*This is the 4th article in a series of articles related to project billing and project-based accounting.
Read the 1st article: Developing an Effective Project Billing Process
Read the 2nd article: Should You Use Milestone Billing or Project-Based Billing?
Read the 3rd article: Project Billing Policies - Tips & Best Practices
Depending on the source, the old saying “You never have a second chance to make a first impression” was the brainchild of either the writer Oscar Wilde or the humorist Will Rogers. At various times, advertising has used this motto or its variation – “You never get a second chance to make a good first impression” – to promote products ranging from men’s suits to dandruff shampoo. The catchphrase is effective because it’s true.
But with all due respect to the slogan’s originator, it’s also true that you never get a second chance to make a good last impression. And for professional services organizations (PSOs) who rely on strong client relationships in all areas of operation, last impressions – namely, the invoicing phase of a project – can be particularly critical. If this process is mismanaged, a client can lose faith in its service provider and decide to take its business elsewhere.
The A/R financing company Integrity Factoring says the wounds caused by invoicing issues are largely self-inflicted: “For many businesses, invoicing is viewed as a rather perfunctory action. An invoice is often given little thought or importance, and that’s a recipe for trouble.” According to Integrity, invoices do more than inform clients what they owe. They also reflect their company as a whole. Sloppy, mistake-filled invoices speak poorly of a firm. Accurate, clear invoices, on the other hand, tell clients that the firm values professionalism.
Integrity believes companies who show respect for their clients through the invoicing policies they follow are likely to receive respect in return. In practice, this means invoices paid promptly…without hassle…for the full amount owed. By following a few choice tips before, during, and after invoice preparation, your PSO can up its project invoicing game to earn this level of respect – ensuring the last impression you leave with a client is positive.
Before You Invoice
Better project invoicing begins well before you write invoices and involves answering a few fundamental questions:
- When can I invoice? – This question refers back to the basic project terms and involves reaching agreement on when the project invoice(s) should be submitted. Sending an invoice partway through a project when the client assumes it won’t come until the job is finished can only make for tense conversations and hard feelings. Be sure you know when the client expects to be billed for your services.
Also be sure you know when the client expects to pay your invoice. For example, suppose a client accepts invoices on the 15th and 30th of the month with a 30-day invoice payment policy and you send an invoice on the 17th. When your invoice is not paid by the 15th of the following month, the client is not late and should not be contacted regarding overdue payment.
- Who gets the invoice? – The client’s contact point for a project and its contact point for project invoices are not necessarily one in the same. Business financing company Primary Funding Corporation says sending an invoice to the wrong person usually occurs when clients have many staffers in several departments and that it’s “easy to get confused about who receives invoices in such organizations.” While this may be true, misdirecting an invoice can slow your cash flow to a crawl. To foster prompt client payments – and avoid looking foolish in the process – make the effort up front to nail down “Who gets the invoice?”
- Are any other documents required? – Some project invoices may need to be accompanied by supporting documents. These can be as simple as sales receipts or expense reports, but project management expert David Brown points out, they can also include compliance documents of a more official nature, for example, certified payroll and lien releases. As with sending an invoice to the wrong person, sending an invoice without these records makes your organization look bad – especially if this isn’t the first time the omission has occurred.
To Build a Better Invoice
The design of project invoices is about as individual as the PSOs who write them. But regardless of its physical appearance, every project invoice should include all information needed to help the client understand and process the invoice efficiently. If key details are missing or so poorly presented that the client becomes confused, a PSO has just made its client’s job harder. It may also have made the client mad…and shouldn’t be surprised, then, when its invoice ends up dead last on the client’s list of outstanding bills to pay.
Ask any CPA firm or billing management organization and you’ll likely get consensus that every project invoice should include these essential components:
- Professional Header – Business name, mailing address, phone number, email address, and website.
- Client Contact Information – Invoice recipient name, address, and phone number.
- Invoice Number and Date – Invoice number, date prepared, payment due date, and preferred payment method.
- Itemized Breakdown – Description of services/products, date of performance/purchase, quantity provided (hours/items), rate (per hour/item), and financial details (row totals, subtotal, taxes and fees, and grand total).
- Terms and Conditions – Miscellaneous information such as refund policy, invoice discounts, days to pay, and additional fees.
- Payment Method – How the invoice should be paid.
- “Thank You” – Some expression of client appreciation.
Invoices can have other uses in addition to presenting the billing details of a project or transaction (for example, highlighting discounts for early contract renewals), but an invoice that contains at least these seven items will foster client goodwill that nearly always translates into prompt, trouble-free invoice payment.
The Invoice is in the Mail
“The check is in the mail” is supposedly what every company says if one of its vendors calls, asking about a late payment. Even if an invoice is complete, easy-to-understand, and error free, however, “The invoice is in the mail” isn’t something a client should hear if it expects project invoices to arrive via some other delivery method, such as email. Similarly, the client shouldn’t hear “I attached it to an email” if invoices should be sent to its post-office box.
To be sure, digital invoicing is a great way to go, but the larger point is this: If you want to keep clients on your side as you wrap up projects, don’t try to call the shots. Find out how they want their project invoices delivered – and then send them this way.
Invoicing as a Service
When you think about it, the project invoice is just another service your PSO offers clients. That said, what do you think delivering an app missing key features or a legal document full of typos to a client would do for future business? To make sure your clients’ last impression of your PSO is a good one, maintain the momentum. Make sure your project invoices are as good as the rest of the services you offer. Your cash flow and project list will thank you.
Looking Ahead…
The final part of this series will summarize the aspects of good post-invoice follow-up.
For additional information on Beyond Software please contact:
Nicole Holliday
nholliday@beyondsoftware.com
866-510-7839
