Table of Contents
When you run a small business, it’s easy to find your attention totally consumed by creating and marketing your products, managing your team, and ensuring the best possible service experience for your customers. Undoubtedly, these are important undertakings. However, to maintain healthy cash flow and to keep your business up and running, you’ll also need to be attentive to invoicing.
Indeed, poor invoicing habits are among the leading causes of impaired cash flow, limiting a company’s ability to invest, hire, acquire, and expand. LLCs are by no means immune to these problems. Whether you have an LLC in Texas, Idaho, or Massachusetts, it’s crucial to know about some of the most common invoicing challenges… and to take the right steps to avoid them.
What are the Most Common Invoicing Challenges That LLCs Face?
While invoicing challenges can vary from one LLC to the next, here are some that are pretty common across the board.
1) Failing to Send Invoices Promptly
Delaying your invoices ultimately means delaying the receipt of payments. Again, this can be a real obstacle to healthy cash flow. Additionally, displaying a non-urgent attitude toward your own invoicing process can cause customers to take a non-urgent attitude toward paying you!
As a rule of thumb, an LLC should send invoices as soon as work is completed or a product is shipped. The only real exception is if you have a recurring customer with whom you have a different arrangement, like invoicing on the first or 15th of the month.
2) Sending Invoices Riddled with Errors
When you send invoices that have incomplete or inaccurate information, it can significantly increase the risk of payment disputes. Additionally, error-ridden invoices can detract from the professionalism of your business, leading to lost trust and a tarnished reputation.
When sending an invoice, always double-check to make certain that you spell the customer’s name (and their business name, if applicable) correctly. Also verify that you accurately include details such as the invoice number, the total amount owed, and the payment date. If your state requires you to list tax ID numbers on your invoices, double-check the accuracy of those, as well.
3) Including Payment Terms that Lack Clarity
How soon should your customers pay their invoices, and what kinds of penalties will you levy if they don’t make their payments on time? Invoices should always stipulate your policies in a way that reduces any risk of misunderstanding.
For example, you may state on your invoice that clients have 15 days to pay their invoice… and while that might seem simple, it invites questions about whether or not you mean business days. Stating something like “Pay within 15 days of receiving the invoice,” and noting the invoice issuance data, can be much more helpful.
4) Failing to Demonstrate Invoicing
The invoicing process provides LLCs with an invaluable opportunity to demonstrate a commitment to professionalism.
For instance, it’s always important to verify that your invoices are printed in a clear and legible font. And you can verify that you respond to all completed payments with a simple note of thanks.
A lack of professionalism in the invoicing process can ultimately sour a customer’s view of your company, potentially losing their return business or costing your LLC a glowing Google review.
5) Surprising Customers with Hidden Fees
Nobody likes to be surprised during the invoicing process, especially when it involves unexpected costs.
You may have a project that requires you to invest some extra personnel hours or to procure some supplies you hadn’t anticipated needing. Don’t simply pass along these costs without first alerting your customer. Be clear and upfront with them about any extra costs their project has incurred so that when they open their invoice, they know exactly what to expect.
6) Limiting Your Payment Options
Different customers will want to complete their payments using different means. You may find, for example, that one customer prefers writing a personal check. A second customer may desire to use their debit card. And a third customer may prefer the ease and convenience of Apple Pay, Google Pay, or Paypal.
You don’t necessarily have to accept every payment option under the sun, but it’s generally a good idea to offer a few different ways for your customers to settle up with you. The more flexibility you provide, the more likely it is that customers will make their payments quickly, allowing you to avoid any impediments to a healthy cash flow.
7) Giving Up on Unpaid Invoices
What happens when your LLC sends out an invoice and weeks go by without the receipt of payment? It may be all too easy to throw up your hands in frustration, assuming the customer simply isn’t going to pay you.
What’s much more likely is that the customer forgot, or perhaps misplaced their invoice. By following up with them, you can often get that payment remitted after all. But you can’t leave this to chance. Make sure you have formal processes in place to follow up on incomplete or open invoices.
Invoice Your Way to Success
Smooth invoicing is essential for maintaining the financial and operational health of your LLC. Make sure you know about the most common invoicing errors, and that you’re proactive in avoiding them.