The Critical Invoicing Mistake You May Be Making as a Small Business Owner
Posted on: 22 February 2017
It's no secret that cash flow – or the lack of it – is one of the biggest threats to any new business in Australia today. Put simply, unless you collect the money that is due to you for the provision of your goods or services, you're going to struggle to survive, especially in the early days. Most small business owners understand that issuing an invoice is a critical part of the procedure, yet few will make this a significant priority. Even worse, many of them made critical mistakes when they are actually issuing the invoices, putting collection under even more stress. What do you need to make sure of, so you don't fall into the same trap?
Your Big Risk
It's always a good idea to have a clear relationship with your customers, even if you have a significant turnover, and you may have many of them. You need to know exactly who you are dealing with and that basically refers to the type of legal entity. As you may know, it is possible to bring in a debt collection agency and take the whole situation through the legal system, if you haven't been paid on time. However, you have to make sure that you have all the details entered correctly, otherwise you may not be able to succeed in this way.
Getting the Fine Detail Right
Some companies trade under a business name that is entirely different to their proper legal identity. This is, of course, above board, but it can often trip small business owners up. What you need to do in this situation is to check the actual ABN number with the ASIC, to ensure that you have the correct legal name of the business on file.
Never make an invoice out to the trading name. Always make it out to the full legal entity name, and also mention the listed directors within the body of the invoice itself. In this way, you will be fully protected as far as any claim is concerned, while you take it through the collection process.
Remember, that the ABN number is associated with the legal entity that owns the business name. If you put that information on the invoice, then you are much more likely to succeed in collecting any overdue money.
Beware of Trusts
Finally, remember that if you do work for any legal trusts, you may run into the same type of situation. A trust is not a legal entity in itself, but the trustees who are responsible for the management of that entity are. Just make sure that you have all of the relevant detail, and don't be afraid to put too much information rather than too little.
How to be Sure
If you're unsure about how you should be invoicing, have a word with those who specialise in collecting debts for their advice.
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