A guide to common mistakes made when demanding payment and tips on how to avoid making them.
A badly designed invoice can cause confusion, delays in payment, and even reputational damage to a company. But there are several other commonplace mistakes businesses make when demanding payment.
Using manual systems
A surprising number of SMEs still use paper invoices, which are slow to deliver, take longer to process, and can be prone to duplication. They’re also more likely to contain inaccuracies and sometimes get lost altogether. Accounting software issues invoices automatically, improves efficiency, and can personalise digital templates for each customer. These electronic systems are affordable, and can also track the payment process, sending automatic reminders for bills remaining unpaid.
Getting information wrong or sending the invoice to the wrong person
Misspelling a company name or addressing an invoice incorrectly happens all too often, causing delays while the mistake is discovered, a new invoice requested, and the amended document re-issued. Avoid confusion by being explicit and detailed in describing what product or service has been provided. Don’t give the client any excuse for disputing the invoice.
Asking for the wrong amount
Always double-check the price quoted to ensure it’s the one agreed with a customer and matches the job in hand. If an incorrect invoice has been sent, the business must issue a cancellation invoice with its own, new invoice number. This will include a negative invoice amount, as well as the original invoice number and the date it was issued. Then, a correct invoice can be raised with a different invoice number. However, the original invoice reference should also be stated should HMRC seek clarification at a later date.
Including the wrong VAT rate
If your business is VAT-registered, be certain to use the right calculation for the goods and services provided. If your rate differs from the standard VAT level of 20% or you’ve only recently registered for VAT, make sure customers are aware to prevent giving them a nasty shock.
Providing incorrect payment information
Ensure your company’s payment details, bank account number, and mailing address are correct and easy to read. Better yet, provide the facility for customers to pay immediately with the click of a button. Providing a link to an online payment service makes their life easier, and means money hits your account sooner.