Why Invoice? What It Means to Your Business

As an equine business owner, it’s easy to bypass invoicing. In the horse world, verbal billing and recurring contracts seem to be the norm, but here’s why invoicing can vastly help your business.

Adobe Stock/AntonioDiaz

By Pam Saul, Certified Bookkeeper, Owner Farm & Equine Business Services

As a business owner, you are providing a service or product to your client. However, in the horse world, we often use verbal billing: “Just send me $100 for it.” However, when you do this, you are setting yourself up for some serious problems. Having an invoicing system shows that you are a professional and take time to state specifically what you are providing, whether it is a service or a product. For many, sending an invoice is sometimes low on the priority list of important things to do. Let’s look at some reasons why it should be higher on the list, and what an invoice really provides to you as a business owner.

Adobe Stock/Andrey Popov

Invoicing contains important information to your client about your business and services. It should show your business name, address, contact number, website, logo, etc., and it should include your billing practices regarding late fees or interest should they not pay on time. Having this in writing makes it difficult for someone to say they “didn’t know” about your policies!

An invoice includes instructions to your client as to how to pay the bill. There should be a “pay by date,” on the invoice, along with directions on how they can pay, such as paying by credit card, a service (such as PayPal or Venmo), or check/cash. You want the client to see that paying your invoice is easy! Lastly, it should contain your policy for disputes. For example, you could state on your invoice, “Any discrepancies must be reported within 10 days of receipt of the invoice.” This way, you put the responsibility on them to contact you immediately for any changes.

Your invoice should also include a detailed list of what you provided, as well as when you provided it. This is extremely important should any type of dispute come up. For example, say your invoice says you provided four private lessons during the month of November for $75.00 each, for a total of $200.00 due in 15 days. You should then send that invoice to your customer and wait for the payment on or before November 15th. You want to make sure that the top three excuses they can use are covered by your invoice.

  • Excuse 1 – “I have an issue with the order, I just hadn’t gotten around to calling you.”
  • Excuse 2 – “I didn’t know it was due yet.”
  • Excuse 3 – “I wasn’t sure what I had ordered.”

If you don’t hear from your client or receive payment, you know exactly what you can say should they dispute your charges. Since they didn’t contact you within the 10-day required notice, you can say that they didn’t have any issues with the order or are beyond the period for reporting an issue. There goes Excuse #1. You can state that your invoice showed the specific date the payment was due. There goes Excuse #2. And you can state that the invoice showed specifically what they got. There goes Excuse #3. All three top excuses have been nipped in the bud by using an invoice.

Your invoice should state your policy on late payments. For example, “Please remember that any invoice not paid by the due date is subject to a $25 late fee.” Then there can be no argument when you apply that $25 late fee to their next invoice. It should also have your policy of interest charged and the rate, along with how often this will be applied: “All invoices not paid will be assessed a 1.5% interest fee and will be charged every 30 days until payment received.” If you end up in court, having this information clearly stated on your invoices will go a long way in helping your case!

The most important part of invoicing is to make sure you follow up quickly for any payment due to you. The percentage of collectability drops significantly the longer payment is not made. Looking at the collection from the due date to 24 months out is dramatic. The percentage of collection 93.8% at the due date and drops to 73.6% by the third month. If you try to collect at six months, it drops to 57.8% and at 12 months drops to 26.6%. The quicker you ask for your payment, the better off you’ll be. *

Invoicing also allows you to track important information for you about your business. You can track which items or services you most often sell or provide or which is moving slowly. Then you can decide if you want to remove that item or go the other direction and market it more. You can also track to see your high or low point by sell date. Or you can run a report that shows you which client is producing the most income, and which client is the slowest pay! This allows you to decide if you want to institute a deposit or retainer account for those clients who seem to always be late. If you can clearly state that they have been late on the last 10 invoices or for the past five months, it goes a long way in supporting your decision to make this adjustment. Having this information allows you to make informed business decisions. With it in writing, you are showing your customers that you are a professional and provide a clear and concise invoice so there are no misunderstandings.

Need help with your invoicing? Saul Bookkeeping can help you in a variety of ways. Whether you simply need help getting an invoicing system set up, or you want to hand over the reins entirely, we’re here to help! Simply contact us at [email protected] to set up a free consultation.

*Source: Commercial Agencies Section of the Commercial Law League of America

DISCLAIMER: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.