Getting paid on time
This is the key to staying on top of your cash flow. Here’s how to keep the money you’re owed flowing into your business.
If someone doesn’t pay their invoice you’re left financing the cost of the job until it’s paid — which can be costly if you’ve paid for materials or staff to do the job.
Sending invoices and chasing debtors is part of getting the job done.
Creating an invoice
On each invoice you need to include:
- your business name
- your customer’s name and address
- the invoice number, date sent and due date
- a description of the goods or services provided, eg date, quantity, rate and hours
- the amount payable
- payment details, eg your bank account or a credit card payment slip.
If you’re GST registered, you also need to include:
- your GST number
- the words “tax invoice” in a prominent place
- for supplies worth $50-$1,000, state GST is included in the amount payable
- for supplies worth more than $1,000, either:
- specify the amount charged, the GST added and the total amount payable, or
- state GST is included in the amount payable.
Tax invoices aren’t needed for supplies worth less than $50.
But it’s a good idea to keep these for your records — and if you want to make a claim.
Tax invoice information (external link) — Inland Revenue
Invoicing tips
Tips to help you get paid on time:
- Talk about cost estimates up front — even before you start work it’s good to set expectations with your customer.
- Confirm contact details — you need to be able to get in touch with the person paying your bill.
- Keep details clear — make sure your invoice has a description of what was provided, when it was provided, plus the cost, due date and payment terms.
- Invoice as soon as the work is done — the value of the job will be fresh in your customer’s mind. The longer you leave it the lower the invoice priority.
- Offer flexible payment methods — does your customer have a preferred way to pay bills? Offering options will make it easier for them to pay.
- Check in if the due date is looming. A phone call or email can help make sure your bill doesn’t fall off the radar.
Expert view
Warning signs of missed payments
If someone who owes you money is in financial stress, you’ll probably notice changes to their payment patterns, says Anna Chartres of Christchurch law firm Lane Neave.
“They’ll 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,” she says.
“Make sure you have terms and conditions of trade in place. If you’re supplying goods, it’s a good idea to grant a 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.”
Chasing debtors
If invoices aren’t paid on time:
- Keep a record of who has outstanding invoices and how long these are overdue.
- Follow up as soon as possible — the longer you leave it the easier it is for your customer to forget or ignore your invoice.
- Have a process for what happens when, eg an email reminder two business days after the due date, and a follow-up phone call if you’ve had no response after a week.
- Keep these early reminders brief and courteous.
There are services and online tools that can help you manage your debtors. Find out what works for you.
Common mistakes
Avoid these common invoicing pitfalls:
- Leaving too much time between completing the job and sending the invoice.
- Not keeping clear records or contact details of who owes you money.
- Not having a process for what to do if a customer doesn’t pay.
- Leaving it for months before you get in touch with debtors.
