How to write an invoice that encourages fast payment
5-minute read
5-minute read
Small business owners have quite enough day-to-day challenges without having to spend time chasing slow payers. Getting paid as quickly as possible is good for cash flow and gives you one less thing to worry about. Your invoicing process and the way you write your invoices could help.
The simple principles are that (1) the way you word your invoices can speed up invoice processing, and (2) the easier you make it for a customer to pay you, the faster their payment is likely to be. These aren't guarantees, but they make sense.
1. Use these tips to help speed up invoice processing
If you build up good personal relationships with clients, they may be more likely to pay you on time. And some businesses find that offering a discount incentive for prompt or early payment works well for them too.
2. Let customers pay you the way they want to
Another way to encourage fast payments is to let customers pay you the way that's most convenient for them. So, you might want to offer a number of options in the payment details section of your invoices. They could include:
You could also offer customers the option of paying you with cash, or in person with a credit card. A new simple way to take in-person card and mobile wallet payments is to have a mobile app such as Westpac EFTPOS Air on your compatible smartphone – with no extra hardware required.
If you're asked to provide a customer with a tax invoice, the Australian Taxation Office (ATO) states that you must provide one within 28 days of their request. The ATO also requires businesses to include specific information on their tax invoices:
If the total of an invoice is less than $1,000 and all items on it are subject to 10% GST, you can include the tax in the total amount charged with the words ‘Total price includes GST'. If the invoice is for more than a $1,000 in total, the GST amount must be featured beside each line item.
If you're a small business owner who's not registered for GST and/or not charging GST, the ATO requirements for what they call a ‘regular (non-tax)' invoice are slightly simpler:
No, paper invoices are not an ATO requirement. Many companies now save money on paper and postage by doing their invoicing online, including using online invoicing software.
This can be done in the form of invoices generated by accounting software, by electronic invoices that are automatically exchanged between the software systems of suppliers and buyers, by an emailed PDF, or by emailing a link to an invoice.
A quick search online should give you plenty of options for free invoice templates. Just make sure that the one you choose features all the mandatory fields listed in this article – and has the capacity to add extra wording that can help get you paid faster.
If you're using accounting software such as MYOB or Xero, they might provide a free invoice template you could use – but make sure it's one that's suitable for use in Australia.
To sum up
Providing professional looking invoices reflects well on your business – and writing them in a way that helps speed up payments could be good for your cash flow. Read about other ways to boost cash flow in our Help for your business articles.
This information does not take into account your personal circumstances and is general. It is an overview only and should not be considered a comprehensive statement on any matter or relied upon. Consider obtaining personalised advice from a professional financial adviser and your accountant before making any financial decisions in relation to the matters discussed in this article, including when considering tax and finance options for your business. Westpac does not endorse any of the external providers referred to in this article.
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