7 Invoice Best Practices Every AR Professional Needs to Know

Introduction

Whether you own an SMB or an enterprise business, invoices are vital to your financial workflow. Crafting them well can help you get paid on time and can also help you focus on your core activities rather than spending time and energy chasing overdue payments. To write an effective invoice, you need to know two things: common mistakes to avoid and invoice best practices to get ahead.

To make it easier for you, in this article, we’ll cover invoicing mistakes and invoice best practices that can help you reinforce your professionalism, provide legal legitimacy, and help you receive payment promptly.

But first things firstᅳyou have to know what a great invoice looks like if you’re going to craft one.

Anatomy of a Good Invoice

Every invoice you craft has some basic components and elements: Invoice number, date of sending, and the total amount owed. But if you want to craft an effective one, there’s a right way to do it and standards that should be followed. 

Want to learn in detail all the components or elements of an effective invoice? This article can help – What is an Invoice: Types and Examples.

5 Common Invoicing Mistakes to Avoid

Every invoice offers an opportunity to get paid on time, build your brand identity, and build customer trust, but only if you avoid common invoicing mistakes. Here are five such mistakes to avoid:

1. Not following up

   You’re likely looking for a timely payment when you send a well-crafted invoice. But remember, most customers receive a lot of invoices, and sometimes they forget to pay.

   As a general rule, if you don’t receive payment on time, send a follow-up reminder to bring attention to your previously sent invoice and follow up with a courtesy call.

2. Not giving multiple payment options

   Well, you must have heard about the psychology of choice – the more options you give – the less likely people will take action. But this rule doesn’t apply to invoices. 

   In fact, it’s quite the opposite in the case of invoices – the more payment options you offer, the higher the chances that your customers will make the payment on time. So, ensure that you provide multiple payment options, from credit cards to digital wallets, to help your customers pay on time.

3. Not specifying payment terms and policies clearly

   When crafting the invoice copy, remember clarity is the key. Your invoices should serve as crystal-clear guides for your customers, leaving no room for interpretation or confusion.

   To achieve this, using straightforward language devoid of payment acronyms and accounting jargon is crucial. To avoid future disputes, specify your terms and conditions, including payment and credit terms, shipping policy, late fees, and refund policies clearly.

4. Not providing correct invoice information

   If you want your invoices to get paid promptly, ensure that they don’t contain any mistakes, from calculation errors to spelling mistakes to missing information. All this can hurt your chances of getting payment on time and tarnish your business reputation. 

   Ensure that your invoices include all essential details from invoice number to tax number required by state and national laws to payment due date to the total amount due in the correct currency in case of cross-country billing. 

   Also, you can itemize the invoice by breaking down the goods and services into sections and adding a clear description for each. This will provide a neat and accurate payment summary to your customers.

5. Not leveraging automation

   The manual invoicing process is error-prone, time-consuming, and has substantial operating expenses, yet some businesses hold on to it to cut costs. The answer to addressing these challenges is to automate the invoicing process workflow. Automating the invoicing process streamlines the invoice payment process and translates to enhanced efficiency.

Switching to an online invoicing solution that can automate invoice delivery across channels, including emails, customer portals, accounting systems, post, and fax, can be a game-changer for your business.

7 Top Invoicing Best Practices

Now that you’ve got the proper invoice format and know what invoicing mistakes to avoid, it’s time to focus on crafting invoices that help you get paid promptly. Here are seven billing best practices to help you do that.

1. Keep It Concise

Focus on simplicity rather than complexity when designing your invoices; clarity is key to ensuring they are effective. You can play a little with the standard format to improve it, but there is no need to change it a lot. After all, certain aspects of your invoices are bound to be formulaic – you want to keep it as simple as possible. 

Remember, the only goal of your invoice is to get paid, so make sure every element you add helps you make it easy for your client to pay. If it’s not, remove it.

2. Nudge Before the Due Date

We all know prevention is always better than cure, but most businesses don’t follow this rule when it comes to invoicing. Remember, to ensure timely payments, gentle reminders play a crucial role. Sending a courteous follow-up message a week before the invoice due date can prompt clients to make necessary arrangements and demonstrate your proactive approach to managing receivables. 

Maintaining a polite tone and emphasizing the importance of timely payment can encourage prompt settlement without later causing undue tension or discomfort.

3. Follow Up—in Good Time

Following up on invoices is crucial to ensure timely payment, but to get results from it, you need to do it the right way; otherwise, it can annoy your clients and prove counterproductive. Allow a reasonable time before sending a follow-up message, typically at least 3 to 5 days. This approach demonstrates consideration for your client’s schedule and avoids appearing overly pushy. 

Once a week has passed since the invoice was due, it’s time to follow up with your customer via email and increase the sense of urgency in the wording of your payment. Also, show them you are genuinely interested in helping them by offering them a chance to help. Simply asking if anything is preventing them from making payments and if you can assist them can show that you are interested in maintaining the relationship.

4. Show Your Appreciation to Customers 

Keeping customers happy is the key to every business success, but you don’t need to spend money or work hard to keep them happy. Simply showing customers you care can do the trick. For example, just adding a thoughtful, personalized message in your invoices is an easy way to show customers you appreciate their business. 

You don’t need to update it every time – you can use a template where you add a line or two about showing them you appreciate their business, and it can make a lot of difference in helping you add a positive touch to your invoicing process. 

5. Highlight Late Fees Clearly in Your Invoices

No matter how clear and well-crafted your invoices are, some clients just don’t like paying on time – to avoid this and deter them from doing this, most businesses levy “A Late Fee.” However, doing this is tricky as it can hurt your relationship adversely. To prevent this from happening, be upfront from the start that late payment will lead to charges. 

Before levying or specifying these charges, know the limits and take legal advice to prevent mishaps, as these late fee percentages are regulated in some states. Practically speaking, this ranges from 1% to 1.5% per month. More than that could seem excessive; less than that isn’t worth the trouble.

6. Format Them Well

The main goal of all these billing best practices is to get paid on time; for that, you need to make it as easy for your customers to pay as possible. And that’s where clear formatting plays a crucial role. So make sure that your invoice is in an easy-to-read format and looks professional. Because if it is hard to read or understand, it might delay your payment.

7. Switch to E-invoicing

Switch from traditional invoicing to electronic invoicing as the manual invoicing process is error-prone and time-consuming. And that’s where e-invoicing solutions can help – they can help you save money, elevate your customer experience, simplify your accounts receivable operations, and reduce your carbon footprint.

However, switching to an e-invoicing solution can only help if you pick the right tool – one that integrates easily with your existing business software and offers features such as compliance with document storage, tax calculations, digital signatures, multicurrency, and multilingual support if you’re a global operation. And that’s where HighRadius’s Order-to-cash suite can help.

Here’s how:

E-Invoicing and Payment Module (EIPP)

It automatically lets you generate invoices from completed sales orders, cutting down on manual data entry and associated errors. Also, it offers customizable invoice templates, multiple payment options, and multi-channel delivery so you can meet your customers’ unique needs.

Low-Touch Buyer Onboarding

 HighRadius lets you onboard customers via email invites, self-registration, and Single Sign-On (SSO), making the initial experience low-touch and effortless for your customers.

Flexible Payment Options

It lets customers tailor their payment schedules, opt for installments, or even make partial payments—offering flexibility and improving satisfaction.

Consolidated Billing

When a customer places multiple orders within a billing cycle, the software lets you bundle these into a single, consolidated invoice. And it smartly allocates the funds to the corresponding orders when payments come in.

In short, a comprehensive solution like HighRadius can improve your internal processes and elevate the customer experience. Streamlining your invoicing and payments process through such an advanced e-invoicing system can significantly enhance your operational efficiency, reduce errors, and help you manage cash flow better.

FAQs

1). How to make a perfect invoice?

To make a perfect invoice, follow these best practices:

• Personalize your invoice: Choose a color representing your brand and upload your logo. 
• Fill out the contact information: Include the names, email addresses, addresses, and phone numbers of both the sender and the recipient.
• Add the due date: Set a due date for the invoice to track payments and ensure timely payments from clients.
• Include invoice information: Clearly state the invoice number, date, and any relevant purchase order numbers.
• Review and proofread: Before sending the invoice, review it for accuracy and proofread for errors. 

2). What should every invoice have?

Every invoice should have the following elements to ensure clarity, professionalism, and ease of payment: business information, client details, invoice number, date, description of goods or services, the total amount due, applicable discounts and taxes, payment details, and payment terms.

3). What are the best practices for paying invoices?

Establish clear payment terms, ensure that invoices are accurate and complete, offer early payment discounts, and use automation to streamline the invoice processing and payment process. Additionally, making it easy for clients to pay by providing multiple payment methods.

4). How do you invoice more effectively?

To invoice more effectively, consider the following best practices:

1. Set clear terms
2. Send invoices promptly
3. Use a clear and scannable template
4. Double-check for errors
5. Offer multiple payment methods
6. Automate the invoicing process