Accounts Receivable Invoicing
Collection Prevention Part 2
Accounts Receivable Invoicing is step 2 in a 3 step path to payment.
- Make a sale
- Create and send an invoice
- Collect payment for the invoice
When all goes well, it’s a simple and elegant process leading to positive cash flow and profitability.
Unfortunately, the number of ways we manage to screw up invoices seems to be almost limitless. (Okay I’m exaggerating for effect) But the fact remains that a mistake on an invoice will delay payment and create unnecessary collection work.
Common Invoicing Errors
If you want to be paid promptly, send your invoice promptly. Ideally, you’ll send it within a day or two of providing your service or shipping your product. Some customers may take late invoicing as an invitation to pay late.
In other words, waiting too long to send the invoice and using the date of service as the invoice date in hopes of getting paid faster. It won’t work, and you’ll annoy the accounts payable department.
- Not sending the invoice at all (happens more than you would imagine).
- Sending the invoice to the wrong department (usually purchasing instead of accounts payable).
- Using an incorrect address or email address – (again preventable if you insist on a complete credit application).
- Not following vendor instructions (read the vendor instructions, they’re annoying, but if you want to get paid quickly, you’ve got to play by the rules.
- Mail only or email only – again read the vendor instructions or ask your accounts payable contact how they want invoices delivered, then do it!
Invoice Identification Errors
- No invoice number – you’ve got to use invoice numbers, so your customers have a way to enter and locate your invoice.
- Duplicate invoice numbers – I’ve never seen an accounting system that will accept a duplicate invoice number.
- Difficult Invoice Numbers –
- Too long
- Using the date only
- Too many leading zeros (or really, too many 0’s in a row anywhere in the invoice will lead to data entry errors.
Purchase Order Errors
- No PO listed on the invoice (if your customer uses Purchase Orders, they’ll want to see the PO number on the invoice; if it’s not there, you won’t get paid.
- Wrong PO listed on the invoice
- PO doesn’t match the invoice
- No information
- Partial information
- Wrong information
Any Purchase Order (PO) error is going to hold up payment. Generally speaking, don’t assume your customer “knows” or “remembers” anything. Include as much accurate information on your invoice as is reasonably possible. The fewer errors on your invoices the less time you’ll spend on the back end correcting and collecting.