Recurring Billing

14 Invoicing Mistakes to Avoid in Your Subscription Business

Kyle Booysen

You’re busy—developing your technology, honing your services, and capturing the interest of new customers. These demands can turn invoicing and revenue collection into afterthoughts, but these processes often deserve more attention than they receive.

Effective, well-organized invoicing is the backbone of positive cashflow. It’s the first step to getting paid, and an important mechanism for communicating with your customers and building their trust, respect, and hopefully long-term recurring patronage.

Here are 14 invoicing mistakes to avoid in your technology subscription business. Avoiding these blunders will enable you to circumvent lost revenue, reduce churn, and overcome a number of barriers to growth.

1. Forgetting to invoice.

If you want to get paid, you obviously have to send an invoice for services rendered. This is especially important for a subscription business that sends regular invoices to its customers.

Missing one or more invoices can create confusion and backlog for both for your business and your customers. It happens though—especially to businesses using legacy billing systems that require complex and time-consuming manual effort. When a task isn’t automated, there’s also always the risk of human error.

When customers subscribe, they expect to see and pay their bills on a consistent schedule. However, things can get busy, and payment schedules can be challenging to maintain manually as your business scales.

Unfortunately, inconsistent billing can shake your customer’s confidence in your business. From an internal perspective, it can also complicate the issue of ongoing revenue leaks and revenue recognition.

Implementing recurring billing software to automate your billing process is a great way to avoid late and missed invoices. Regardless of the complexity, volume, and frequency of your billing cycles, the capabilities of this software can keep your invoices accurate and on time. This will ensure your customers feel confident and secure with your business, and will dramatically reduce the time and effort your team spends on billing.

2. Not following up on unpaid invoices.

Once an invoice has been sent, it’s important to have an efficient tracking system in place to keep tabs on its progress. Just because the invoice was sent doesn’t mean the customer who received the invoice will pay immediately, or even within the agreed upon time-frame. In fact, collecting outstanding payments is a top concern for more than 64% of businesses.

There are many reasons why customers don’t pay their bills. For subscription-based businesses collecting payment automatically each cycle, the most common reason is a declined or expired credit card. Following up with customers manually for this, or a variety of other payment collection scenarios, quickly becomes an unsustainable solution.

Recurring billing software with dunning management capabilities will enable your business to increase its efficiency by reducing or eliminating manual effort, in addition to reclaiming lost revenue with timeliness and tact.

Automated emails can communicate with customers when cards are about to expire, when they’ve been declined, and when a customer has incurred late or missed payments. The entire process can also be tracked and kept in motion with reminder emails and notices that let customers know when payment has been processed successfully.

On The Map (OTM) is an example of a business that was stunted by legacy billing processes. OTM—an internet marketing business—originally used individual spreadsheets as ledgers for its clients. It would also follow up with clients manually for payment collection.

OTM was able to leverage Stax Bill’s automatic invoicing capabilities to recover an average of $600,000 each year. OTM’s accounting department also reduced the time it spends on billing by 12 to 15 hours a month.

The reduction in failed payments, as well as greater visibility and tracking capabilities, have enabled the business to scale from sending about 100 invoices per month to now sending about 600.  

3. Having unclear terms.

The terms of your invoices should never be open to interpretation. Confusion can lead to wasted time and effort spent clarifying issues with customers, and ultimately to delays in the payment process. It’s always best to use simple and concise language without relying too heavily on accounting jargon.

For example, many businesses offer “net 15” payment terms, meaning payment is due within 15 days. While obvious to most in the accounting industry, this term can lead to misunderstandings. Does it only include working days? What if the business is open on weekends?

Stating “15 business days” can eliminate some of the confusion, which means you’ll hopefully get paid faster.

4. Not signing a contract.

It would be wonderful if we lived in a world where a promise and a handshake ensured a binding commitment. While these are great additions to any business transaction, it’s vital to have the terms of an agreement in writing and signed by all parties. For e-commerce transactions—more common for technology subscription services—a legally binding click-through contract needs to be in place.

Contracts can be referred to as needed when there are questions or concerns on either side. And while it’s rare for a customer situation to reach such drastic measures, contracts are crucial if a deal goes sideways and legal action is required to collect payment.

5. Sending invoices to the wrong person or department.

Mistakes happen, but this is a simple error that can have dire consequences.

When it comes to business-to-business (B2B) subscriptions, customers are often responsible for entering their own contact information. However, the main contact isn’t always the one paying the bills.

Your subscription billing software needs to offer customers—as well as your team—the option to enter and update separate contact and billing information through a self-service portal. This will ensure the invoice goes where it needs to and doesn’t fall through the cracks.

Even worse than a lost invoice is sending an invoice to the wrong customer altogether.

When a customer receives the wrong invoice, your business’s attention to detail can be called into question.

If you’re able to make a blatant mistake with such a small task, how will you perform on a larger scale? Even more concerning is the question of whether their business and financial information is secure. Their trust is fractured, and your reputation ultimately takes a hit.

Simply stated, sending invoices manually introduces the risk of human error. This is another instance where robust subscription management and recurring billing software that supports a self-service portal can benefit your business.

6. Missing or incorrect details.

A well-organized invoice that includes all the right details reminds your customer exactly what services they received from your business. This kind of clarity makes it easier for them to move forward with payment. It also leaves a professional impression that can reinforce your customer’s trust in your business, and encourage their continued patronage.

At a basic level, your invoices should include the following:

  • Legal business name and number
  • Office address
  • The customer’s name and address
  • Invoice number
  • Invoice date
  • Itemized list of services you provided
  • Due date
  • Any tax numbers that may be required by local law
  • Payment terms

Not only do all the proper details need to be in place, but they also need to be 100% accurate. Monetary discrepancies, itemization errors, and even grammar and spelling mistakes all suggest a lack of care and attention.

Perfecting every invoice may seem like a daunting task for a growing subscription business, but a modern recurring billing system makes it simple without any manual intervention. All of a customer’s account details, including contact information, types of billing, frequency, add-ons, upgrades, promos, etc. can be tracked in real time to expertly and automatically generate flawless invoices.

7. Unexplained fees.

Nobody likes hidden costs; they make people feel like they’ve been scammed, and can result in a loss of trust and business.

Communication is key, so be upfront about all charges before your customers subscribe to your services. This will ensure they aren’t surprised when they receive their invoices.

Modern recurring billing software should enable you to customize your invoices to make the amount customers have been billed clear, as well as the itemized reasons for the billing. This will help put them at ease.

Unique or new charges, such as for a renewal, upgrade, or special offer, can also be automatically communicated to your customers with customized emails so they’re aware—in real time—of why they’re being charged.

8. Not backing up your invoices on the cloud.

Computers aren’t always as reliable as we’d like them to be. If you aren’t backing up your business’ data, you’re taking a gamble.

Depending on your jurisdiction, you may be legally obligated to have invoices on file for a specific period of time. It’s also good practice to be able to provide your customers with archived invoices upon request. It shows you’re dedicated to taking good care of their accounts and information.

Comprehensive recurring billing software will automatically back up the invoices it creates. It will also ideally offer a self-serve portal that allows customers to access their invoices, as well as make payments and changes to account preferences. This portal will save your business a lot of time and effort, while simultaneously offering your customers more control.

9. No late fees (or incentives).

Building a sense of urgency into your invoices can be the difference between getting paid on time and having to follow up repeatedly with a customer. Just make sure to discuss your late interest fees with your customer up front and include them in your payment terms.

In the same stroke, you can offer your customers incentives to pay their bills on time, or even early. A discount, gift, or credit toward a future purchase creates positive urgency that might even help your business make its next sale.

10. Poor formatting and editing, and a lack of branding.

Appearances matter, and invoices are no exception. A sloppy or generic invoice creates a poor impression of your business. It can also make it easier to disregard in a stack on your customer’s desk or in their inbox.

The first thing a customer should see when they look at your invoice is a compelling logo. In practical terms, branding helps your customers identify who the invoice is from straight away. The professional look and feel exuded by branded documents can also increase the recognition and standing of your business over time.

Modern recurring billing software enables users to include branding on invoices, landing pages, emails, and more. For example, Stax Bill accomplishes all of this without any customer-facing evidence of the billing software—creating a much more professional look and feel for your business.

Your invoices should be neatly formatted, expertly edited, and should follow a general style consistent with your overall branding. Continuity in all your customer-facing material is key.

11. Failing to use your invoice as a marketing tool.

While your technology subscription business likely focuses a lot of effort on acquiring new subscribers in order to scale, there are always opportunities to grow by cultivating your existing relationships with current customers.

Renewals, upgrades, add-ons, and plan changes can all increase the value of a customer’s business.

Since invoices are one of the main ways you communicate with your customers, it makes sense to use them as an opportunity to up-sell.

Your business could also offer incentives to customers who refer your business to new customers. It’s a win-win for everyone.

Robust recurring billing software makes all of this simple and stress-free by enabling you to add custom messaging, as well as offers and incentives, directly into your invoices. The software then tracks and adjusts customer accounts, generating future invoices accordingly.

12. Poor manners.

“Please” and “thank-you” didn’t go out of style after grade school; being polite and courteous can go a long way toward boosting your business image and making your customers feel valued. And customers who feel valued are more likely to pay their bills.

Did you know you can increase your percentage of paid invoices by 5% just by including polite language?

The courteous marketing copy you include in your invoices could also highlight important announcements, offers, or coupons to end on a delightful note with your customer.

13. Failing to ensure PCI compliance.

Subscription businesses often need to hold their customers’ financial data in order to automatically charge them during each billing cycle. Therefore, compliance with the Payment Card Industry (PCI) is a must.

The PCI Security Standards Council is a global forum established in 2006 to ensure the safety of consumers’ financial information. Compliance is crucial because a bank tied to a business that isn’t PCI compliant can face monthly fines of up to $100,000 per violation. The cost of these fines inevitably trickles down to the associated business.

Comprehensive subscription billing software can take on the burden of PCI compliance. This will save your business the worry and effort of having to deal with time-consuming, and potentially costly, audits.

14. Using a paper-based system.

If your business is still hanging on to paper-based billing or inadequate legacy billing systems, it’s time to let go. Moving to a complete recurring billing system will save you time and money, and remove a number of barriers to growth. It will also give your business a precise financial system of record with regard to your subscription revenues.

Recurring billing software streamlines your invoicing process, automating what would normally be time-consuming tasks such as generating invoices and sending email notifications. This is all while simultaneously backing up your invoices and customer data on the cloud. Recurring billing software also enables your business to customize its invoices and communications with branding, tailored messaging, and special offers and discounts that can be easily tied into future billing calculations.

Flexible payment management, real-time revenue tracking and business insights, and seamless integration with your existing technologies are just a few more examples of how switching from your current system to complete recurring billing software will give your business the capabilities, support, and flexibility it needs.

Invoicing is a crucial part of doing business. Avoid making costly mistakes that will prevent your business from scaling by putting it in the hands of subscription billing professionals.


Written by:

Kyle Booysen
Kyle Booysen
Account Executive, Stax Bill

Kyle Booysen is a former account manager and recurring billing expert at Stax Bill. Kyle is a business graduate with majors in Management and International Business.