Accounts Receivable Management: Crafting the Perfect Invoice

The first, and arguable the most important, step of the accounts receivable management process is invoicing. It seems pretty straight forward and easy, but many companies flounder to get invoices to customers in a timely manner or worse yet; the invoice has incorrect, incomplete, or missing information that further delays payment from your customers. What information is required for the perfect invoice? Some of these may seem a little obvious, but you’d be amazed at what some companies leave out and the negative impact that has on their ability to quickly collect on their invoices.

Generally, all invoices should include the following:

1. Your company’s information:

  • Your Business Name and logo
  • Your Business Mailing Address
  • Your phone number and extension
  • Your email address
  • Your fax number

2. Client Company’s information:

  • The Client company’s name
  • The Client’s Business/Mailing Address
  • The name of the person handling the account at the client company as well as their contact information. A small company can likely figure out what’s going on, but in big companies, invoices get misplaced so you will want to make sure you are specific about the recipient.

3. Necessary Information for payment:

  • Project Name
  • Itemized list of services/products
  • Total Amount Due
  • Note any discounts given
  • Consequences of late payment. Ex: “A Late Fee of x% may be assessed on past due balances” The exact language can vary and you might want to have your legal advisor review or provide the exact wording. The fee percentage (interest rate) is regulated in some states so be sure you know what the limits are.
  • If the charge is project-based or hourly
  • Include a Remit to address. If appropriate, also include instructions to “make check payable to” the entity name you prefer.
  • Invoice Number
  • PO Number/Job number
  • Payment Terms
  • Due Date
  • A Phrase thanking them for their business
  • Supporting documentation such as a signed receiving document (proof of delivery) or approved timesheets. This will be different for every customer so be sure to ask about their requirements before starting work.

Other Considerations:

  • Make sure your invoice looks professional.This is your last contact with your client (hopefully) and leaving a lasting impression on them of your professionalism will likely add to their decision to work with you in the future.  This means checking spelling, grammar, spacing, etc. Also be sure all of your contact information and various numbers and amounts are correct. Make sure everything is neat, tidy, and easy to read.  Using your companies branding, logo, font style, and color are a nice touch that may grab your customer’s attention a bit faster.
  • Add a little personality- when and if appropriate. Support your overall brand identity all the way from marketing through to invoicing. If your company brand really plays into humor- a little light hearted text on your invoice may not be a bad idea- but really think about it before doing it as you still want this to be professional and taken seriously by your customers.
  • Ask your customers how you did. Some companies will ask for a testimonial at the bottom of their invoices. An example of this would be, “let us know how we did, send your comments to example@example.com.” Your marketing team will love you for it as this will provide them with tons of testimonials and you can use customer feedback to make changes to improve customer satisfaction.
  • Invest in technology to help you better manage the entire AR process. Even if you do craft the perfect invoice, other factors may result in late payment.  Businesses should consider using credit and collections software which can make the entire collections faster, easier, and more successful than ever before.

 

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