Mistakes are unavoidable. When issuing invoices, they tend to happen once in a while. Which invoicing mistakes are the most common? How to avoid invoicing mistakes? What consequences can they have? If you want to know the answers to these questions, read our article on 5 common invoicing mistakes.
5 common invoicing mistakes – table of contents
- Wrong invoice number
- Incorrect counterparty data
- No information on the method of payment
- Incorrect description of goods or services
- Billing errors
Wrong invoice number
Every invoice must have a unique number. This is something obvious but in some situations, it is easy to make these invoicing mistakes. This is especially true if you use programs like Word or Excel or their equivalents to issue invoices. At first glance, it may seem like this will make your invoicing job easier. In such programs you can prepare ready-made invoice templates, in which you only have to change data when issuing subsequent documents. But this solution has one big disadvantage.
Overwriting subsequent files may cause you to get lost in numbering. And saving invoices as successive pages in a Word document or successive sheets in Excel can also lead to inaccuracies.
What are the most common invoicing mistakes in invoice numbering? There are two types: duplicate invoice numbers and gaps in numbering. Both of these invoicing mistakes can have unpleasant consequences when the tax authorities check them. Numbering that contains gaps may indicate that not all issued invoices are included in tax calculations. Gaps in numbering will raise serious doubts even if they are accidental and not intended to mislead the tax authorities.
The second type of error, i.e., two or more invoices with the same number but different content, may also suggest that they were deliberately issued that way to avoid tax. In this case there may also be a problem with posting such invoices, because the accounting software may not allow you to enter two or more documents with the same number.
Correcting such oversights may not be easy, especially if you have already sent such erroneous invoices to your customers and only later realized that you had the wrong numbering. They do not matter much to your contractors, because they do not check the correct numbering of your invoices. Therefore, they can pay such invoices without any problem. But in case of a tax audit you may be penalized for it. That’s why it’s better to prevent them, for example, by using an invoicing program or app where the numbering will be assigned automatically. This way you will avoid invoicing mistakes and you will be sure that you have not issued invoices with wrong numbers.
Incorrect counterparty data
We are only human and missteps happen to all of us from time to time. It could be a typo in the name of the company you invoiced or a misspelling of your customer’s name. A typical one is also the wrong address of the contractor. In such a case, there can be a variety of errors: wrong building number, wrong zip code, wrong street name or even a misspelled city of the company’s headquarters. It can also happen that you write the wrong tax identification number of your customer on the invoice.
It would seem that these are just little things. But no one likes it when their name or surname contains spelling errors. Additionally, they can lead to tax consequences. Incorrect contractor’s data may make him unable to recognize such invoice as a cost of his business. In such a case it will be necessary to correct the data. This will prolong the time you have to wait for payment for such an invoice, because your customer may withhold payment until they receive the document with the correct data.
Another type of flaw is issuing an invoice to a completely different recipient’s data. This can happen especially when invoices are created manually by overwriting data in a file. In this case, the correct quantities of goods or services sold are included on the invoice, but the recipient data remains from the previous invoice.
This lapse can cause you to send such an invoice to the wrong recipient, who did not buy the items listed on it from you. You can also send it to a contractor who has purchased from you, but the recipient’s information will be wrong on that invoice. Until you correct them, you certainly cannot count on receiving payment for such an invoice.
How to avoid them? This is where an invoicing program can come to your aid. You can use it to create a database of your customers. You only need to check their data once, so you can invoice flawlessly later on. Some programs enable you to download company data from government records, so you can avert these errors when issuing invoices.
No information on the method of payment
Everyone likes to have money deposited into their account. But a lack of information about how to pay can make it impossible to pay an invoice.
This is where a variety of errors can occur, from not having a bank account number to an incorrect account number to not knowing when and how to pay an invoice. Inaccuracies here can have a variety of consequences. Missing the due date will probably result in the customer paying you for the invoice within the legal deadline. But a wrong account number or even the lack of one will result in the contractor not being able to pay you. Only when you correct or complete this data you can count on payment for the invoice.
Incorrect description of goods or services
Invoices must contain accurate descriptions of goods and services sold. While in the case of goods mistakes are far less common, a good description of services can cause many problems. Your customer must not doubt that they are paying for what they ordered. That’s why the data on the invoice must match the data on the order.
Depending on the procedures your contractors have, some may require more detailed descriptions of the services you provide, while others may not. Nonetheless, it’s a good idea to ensure accuracy so that you don’t have problems receiving payment later on. An incorrect description will need to be corrected, which will probably take some time. As a result, you may receive payment for such an invoice later than you expected. A solution to this problem may be to create a catalog of sold goods and accurate descriptions of individual services. This way you will always have clear and legible descriptions of your offer on the invoice.
An invoice must not contain any accounting errors, but these situations can occur. There are several places where they appear most often. These include the total amount to be paid. It may be incorrectly added up, making the invoice either understated or overstated. Neither of these options is beneficial. Why? Because it reflects badly on the person who issued the invoice.
It may happen that the customer does not carefully check whether the document issued by you does not contain accounting errors and pay for such an invoice. But as a result, you may receive too little or too much money. In the first case you will have to ask the customer to pay extra, which may put you in a bad light. In the second case, the customer may demand a refund of the overpayment, which could reflect badly on your company’s reputation. In both cases, such an invoice may be challenged by a tax audit, so it is better to avoid it.
Another place where accounting errors occur on an invoice is in the calculation of the value of goods sold. In this case, there may be an error in multiplying the number of pieces of goods and the price for a single piece. This most often happens when calculations are done manually. An error can also occur when calculating the value of VAT. Using an invoicing program will help you avoid such invoicing mistakes because the calculations are made automatically there.
Invoicing mistakes – summary
Invoicing mistakes happen to everyone. However, you should be aware that they can have legal consequences. Invoicing mistakes also contribute to delays in payments and can have a negative impact on the credibility of your company. One of the solutions is to use dedicated invoicing platforms that automate many processes and at the same time allow you to avoid basic errors.