To maintain a healthy cash flow as a contractor, sole trader, or business owner, it’s essential to ensure that your invoices are paid on time. Failing to do so may result in financing the cost of work until it’s settled, which can be expensive if materials or staff have already been paid for. Therefore, invoicing and following up with debtors are crucial aspects of managing cash flow and completing jobs.
Include the following details on each invoice:
- Your business name
- Customer name and address
- Invoice number, date sent, and due date
- Description of goods or services provided (date, quantity, rate, hours)
- Amount payable
- Payment details (bank account or credit card payment slip)
If you’re GST registered, your invoice should also include:
- Your GST number
- “Tax Invoice” prominently displayed
- For supplies worth $50-$1,000, GST is included in the amount payable
- For supplies over $1,000, either
- specify the amount charged, GST added, and the total amount payable, or
- state that GST is included.
Get started with free invoice template [PDF, 196 KB].
Tax invoices aren’t required for supplies under $50, but it’s advisable to keep them for record-keeping purposes and potential claims.
Tax invoice information — Inland Revenue
These tips can help you get paid on time:
- Discuss cost estimates upfront to set expectations with your customers
- Confirm contact details for the person paying your bill.
- Keep invoice details clear with a description, cost, due date, and payment terms.
- Invoice as soon as the work is done to prioritise payment.
- Offer flexible payment methods to make it easier for customers.
- Check-in if the due date is approaching to avoid missed payments.
Advice on systems that can help
Warning signs of missed payments
“If someone who owes you money is in financial stress, you will likely notice changes to their payment patterns,” says Anna Chartres of Christchurch law firm Lane Neave. “They will be deviating from your standard credit terms and conditions, which they may have previously complied with. You might see that they are slow on payments, you have cheques which are being dishonoured, and that’s an early indication that something might be awry.”
“Make sure you have terms and conditions of trade in place. If you’re supplying goods, it’s a good idea to grant security over those goods and say that title in the goods — the actual ownership of the goods — doesn’t pass until you have been paid.”
To handle unpaid invoices:
- Maintain a record of outstanding invoices and their overdue duration.
- Follow up promptly; delayed follow-ups increase the chances of forgotten or neglected invoices.
- Establish a process for follow-ups, such as sending an email reminder two days after the due date and making a follow-up phone call a week after.
- Keep your early reminders concise and polite.
Explore different services and online tools available to help you manage your debtors and determine the one that suits you best.
Common invoicing mistakes to avoid:
- Delaying sending the invoice after completing the job.
- Lacking clear records or contact information of debtors.
- Neglecting to establish a process for dealing with non-payment.
- Waiting for several months before following up with debtors.
Are you struggling with accounting and business management for your business? We are here to help! Get in touch with us to discuss how our expert services can support your business’s success. Contact us today to schedule a free consultation and see how we can add value to your operations.
