Have you ever found yourself chasing down late payments? Wondering whether you're charging taxes correctly for clients in different provinces? Or feeling overwhelmed by the administrative burden of recurring invoices? You’re not alone.
At first, handling invoices may seem straightforward—especially when you’re managing just a handful of clients. But as your business grows, so does the complexity of keeping track of payments, following up on overdue invoices, and ensuring compliance with tax regulations. If left unmanaged, these challenges can lead to cash flow disruptions, wasted administrative time, and even potential legal issues. Optimizing financial processes and critical process improvement strategies can help alleviate these burdens.
The good news is that with the right systems in place, you can simplify invoicing, ensure compliance, and get paid faster. Streamlining core business processes ensures an efficient process for both business employees and clients.
This guide will walk you through different invoicing methods, tax compliance requirements, and payment processing options, all designed to help you streamline revenue collection and keep your business financially healthy.
Step 1: Choosing How to Invoice
Before deciding on an invoicing method, consider the nature of your business and client relationships. Are you billing for one-time services, ongoing retainers, or milestone-based projects? The right invoicing method can improve cash flow and reduce administrative work, avoiding the complications that can drain employee productivity.
Option 1: Basic Invoicing
For businesses that offer one-time services, a simple invoice is often sufficient. How to do it in QBO:
- Navigate to Sales > Invoices > Create Invoice
- Enter client details, service description, and amount
- Set payment terms and send the invoice
Option 2: Retainers/Recurring Billing
If your business operates on a retainer model or provides ongoing services, automating recurring invoices ensures consistency and reduces administrative work, a fundamental part of hyper-automation technologies.
How to do it in QBO:
- Go to Gear Icon > Recurring Transactions
- Select New Transaction > Invoice
- Set billing frequency (e.g., weekly, monthly)
- Enable automatic payment collection
- Ensure reconciliation and retry mechanisms are in place for failed payments
Option 3: Progress Billing
For projects with multiple milestones, progress billing helps maintain a steady cash flow by collecting payments in phases, improving customer engagement and customer satisfaction.
How to do it in QBO:
- Create an Estimate with the total project value
- Convert it into a partial invoice as milestones are completed
- Track payments and outstanding balances
- Collect a deposit upfront to secure the project
Step 2: Charge the Right Taxes
Taxes on invoices vary based on the location of your clients and the type of services you provide. Understanding tax rules ensures compliance and prevents potential issues in financial processes.
Typical Taxes to Charge on a Service
- Local Services: Charge the provincial sales tax (GST/HST/PST) based on the client’s location.
- Remote Services: If serving clients in different provinces, charge tax based on the customer’s location (not yours).
- Cross-border Clients: If serving international clients, you may not need to collect sales tax, but you should verify compliance.
Step 3: Making Sure Your Invoice is Compliant
Maintaining tax and invoicing compliance reduces the risk of penalties and audits. To ensure your invoices meet legal and professional standards, follow these guidelines:
Key Compliance Requirements
✅ Business Identification: Include your business name, address, and GST/HST number on invoices
✅ Invoice Details: Clearly state the service description, date, and amount charged
✅ Tax Application: Apply the correct sales tax rate based on the place of supply
✅ Invoice Numbering: Ensure invoice numbers are sequential for tracking purposes
✅ Record Keeping: Store invoices securely for at least six years for audit compliance
✅ Client Information: Ensure invoices contain accurate client details to avoid disputes
Taking these steps not only helps with regulatory compliance but also enhances your professionalism and credibility with clients, ultimately improving customer experience.
Step 4: Get Paid
Selecting the right payment method ensures fast and seamless collections. Here are the most common options:
1. Credit Card Payments
Pros: Quick processing, easy for clients, integrates with QBO
Cons: Transaction fees (typically 2.9% + per transaction)
Best for: Businesses that prioritize convenience and fast transactions
🔗 Unsure which payment processor to use? Check out our top options for small businesses 🚀
2. E-Transfers
Pros: Low transaction costs, instant deposits
Cons: Requires manual reconciliation, not scalable for high-volume
Best for: Businesses with occasional invoices and cost-conscious clients
3. Pre-Authorized Debit (PAD)
Pros: Automates recurring payments, reduces late payments
Cons: Requires client authorization, setup takes time
Best for: Subscription-based or retainer-model businesses
Step 5: Follow Up
Even with automated invoicing, following up on unpaid invoices is crucial for cash flow management. Implement a follow-up system to ensure prompt payments.
📩 Send Reminders: Use automated email reminders for due and overdue invoices at set intervals.
💬 Use Polite but Firm Communication: Start with friendly reminders and gradually increase urgency.
📊 Leverage Payment Plans: Offer structured payment plans for clients struggling to pay in full.
📌 Track Outstanding Invoices: Use accounting software to monitor unpaid invoices.
⚖️ Escalate When Necessary: If a client consistently misses payments, escalate to collections or legal action.
🔗 Want to Get Paid Faster? Check out our comprehensive guide on speeding up your payment collection process. 🚀
Summary
Efficient invoicing and revenue collection are crucial for maintaining a healthy cash flow. Whether you’re sending one-off invoices, managing recurring payments, or handling progress billing, QuickBooks Online provides the tools to streamline the process. By ensuring tax compliance and selecting the right payment processing method, you can reduce administrative headaches and get paid faster. Implement these best practices today to keep your service-based business financially strong!