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How well are your invoices working for you?

Written by: Jane Francis

Article Overview: Many people fail to appreciate that the way they price, and the process of invoicing, is a marketing issue. Invoicing is a process that starts from the moment you first meet the client. Your numbers tell a story and you need a congruent and SIMPLE explanation to accompany them. Your invoices are about communication; be sure you communicate clearly.

How well are your invoices working for you?

Have you ever queried a bill? Can you remember the bad feelings it created?

Many business people fail to appreciate that the way they price, and the process of invoicing, is a marketing issue. Though the invoice comes down to a figure that is payable, those numbers are symbolic of value; those figures symbolize what your client expected to receive and if they are higher than what they expected to pay they will not be happy.

A friend hired a landscape gardener to tidy her garden. When she asked for a quote she was led to believe the job was going to cost around $400. However, when she received the invoice it was closer to $700; here is the detailed description the company provided of the work for which they charged her:

Landscaping works completed including: Full weed & trim gardens, removal ivy & trim back invasive creeper on back fence, cut back hydrangeas, deadwood & feed fruit trees, tidy miniature agapanthus, transplant agaves & miniature agapanthus is main garden, removed lavender, prepared soil for & installed client's own potted color, potted aloe vera, tidied spider plant & jade tree in pots, tidied pathway at letterbox, full fertilise all gardens, derris dusted cabbage trees, supply compost, fertilisers, derris dust, water retention crystals. Full load to tip. Day charge. Total hours 9.5.

My friend had no issues with what the company said they did, her issue was with the unanticipated expense. When she queried why the invoice was $300 higher than her expectations, here is the reply she received.

Dear L,

We had a phone conversation regarding the expected $ for the day. As it was a charge up (not based on the original quote), I stated an hourly rate of $38.50, plus materials and rubbish removal and that we have a day charge of $150 for an 8 hour day, which is reduced if there is less time on site. Basically is equates to $150.00 divided by 8 hours = $18.75 per hour. Times this by the physical time on the job (not by the number of crew hours) i.e: 6.75 hours (9-3.45) including rubbish removal time. So $18.75 x 6.75 hours = $126.55 day/overhead charge.

The materials and waste removal were quantities not known till the end of the job.

I hope this is clearer for you.

Kindest regards J

What???? How many times did you need to reread that to understand it?

Here are 7 ways this company failed to communicate effectively with their client:

1) They failed to make it clear that they planned to 'charge up' the work as they incurred costs.

2) At no time did they provide an estimate of how much these costs might be.

3) In their reply they focused almost exclusively on their hourly rate (their issue) when their labor charges were not the main issue.

4) Nor did they provide a relevant response -- in this instance the total hours billed for this job were 9.5, not 6.75 as explained in their email.

5) The reply was needlessly complicated; befuddlement sends the signal they feel they have something to hide.

6) Nor did they acknowledge the client's feelings. Yes, they provided a left-brain informative response which might be the official line their accountant has suggested they follow but at no time have they addressed the customer as a disappointed human being.

7) Nor did they show any appreciation for the business. Even though she queried the invoice, my friend let it be known she would pay the full amount. Will my friend use this company again? No. Will she recommend them to someone else? No.

Many people fail to appreciate that the way they price, and the process of invoicing, is a marketing issue. Invoicing is a process that starts from the moment you first meet the client. Your numbers tell a story and you need a congruent and SIMPLE explanation to accompany them. How much detail you provide on the invoice will depend on how well you have communicated with your client on previous occasions. Your invoices are about communication; be sure you communicate clearly so you gain a happy customer -- one that will recommend you to their friends and not write about you behind your back!

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Re: Invoicing - Seeing as I work at a bank, let me provide some insight as to why charging interest on late invoices is becoming increasingly more prevelant. Let's say for example, that BANK A has 10,000 outstanding invoices. Let's approximate (for the sake of being hypothetical) that the average value is $100. That means that the total outstanding cash is around $1,000,000. Now, a bank can make a lot of money through loans and investments off of other money. To handicap a bank's earning potential for the sake of allowing a consumer to pay late is fiscally irresponsible policy. It's like complaining that the banks are taking advantage of you but you're not making your invoices on time. Private firms and companies are in the same predicament. They need capital to pay salaries, expand, etc etc. Charging interest on past due invoices is a way for them to recoup some of the capital they *could* have created by receiving the money *on time*.
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Weigh your options - Hi TheAnonymousMan, Unfortunately none of us know the character of your client or the extent of your relationship with him well enough to advise you to give him a 3rd chance. So from an objective opinion, 3 things can happen... a.) You do the 3rd job and his business succeeds, so you'll eventually see all of your money back. My opinion: This is unlikely since you're betting on a guy who drowns his sorrows with alcohol. You don't need to see his financial statements or business plan to know that this guy isn't a safe investment. [u:2exoh5oh]OR[/u:2exoh5oh] b.) You do the 3rd job and his business still fails, so now you've lost payment on 3 invoices rather than only 2. Moreover, if your client is in deeper hole, he'll potentially become more desperate to seek another free "pity" job off you since he knows you caved in 3 times already and can be taken advantage of. Moreover, it probably wouldn't even be worth the time, money or stress to take him to court to pay off your invoices. [u:2exoh5oh]OR[/u:2exoh5oh] c.) Don't do the 3rd job until you see some form of payment. Best case scenario: You get some money. Worst case scenario: You cut your losses and only lose 2 payments rather than 3. When in doubt, pick c.)
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