How to: create invoices and chase payments

Creating an invoice may seem like a simple task, but it plays a vital role in the financial well-being of your business.

As a small business owner or a freelancer, one of the critical aspects of maintaining a healthy cash flow is managing your invoicing process effectively. Knowing how to create invoices and chase payments not only ensures you get paid promptly but also helps establish a sense of trust and professionalism with your clients.

In this blog, we will cover the four essential components of an invoice, how to set your payment terms, and what steps to take if an invoice remains unpaid.

How to create your own invoice

An effective invoice should contain the following four crucial elements:

• Invoice Header: The top section of your invoice should include your business name, logo (if applicable), contact details (address, phone number, email) and the invoice date. This information makes it easier for your clients to identify your business and establish communication.
• Invoice Number: Assign a unique invoice number to each invoice you create. This helps you keep track of your invoices and assists in reference during payment discussions or for your records.
• Itemised List of Goods or Services: Clearly outline each product or service you provided to the client. Include a description, quantity, rate, and the total amount for each line item. This transparency helps your clients understand the charges and reduces the likelihood of disputes.
• Payment Details: Specify the total amount due, any applicable taxes, accepted payment methods, and your preferred payment deadline. This ensures your clients know precisely how much they owe and how to pay you.

Setting Your Own Payment Terms

Determining your payment terms is crucial for managing your cash flow efficiently. There are a number of steps to consider when setting your payment terms.

Research common payment terms within your industry to understand what is typical. Common payment terms are “Net 30”, meaning payment is due within 30 days of the invoice date, but you can set different terms that suit your business needs.

However, the most important thing is that you are clear and specific. Communicate your payment terms clearly on your invoice and any contracts or agreements with your clients. Specify the payment due date, accepted payment methods and any late payment penalties, if applicable.

While it’s essential to have a standard set of payment terms, be open to negotiating with clients on a case-by-case basis. Some larger clients or corporations may have their payment policies, which you can discuss before starting the project.

Chasing an Invoice

Despite your best efforts, some clients may delay payment. 

When chasing an unpaid invoice checkapayer recommends the following steps:

Friendly Reminders: Send polite and friendly payment reminders as the due date approaches or becomes overdue. Sometimes, clients may simply forget, a gentle nudge can prompt them to make the payment.

Personal Communication: If the invoice remains unpaid after the initial reminders, reach out to your client personally. This could be through a phone call or a well-worded email, inquiring about the status of the payment and addressing any potential issues or concerns.

Formal Late Payment Letter: If friendly reminders and personal communication do not yield results, send a formal late payment letter. This letter should state the amount owed, the overdue period and the consequences of further delays, such as late fees or collection action.

For more information on this, please check out our blog on sending Reminder Messages for Late Payment.

Consider Mediation: If all attempts to recover payment fail, consider mediation services to help resolve the issue amicably without resorting to legal action. Mediation can be less costly and time-consuming compared to litigation.

Steps to Follow if an Invoice is Not Paid

In unfortunate cases where the client fails to make payment, follow these steps:

Escalate Communication: Clearly state your intention to escalate the matter if payment is not made promptly. Reiterate the consequences mentioned in your late payment letter.

Consult Legal Advice: Seek legal counsel to understand your rights and options in recovering the payment. They can advise you on the best course of action, such as sending a formal demand letter or initiating a legal claim.

Debt Collection Agency: If legal action seems necessary but daunting, consider hiring a reputable debt collection agency to pursue the payment on your behalf. They have experience dealing with such situations and can be more effective in collecting unpaid debts.

The Importance of knowing how to create invoices and chase payments

Knowing how to create invoices and chase payments may seem like a simple task, but it plays a vital role in the financial well-being of your business. By including the essential components in your invoice, setting clear payment terms and taking proactive measures to chase unpaid invoices, you can establish a reliable invoicing process and maintain a healthy cash flow. Remember, communication and professionalism are key to resolving any payment issues amicably and maintaining positive client relationships.

Download our invoice template to make your own here.