Invoicing

3 Tips for Designing an Invoice That Gets You Paid Promptly

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Cash flow is one of a business’s most important metrics. You may have a lot of sales and make a hefty profit margin, but when you don’t get paid on time, your business suffers. You have to pay employees, purchase inventory, as well as other necessary out of pocket expenses – all of which costs money. Yet many businesses report problems with getting paid on time, even for work that has been done and delivered.

You invoice your customers to get paid, but have you ever considered whether you’re using it correctly to increase your chances of getting paid on time? To do that, your invoice needs to include three key elements:

1. Establish rapport.

Establishing rapport means stating the details of what was delivered, what is owed and that the customer committed to make a payment. You need to clearly state what products or services you provided and refer to the agreement you signed as well as the payment terms that you agreed on.

We found that the language you use in conveying the commitment to pay can change the customer’s response. Most of us tend to become rigid and demanding when we refer to legal commitments. We tend to write in what we think is “legalese”. While middle-aged business owners respond well to formal language, millennial business owners are turned off when faced with it since they view such language as threatening. It’s vital to adapt your language to your customers’ expectations to get your message across.

Related: Remember These 8 Rules Before Sending Out Your Next Invoice

2: Defining a process.

Parkinson’s law says that work will expand to fill the time that’s available to complete it. So will your customer’s payment behavior. You might have a due date on the original agreement but the customer will often miss it, either intentionally or accidentally. Anything that’s more than a few days out often gets forgotten.

To counter that, always work in short cycles. Provide ample notice before a payment is due and follow up several times in shortening time frames. We found that three days prior to a payment is the ideal time to send a reminder. This pattern should stop at payment reminders: if a customer happens to be late, and you send a demand for payment, make sure that you give him a deadline for payment, too. Write “Please make a payment immediately or contact us in the coming three days”.

Of course, you have to stay honest to your process. Some follow up has to come when these days pass.

Related: The Buck Stops Here: How to Make Invoicing Less Excruciating

3: Removing obstacles.

Once the customer accepts your authority and is aware that a payment is due, the last thing that remains is excuses and how to manage them, but your invoice can go a long way in responding to excuses even before they’re uttered.

One of the main excuses we see is disagreement with the content of the invoice or the stated work long after it has been delivered. This is really an attempt to renegotiate price. Most business owners tend to assume that if the customer voiced no disagreement when the work was done, he agrees to the charge and will pay. We found that this is not the case. Often, especially when the charge is big, you could run into disagreements long after a payment is due.

Don’t run away from a dispute. Make it part of your process, and set boundaries. Be explicit about the process: write “If you wish to dispute this charge, please contact us in the coming three days”. Be ready to discuss and listen to your customer because losing a customer’s future business is much worse than a 5 percent discount if you accept a dispute over a minor item.

Using the right language in your invoice can significantly reduce your time to getting paid. The right language creates a connection with your customer, defines a process to get paid and removes obstacles that would otherwise hinder payment. These are simple yet effective elements you need to make sure are included in every communication with your customers – not only to get paid, but to also maintain a healthy relationship.

Related: Is Your Billing Process Delaying Payments?