Invoices are a fact of life for contractors. You send them out and money comes in (hopefully). Invoices are also useful in other ways as they can help you maintain clients, display your professionalism, and market your brand. As you do business, an invoice becomes one of the most important documents your company produces. Despite how critical invoices are to the health of your business, too many contractors don’t pay enough attention to doing them well. Below are a few common mistakes that contractors often make with their invoices that you should do your best to avoid.
Omitting terms and conditions
Every business has its specific terms of payment and attached conditions that must be included in an invoice. Whether you have discussed these previously with the client or not, leaving out this section can break your contracting business. It’s crucial that the client knows what your payment terms are and the conditions of late payment. Unless you’re clear on these things, you’re setting yourself up for late payments or no payment all.
Poor formatting and editing
Your business must look professional, and with that, your invoices should have a standard format every time. Failing to do so becomes more apparent with repeat clients. Even when you’re using an invoice template, there’s a good chance your first invoice has a different format with the next, and it can really make your business look bad and lead to unnecessary questions from customers wanting clarification. Having a consistent format makes it easier for you to generate quotes more quickly and accurately and makes it easier for your customers to review.
Errors in your invoice, including typos, can also hurt the credibility of your business. Get in the habit of closely reviewing your invoices for errors or having a second employee review them before sending them to clients to make sure you have no typos or mistakes. Not only can mistakes make you look bad, if you make a mistake while totaling up amounts you could be charging too much or too little. Either of those situations can prove troublesome for your business as well.
Missing important details
There are some items that are “must haves” for an invoice. Leaving out any of the items below can make invoices confusing and problematic for your customers to pay you. Here is a list of things to include in your invoice:
• Recipient’s address
• Contractor’s address (yours)
• Invoice date
• Due date
• Invoice number
• Terms and conditions
• Payment methods
• List of products with their amounts
Itemizing too much or too little
This is one of the most common invoicing mistakes made by contractors. On one hand, a quote with little or no itemized details on materials used doesn’t provide enough information for your customers to know what they’re paying for. On the other hand, if you provide your customers with every detail on specific labor hours and materials you could be setting yourself up for a big headache. Too much information can make customers or homeowners nitpick every detail and try to negotiate the final price. It’s better to just itemize tasks and specific, major items needed to do the job. The same goes for material costs. Group small material items together as the customer doesn’t care or need to know how many brackets, flanges, or other minor items were needed to finish the job.
It’s important that your initial quote matches your invoice. There’s nothing that creates more friction between customers and contractors than unexplained fees on invoices. To avoid having to add fees it’s important that you’re extremely thorough when creating your quotes. However, in some cases, the customer will ask for changes or you’ll run into unexpected issues that require more time, labor or materials. In these cases, it’s important that you discuss these things with the customer before adding additional costs. Create an additional quote or a change form if necessary so you have the additional costs documented if the customer tries to dispute them later.
If you do forget to include a service or delivery fee, contact the customer before sending the invoice. Discuss the fee with them and apologize for leaving it out. If they allow it, you can add it. However, if they decline to pay that extra fee, you must count it as a loss.
Lack of courtesy
As mentioned, the tiniest of errors can make you lose customers, and with an invoice, you are trying to show professionalism that will get this customer to use your services again and even refer more business your way. With that in mind, it’s always important that you are thankful and courteous when providing an invoice. Being hasty, pushy, or indifferent can quickly turn customers against you. In a day and age where unhappy customers can leave negative reviews across the internet for the world to see, it’s important that invoices delivered via email, mail, or in person are all delivered with a sincere thanks for choosing your company.
Failing to follow up on pending invoices can hurt your business. Customers usually aren’t in a hurry to part with their money, and unless you follow up payments can become very past due. Remember that your customers are busy too, and sometimes they may not even remember your invoice exists. Make a point of politely reminding them about their delayed payments. In your terms section, if you mentioned the duration you’re giving customers to make payment, remind them in the follow-up. For example, you can send them an email saying, “Thank you for choosing ABC contractors. This is a kind reminder that the payment deadline is a week away (include date). Kindly make a payment as soon as you can to avoid penalties.” At that point, you can refer them to the late payment terms included on your invoice if you choose.
To maintain credibility and ensure your business makes a profit, it’s critical that you have a solid system in place for invoicing. Having a system and sticking to it will help your business to look professional, get more repeat business and referrals, and improve your cash flow. Fortunately, there are technology solutions that can do most of the work for you, like the JobFLEX invoicing app. JobFLEX allows you to create professional looking quotes that you can email as a PDF right from the jobsite. You can even upload one of JobFLEX’s handy price lists which will allow you to create itemized quotes with a few taps on your phone or tablet. When the job is complete you can turn a quote into an invoice with only a few clicks. If you want to take your invoice game to the next level, take a free trial of JobFLEX today.