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From Robert McGarvey
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By Robert McGarvey
You don’t get paid if you don’t invoice. If you ask many financial professionals why some contractors have persistent cashflow problems, the frequent response is that they put off invoicing until they absolutely need the money. In a rush to collect, some contractors fire off sloppily created invoices that are riddled with math errors and may not even correctly identify the work done. There are better, faster ways to invoice for the money you are owed.
The best invoicing tip you will get is, “Invoice each customer as soon as the job is done,” urges Michelle Dunn, New Hampshire-based author of the Ultimate Credit and Collections Handbook. Do it that night, get it in the mail in the morning, and the customer—still basking in the splendor of a new kitchen or bathroom—most likely will pay without question.
“Ask your customers how they want to be invoiced,” Dunn says. Some like faxes, others U.S. Mail, still others will prefer e-mail. The medium doesn’t matter; what matters is that you cater to your customer’s preference.
Make sure your invoices stand out from other materials you send out. If you use U.S. Mail, put invoices in a different color envelope than the envelopes used for mailing out quotes or marketing material, and clearly label this sheet of paper: INVOICE. If you use e-mail for invoices, include a clear header: Invoice from ABC Remodelers, for instance. The goal is to get the recipient to pay special attention to your invoices and, above all, to keep them from getting trashed along with incoming “junk mail.”
Handwriting isn’t on the Wall
Handwritten invoices are a no-go that make a business look unprofessional. A printed, computer-generated invoice has become a must. Probably the small business standard is Intuit’s QuickBooks, which provides intuitive bookkeeping tools along with invoicing capabilities. But, specialized software is not a necessity. “You can just use your word-processing software,” says Los Angeles-Based Eva Rosenberg, publisher of TaxMama.com. Microsoft Word, for instance, provides an invoicing template, as does Microsoft’s Excel spreadsheet. Both create invoices that can be printed and mailed easily, or for a more high-tech flavor, the document can be transformed into an Adobe PDF and e-mailed to the recipient.
The real goal is to make it easy for your customer to pay as soon as possible, Dunn says. “Include a stamped, self-addressed envelope with mailed invoices,” she says. With e-mailed invoices, she suggests accepting payment via PayPal, an online bill payment service offered by eBay, the giant auction house. Anybody who has a credit card and Internet access can pay via PayPal, Dunn says, and any business with a checking account can transfer payments quickly to PayPal into a bank account. That won’t appeal to everybody—PayPal charges recipients significant transaction fees—but when getting money fast is the goal, it’s an option worth considering. The bigger point: When customers find it easy to pay, it’s one less excuse they have to procrastinate. Let your customers pay by check, credit card, online services such as PayPal and, of course, cash.
Rosenberg has a closing tip just for the hardcore invoicing procrastinators. “Dictate invoices into your voicemail … then forward that voicemail to a bookkeeping assistant. It will be worth the price you pay your assistant,” she says. That’s because by doing this easy exercise you will see invoices paid faster, fewer invoices that just never get sent because they are forgotten about and a healthier business bottom line.
A Customer’s Lament
Rita Gunther McGrath is a professor at Columbia Business School in New York and author of MarketBusters. She’s also a New Jersey homeowner whose house underwent major renovations, leading to lots of invoices from contractors. As a teacher, she gives contractors a poor grade on their invoicing. “I was driven absolutely crazy,” she says. That’s because contractors made many invoicing mistakes. Here’s her list of must-avoids:
- Invoices that aren’t itemized, including when and what type of work was performed.
- Mistakes like addition errors, invoicing twice for the same thing, etc.
- Misunderstand rates. “In my case, they varied from $20 per hour to $50 per hour with no explanation of why the different rates applied,” she says. “Turned out that each workman charged a different rate and it totally depended on who did the work, not the value of the work being done.”
- “Best of all…a contractor standing there with an invoice in his hand, expecting immediate payment the minute I walk in the door from a business trip,” she says. “Not professional at all, and has still left a bad taste in my mouth.”
Remember that an invoice is a marketing tool and, when done right, it can leave a customer happy to pay you.
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