Owning a business is complex, and business finances are often in a difficulty tier all on their own. With 38% of small businesses closing due to financial difficulties, getting an early handle on business financials is key. And, with small businesses being paid an average of 8 days late, having a simple, straightforward, and functional invoice can help your business stay ahead. In this guide, we’ll walk you through both how to create a professional invoice and how to send an invoice so you can get paid on time.
Disclaimer: This content should not be construed as legal or financial advice. Always consult an attorney or financial advisor regarding your specific legal or financial situation.
How to send an invoice: Step-by-step
Before sending an invoice, we’ll want to create the best possible one. Let’s take a closer look at the steps needed.
1. Determine your payment terms
First, you’ll want to decide on the terms and policies for accepting payments as a business. Here are factors you’ll want to consider:
Analyze your industry standards
Research the common payment terms in your field to ensure competitiveness while still meeting client expectations. Not all services and industries work the same, so knowing what your clients are likely to expect can go a long way toward planning your payment terms.
Assess your business's cash flow needs
If you require a faster cash conversion cycle, opt for shorter payment terms like 14 or 21 days. Conversely, if you can manage a longer cycle, offering net 30 or 45 days might be more appealing to clients.
Consider the client relationship
Offering more flexible payment terms can help attract new clients or large projects. However, standard terms are usually sufficient for long-term clients or smaller projects.
Evaluate the project scope
For larger projects, consider breaking down payments into milestones to manage cash flow and mitigate risk.
Clearly communicate your payment terms
Include them on your invoices, contracts, and any relevant communication to avoid confusion and ensure timely payment.
2. Prepare the invoice
Now that you’ve decided on your payment terms and policies, creating a clear and professional invoice is a crucial next step for prompt payment and maintaining a positive client relationship. Here are the essential ingredients for a winning invoice:
Clearly-stated business information
This may sound obvious, but ensure that your business name and contact information is prominently displayed on your invoice. Also be sure to include your client’s name and their contact information.
Here’s a quick checklist of what should be included:
- Your information:
- Business name (and logo if applicable)
- Your name (if different from business name)
- Business address
- Contact phone number
- Email Address
- (Optional) Business Registration Number or Tax ID
- Client information:
- Client name
- Client address (if different from billing address)
- Client contact name (if applicable)
- Invoice details:
- Invoice number (unique and sequential)
- Invoice date
- Payment due date (e.g., "Due upon receipt," "Net 30")
Itemize the transaction details
Next up, be sure to clearly list what services or products your invoice covers, as well as the pricing. When thinking about what to include here, we recommend the following details:
- Description: Be clear and concise about what you're charging for. Use specific language (e.g., "Website design - homepage," "Consulting services - 5 hours").
- Quantity: Specify the number of units for each item.
- Rate: The price per unit.
- Subtotal: Calculate the total for each line item (Quantity x Rate).
Prominently display the total amount due
The total amount due should include all of the following:
- Taxes (if applicable): List any applicable sales tax, VAT, or other taxes.
- Shipping/Handling (if applicable): Include costs for shipping or delivery.
- Total amount due: The final amount the client needs to pay.
Don’t forget to include accepted payment methods and terms
Now that you’ve laid out the general structure of your invoice, make sure that you’ve also clearly stated the payment methods you accept, as well as your business terms. Here are a couple of things to keep in mind:
- Payment terms: Clearly state when payment is expected (e.g., "Net 30" means payment is due 30 days from the invoice date).
- Accepted payment methods: Specify how the client can pay (e.g., bank transfer, credit card, online payment platform). Provide relevant details like account numbers or links.
Some optional items to include
We’ve covered the must-haves for your invoice, but these items may also be helpful to include, depending on your business type and policies:
- Late payment policy: You can include a brief statement about late payment fees or penalties (if applicable).
- Discounts: If early payment discounts are offered, mention them here.
- Project details: For larger projects, you might add a brief project summary or reference number.
- Thank you note: A simple "Thank you for your business!" goes a long way.
Keep your invoice organized
When going through the process of creating your invoice, you’ll want to ensure that your invoice looks professional:
- Use a clear and easy-to-read font, headings, and spacing.
- Consider using an invoice template for a polished look. Many word processing and accounting software programs offer free templates.
- Double-check for any errors in calculations, spelling, or grammar.
3. Sending an invoice
With your invoice now fully prepared, you’re ready to send it. When considering how to send an invoice, there are three main ways to send it: via mail, via email, or via invoicing software.
If you choose to send your invoice through the mail, it’s a good idea to ensure that your invoice is printed well and is inside of a sturdy envelope to prevent damage in transport. It also may be ideal to send the invoice via certified mail so that you can track the delivery of the invoice.
With email, use a clear and concise subject line like "Invoice [Invoice Number] from [Your Business Name]" for easy identification. Also, be sure to attach the invoice in a universally accessible format like PDF to ensure readability across different devices.
Additionally, we recommend sending all invoices from a professional business email address.
Using a professional email address ensures that your invoice appears legitimate and helps build client trust.
And don’t forget that most invoicing software will allow you to send out invoices automatically, so don’t neglect this useful feature for your business.
Regardless of your method of sending an invoice, we recommend including a brief, courteous message thanking the client for their business and clearly stating the payment due date. And, maintain a record of all sent invoices for your own accounting and follow-up purposes.
4. Follow up
Following up on unpaid invoices requires a delicate balance of persistence and professionalism. Asking for payment can be extremely uncomfortable for some. To avoid as much awkwardness as possible, your timing is crucial: send a gentle reminder a few days after the due date, a more direct reminder after another week, and a final notice outlining the consequences if payment is still due.
Throughout the process, try not to lose your cool. Maintain a professional tone, offer solutions like payment plans, and document all communication attempts.
Ideally, automating reminders through your invoicing software is generally easier for all parties.
If your efforts prove unsuccessful, escalating to a collections agency or legal action might be necessary. Remember, clear communication and a proactive approach are key to recovering money owed while preserving client relationships.
When should you send an invoice?
The timing of when you send an invoice can impact how quickly you get paid. Here are some common scenarios and when to send an invoice:
| Goods or services delivered: |
| For most businesses, this is the most common trigger. Send the invoice immediately after completing the work or delivering the product. This reinforces the transaction's freshness in the client's mind. |
| Project milestones: |
| For large-scale projects, break down payments into milestones. Send an invoice upon successful completion of each milestone as per your contract. |
| Recurring services: |
| For subscriptions or ongoing services, establish a clear billing cycle (e.g., monthly, quarterly) and send invoices consistently on the same date each cycle. |
| Prepayment required: |
| If your agreement includes upfront payment for materials or services, send the invoice before starting the work. |
| Late payments: |
| If payment is overdue, send a friendly reminder shortly after the due date. If it remains unpaid, follow up with a more formal late payment notice. |
Tips for effective invoice management
For small business owners, effectively managing invoices is key to maintaining a healthy cash flow. One big way to accomplish this is through accounting software. Accounting software can do much of the heavy lifting of invoice management. Choose a program that aligns with your business needs, offering features like automated invoice creation, payment tracking, and customizable templates.
Another tip is to establish a consistent invoicing schedule. If clients know when to expect your invoice, it builds confidence in your company. Along with a schedule, sending invoices promptly upon completion of services or goods delivery also helps.
Also, online payment platforms should be utilized to offer clients convenient payment options and potentially expedite the process. And, it’s a good idea to regularly reconcile invoices with bank statements to ensure accuracy and identify any discrepancies.
Troubleshooting common invoicing issues
Small businesses often encounter challenges that can disrupt cash flow and strain client relationships. Here's a breakdown of some of the major issues and their solutions:
1. Late payments
- Problem: Clients delaying payment beyond the agreed-upon terms, impacting your business's financial stability.
- Solution:
- Clear payment terms: State payment deadlines prominently on invoices, contracts, and even during initial client discussions.
- Offer incentives: Encourage early payments with small discounts or highlight penalties for late payments.
- Automated reminders: Utilize accounting software to send automatic payment reminders before and after due dates.
- Payment plans: For larger invoices, offer payment plan options to make it easier for clients to manage.
- Direct communication: Don't hesitate to make a friendly phone call or send a polite email to inquire about the delay.
2. Disputed payments
- Problem: Clients refusing to pay or disputing part or all of an invoice, often due to misunderstandings or disagreements.
- Solution:
- Detailed invoices: Provide clear itemization with descriptions, quantities, rates, and any agreed-upon discounts.
- Project scope documents: For larger projects, have a clearly defined scope of work document approved by the client beforehand.
- Open communication: Encourage clients to raise concerns or questions promptly and address them professionally.
- Compromise and negotiation: Be open to reasonable compromises or payment plans to resolve disputes amicably.
- Retain documentation: Keep records of all communication, contracts, and agreements related to the project and invoice.
3. Manual errors
- Problem: Human errors in calculations, client details, or item descriptions lead to disputes, revisions, and payment delays.
- Solution:
- Accounting software: Utilize software for automated calculations, data entry, and error checks before sending invoices.
- Double-checking: Implement a system for reviewing invoices for accuracy before sending them to clients.
Invoices don’t have to be complicated
Hopefully, this guide will help shed some light on how to send an invoice as a small business owner and avoid common pitfalls when drafting invoices. Modern invoicing software, such as GoDaddy Invoicing, can help small business owners stay on top of their invoice management and build stronger customer relationships going forward.
