You can’t operate a business without sending invoices to your clients. Creating and sending invoices is vital to get paid. The importance of invoicing is very well known, yet it is common for businesses to make invoicing or billing errors that result in billing issues.
In this article, we’ll talk about some of the most common invoicing and billing mistakes with tips on how to avoid them.
Let’s get started:
What is an Invoice?
An invoice can be defined as a commercial document that comes with a timestamp. It records and itemizes transactions between a buyer and a seller.
In cases where goods or services are purchased on credit, the invoice generally specifies the terms and conditions of the deal including the future date of payment and payment method.
An invoice can be of many types including an online record, a paper receipt, or a bill of sale.
Invoices are important for accounting purposes. They help prepare internal documents and are needed for tax reasons as well.
Invoices can be prepared in a variety of ways. The easiest option is to use a tool like Billdu that offers simple invoicing features. Check our article on why small businesses need an online invoicing software for more information on the importance of an invoicing tool.
Fifteen Common Billing Errors
Here are some of the most common billing mistakes to take care of:
#1 Not Sending Your Invoice in a Timely Manner
This mistake is committed by a large number of sellers despite the consequences. You should invoice your customers right after you complete your job. Simply change the deadline to a future date if you want them to have more time to clear the invoice.
Remember that it’s your responsibility to issue invoices, and not theirs. Do not wait for your clients to ask for an invoice. They might not always do so and you might end up getting paid very late or not getting paid at all.
Invoicing software can make the job easier as most have the option to send invoices to the given address with a single click. Billdu even works on mobile devices, which means you’d be able to send invoices without having to go to your computer.
#2 Not Mentioning a Due Date on the Invoice
Most invoices aren’t due on the same day. Whether you’re a large company working with multinationals or a freelancer taking on small projects, you should give your buyers a grace period to clear invoices. The purpose of this period is to ensure they have enough time to test products or services and raise concerns, if any.
The grace period is usually 30 days from the issue date; however, some other variations can also be discussed. Make sure to clear this point before you finalize a deal and to mention the due date on the invoice so that your buyers are fully aware of it.
#3 Including Surprising Charges
Nobody likes the idea of surprise charges, and your buyers are no different. If a job requires extra work or time that goes beyond the scope of the contract then make sure to have a discussion about it before you go ahead and invoice your clients.
Most clients have limited budgets and they don’t like to see inflated amounts, even if it’s just a few dollars. You’d be surprised how often these billing errors occur, whether it’s intentional or an accident. Avoid these common billing issues by carefully double-checking what you’re charging for.
#4 Not Creating a Backup of Your Invoices
It’s important to back up your invoices. You will need these for tax purposes and financial records. Paper invoices or backup can be risky, so make sure to go for digital copies and keep a backup on the cloud.
It can be hard to create backups for companies that use the manual invoicing method. An invoicing tool can help you here as most programs can create regular backups and save data on the cloud that can be accessed from anywhere.
Billdu allows users to export data including orders, expenses, estimates, and invoices in a variety of formats. You can keep this information stored in your desired location.
#5 Sending Invoices to the Wrong Buyer
This simple mistake can turn out to be very costly as it may cause you to not only face delays in getting paid but also lose your reputation. Moreover, it can lead to unnecessary delays and complications as invoicing the wrong buyer may cause you to check with not just the intended recipient but also the wrong recipient and explain yourself.
Things can end up being very complex when you’re dealing with a large organization. Your contact person or the person who selected you for the job might not always be the one managing your payments.
Invoicing tools can be very helpful here as they allow users to import names and contact details when creating invoices. This can be very beneficial when handling multiple tasks for the same company. You can import data, which will not only help you save time but also reduce the risk of errors. Avoiding these common billing issues is much easier with invoicing tools like Billdu.
#6 Using the Wrong Name On the Invoice
Sending an invoice to the wrong person and using the wrong name on the invoice are two different things.
Clients will not pay an invoice that is not directed to them even if other details are correct. Most will not even read it. There are two reasons; firstly, they’ll assume there are other issues with the invoice. Secondly, an invoice under a wrong name can lead to issues during audits.
Also, some clients want invoices under their ‘company’ name and not the owner’s or manager’s name. Discuss this with your client before you issue an invoice as this billing error can cause delays.
#7 Not Itemizing Services or Products Clearly
Create a detailed invoice that gives your customer an easy to comprehend breakdown of the services and products they are being charged for. This is important when offering multiple services or products.
Clients require this information not only to verify payments but also to track expenses. Not having this information may force customers to get in touch with you and ask for clarifications.
#8 Not Paying Attention to Branding
Though not the most important factor, branding should be taken seriously if you want to make a solid impression on your clients.
Branded invoices use company colors and logos to improve your marketing standing and help clients recognize you. They also reduce the risk of ‘fake’ invoices being sent by spammers.
Plus, some reports suggest that branded invoices get paid faster because they’re better at attracting attention. Most invoicing software offer customization options, i.e.: change the font, add a logo, etc.
#9 Calculation Errors on Your Invoice
Calculation errors refer to incorrectly calculating the total amount on an invoice. This billing error is a common occurrence when dealing with manual invoices. Using a calculator can be tough, especially when you’re doing it all day long. Plus, the process can be tiring and cumbersome.
You can put all your worries aside by using an invoice tool that can do the hard work on your behalf. Invoice software can calculate percentages, discounts, and the final amount after taking into consideration discounts and additional charges.
Since the computer is reliable, you will not even have to recheck amounts.
#10 Making It Hard to Pay
You need to make invoices as easy as possible. Customers do not like invoices that are difficult to pay. First thing first, the invoice should open easily – i.e.: no need to download or have specific tools to open it.
Give users multiple payment options such as PayPal and credit cards with a simple click. You can add clickable links on your invoice to make it easy to pay them. Clients like to delay invoices that take too long to clear.
Remove clutter and offer ease to your buyers. If you have multiple options such as a bank transfer then include account details on the invoice.
#11 Writing Unclear Terms
All payment terms should be very clear, discussed beforehand, and mentioned on the invoice in a neat manner.
If there are extra charges for using a specific payment method then make sure to mention it.
If there are ways to extend the deadline then mention it as well.
Policies regarding discounts should be mentioned as well.
To make things easier, you can add links to your payment terms so that clients can go through the pointers in detail. Adding a barcode may do the trick as well.
#12 Not Following Up With Clients
A common billing error is not following up with clients. This can be a challenge and difficult to deal with and the opinion differs from experts to experts.
Some experts suggest sending an email within a week to verify the person has received your invoice and some suggest to wait for the deadline. You should use the method that works best for you.
Reminder emails need to be drafted with care. They shouldn’t sound rude or intimidating. It’s best to automate the process by using an invoicing tool that can remind you when an invoice is overdue and send an email on your behalf.
#13 Not Using the Right Currency
This is important for clients dealing with international users. Not all buyers want to pay in USD or your default currency and some want to see the amount in their local currency on the invoice.
Digital invoices can solve this problem as they can show the amount on the invoice based on the day’s exchange rate even if you billed the client in USD.
Give your clients the option to choose from different currencies and languages. This will offer them ease in reporting expenses and make you look more professional.
#14 Not Mentioning Discounts or Late Fees
Do not forget to add applicable discounts or late charges. Customers do not like to receive invoices that do not contain discounts they’re eligible for. They feel as if you’re trying to rob them off. Similarly, they don’t like to know about late fees after they’ve defaulted, so make sure to include the amount in your invoice.
To encourage quick payments, you can offer a special discount to consumers who pay within a specified time period.
#15 Adding the Wrong Tax Rate
Tax rates differ from country to country and invoicers must create invoices accordingly. If your VAT rate isn’t usual for any reason then make sure to explain it to your customers and add a special section for tax (service, product, etc.) based on the prevalent rate.
Why Do These Errors Occur
Here are some of the main reasons why these billing errors are so common:
Using the Wrong Billing Tool
Not using an invoicing tool or using the wrong invoicing tool can lead to these issues. Gone are the days of manual invoicing, you must use an invoice maker like Billdu to complete payments seamlessly. Thanks to using online invoice generators, you can avoid a number of these common billing errors.
Being in a Haste
Haste makes waste. Invoicing has to be done with care as a small typo can lead to major issues. While invoicing tools can make the job easier, you still have to be careful when feeding data into your computer. Make sure to enter correct names, addresses, amounts, etc.
Not Being Aware of the Law
Poor understanding of the legal or tax system can lead to invoicing errors. While an invoice isn’t a legal document on its own, it might be used if there are contractual issues later on or when you or the buyer files taxes.
The Cost of Billing Errors
Billing mistakes can lead to huge losses. According to reports, hospitals alone lose about $68 billion per year due to billing errors. Plus, paper-based invoicing has additional costs. Each paper invoice error costs $53.50 to rectify. Digital invoices are easier to manage as there’s no wastage.
The average company spends about 31 days correcting invoices. Moreover, about 25 percent of errors go undetected.
Invoicing errors don’t just impact your financial result but also affect your reputation and image. Clients don’t look very favorably at brands that commit such mistakes.
How Can I Reduce Billing Errors?
Here’s what you can do to reduce billing errors and make your system more efficient.
Make Sure to Review Invoices
Reviews invoices and data fed into the software or computer to ensure there are no issues. Correct issues as they are identified.
Hire the Right Support
You must have friendly customer support agents to take care of concerns related to invoice or billing-related issues. Also, your billing department must have skillful employees with a good understanding of how billing works.
Use a Reliable Tool Like Billdu
Billdu is an invoicing tool with some amazing features including a user-friendly dashboard, the ability to send recurring invoices, track inventory, receive payment reminders, send delivery notes, and more.
We have created a tool that’s perfect for all kinds of businesses. Go here to try it for free or get in touch with us to know more.