team. But there are other components that are also supremely important (oh yes we went there - we told you that we love a good pun at Chaser!).
Your invoice needs all of these team members to be present and correct. Otherwise your invoice will be undone. Like a rubbish game of Jenga in which the removal of the first brick brings certain collapse.
Photo by Robert S. Donovan / CC BY
Invoice components reporting for duty
So what are these invoice components? Here are the key ones from our experience:
- Your payment terms - it’s such an easy one to miss. But if you don’t tell your customer when payment for the invoice is due, you imperil the chances of it getting paid on time.
- Invoice date - it’s all very well including your payment terms (e.g. 30 days) on your invoice. But you must ensure you include the date of the invoice itself (which should be as early as possible - see Habit 1). Without that your customer has no reference point for when payment is due.
- Your VAT or sales tax number - your customer will need this to process the invoice for their own accounting purposes. Don’t allow it to be a potential excuse for not processing and being able to pay your invoice.
- The correct descriptions and prices for the goods or services sold. It’s so easy to rush invoicing and lose the essential attention to detail. The last thing you want is to get bogged down in a protracted back and forth about incorrect details. It can delay the whole process of getting paid on time.
There is a potential fifth component that when relevant packs a huge invoicing punch. Like the Robbie Williams to invoicing’s Take That. That is the purchase order number. Purchase orders are more common in large companies with lots of departments. If someone in a particular department wants the business to purchase something from a supplier, they will request a purchase order to do so. It is a very important mechanism for ensuring that the large company does not over-commit to more expenditure than it can afford.
Large companies invariably don’t pay an invoice unless they can match it to the relevant purchase order number. You will need to include it on your invoice. In our experience, obtaining purchase orders can be a huge and prolonged pain in the... . So if you are going to need one for your piece of work, definitely get cracking on obtaining it from your customer as early as possible.
Be all present & correct
Your invoice needs to tick a lot of boxes in order to be able to get paid on time. None of these boxes are hard to tick. But equally, they can be very easily overlooked in issuing your invoice. These oversights can really come back to bite you and your cashflow. By making sure all of the members of the invoice team are present and correct, you can help avoid the painful bite of late payment.
Thanks for reading. Stay tuned for Habit 5: Know where you need to go.
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