9 Invoicing Best Practices for Small Businesses

Small business invoicing seems daunting when you first start out, but it’s important to manage well so you can avoid cash flow issues. It can be maddening to send out invoices, only to wait for days, weeks or even months for clients to pay. However, learning, understanding and following the best invoicing practices for your small business can help make the process as simple as possible. 

1. Know what your contract needs.

Before taking on a job, make a detailed contract of work. Contracts are extremely important when it comes to small business invoicing. Since they’re legally binding agreements, they can help you out in case a customer refuses, or even fails, to pay. When creating and negotiating contracts, make sure you lay out all of the details. Don’t be afraid to be as explicit as possible. This will come in handy should any problems arise. 

For example, let’s say you write in your contract that the job will be completed in six weeks, but the customer later comes back, and argues that you agreed on four and refuses to pay. You can show them the contract they signed, proving you both agreed on six weeks. 

2. Include invoicing foundations.

When creating invoices for your business, be sure to include the basic essentials, including: 

  • Issue date
  • Invoice number
  • Your business name and address
  • Your customer’s name and address
  • Payment due date
  • Your bank details
  • Your contact information
  • Other relevant information (client reference number, purchase order details, etc.)

Having all of this information ensures your customer cannot claim they didn’t have enough information to send their payment through and will speed up the payment process.

3. Be as clear as possible.

Your invoices should have a thorough breakdown of the charges, including item price(s), packaging, delivery, hourly rate, etc. This will help your customer better understand how the total amount came to be. If you’re performing services for a customer, like landscaping or accounting, include a copy of your timesheet so they know how many hours you worked and your hourly rate.

When a customer disputes an invoice, it drags out the entire process, costing you time and money. Helping them get a clear understanding of their bill should avoid any disputes or disagreements.

4. Send invoices as soon as possible. 

Never send your invoices late. Doing so decreases your cash flow, so make sure you send an invoice out as soon as you complete a project. Invoices must have the payment terms clearly defined so the customer knows how long they have to pay and what late fees you may charge if they don’t pay on time. 

If you’re not sure how to create an invoice, Kabbage is here to help. Kabbage Payments makes it easy to send invoices quickly by allowing you to create and manage all of your invoices in one place. You can create personalized professional invoices to send your customers via email or a custom pay link you can send them through text, email or the web. 

5. Consider using read receipts.

If your bookkeeping software or email service offers it, consider turning on read receipts to be notified when your customer opens the invoice. This isn’t to scare them or push them into paying faster but instead to assure you that your invoice was delivered to the right person and on time. 

Tracking the history of each individual invoice is also a good way to manage your invoicing. That way, you’ll know exactly when each is sent, delivered, paid and deposited into your account. 

6. Offer multiple ways to pay.

While you should tell your clients how you prefer to be paid, you also should offer them a number of options so they can pay in a way that’s ideal for them. The most common payment methods are cash, credit and checks, but don’t rule out methods like money orders or direct deposits. 

Giving your customers multiple options to pay invoices shows you’re easy to work with, and they’ll appreciate the flexibility. And fortunately, products like Kabbage Payments make small business invoicing much more seamless, allowing your customers to pay any amount less than $10,000 through a personalized invoice or any amount up to $10,000 through a custom pay link. 

7. Know how to follow up.

An important aspect of managing invoices is following up with customers so that you get paid faster. Sometimes clients take a while to pay you, which can be frustrating. However, it’s important to remain professional and reach out to your customer via text, email or phone call to ensure they’ve received the invoice and will pay you soon.

Be sure to follow up shortly before the due date as well. A friendly reminder as it gets closer to the due date quickens the payment process, puts you at the top of their list or even refreshes your customer’s memory if it somehow slipped their mind. You might also learn that your customer needs more time to send their payment, allowing you to mitigate any cash flow risk. 

8. Keep track of late invoices.

Sometimes, there’s nothing you can do about late payments, even if you’ve followed all the invoicing best practices. Your customer hasn’t paid, refuses to pay or comes up with multiple excuses and keeps putting it off. 

Unfortunately, late payments aren’t uncommon. In fact, QuickBooks found that one-third of small businesses report 10% of their invoices as being paid late. What’s more is that another third say the late payments lasted anywhere between 3 months and 2 years. So keep an eye out and follow up on a continual basis to avoid any potential damage to your business.

9. Always be professional.

Customers can be difficult at times, which makes it hard to stay calm. However, maintaining the highest level of professionalism when managing your invoices is essential. Never threaten, yell at or disregard customers when they refuse to pay or question the previously agreed upon bill. Instead, try working with them in a collected manner to ensure they pay you. Should problems persist, let them know what legal actions you’re considering taking based on the contract they signed. 

It’s also important to maintain professionalism after a customer has paid. Sending a quick thank you note once you’ve received payment assures them it’s gone through and leaves a lasting, positive impression that’ll improve your customer satisfaction (and in turn, increase business). 


Small business invoicing is key for cash flow and reducing your overall stress. How well you create and manage invoices directly correlates to how long you’re able to stay in business, so be sure to learn and follow the invoicing best practices to maximize your profitability.

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