Who is paying the invoice?
Often an invoice is disputed because it has been sent to the wrong person or written out to the wrong entity.
Make sure the entity you are dealing with is an enforceable entity, we often see invoices made out to entities that cannot be sued.
As you know, invoicing is one of the most important elements for getting paid for the work you have done, making it important that you are issuing them to an enforceable entity.
A common mistake many businesses make is issuing an invoice to a business name.
Now, I can hear you saying 'what’s wrong with that?'.
Well a business name is not a legal entity, ASIC Manages business names and when you search on their website it applies ABN numbers to them, but the ABN belongs to the legal entity that owns the business name. This may be a PTY LTD Company or an individual, it may even be an association, no matter what it will be owned by a legal entity.
You need to think of the business name as an alias or a nickname.
On your contracts and invoices make sure you are addressing the full legal entity, plus the names of the directors, trustees and people who the entity is associated.
Ok, now I have mentioned trustees, trusts are another problem and are set up for various reasons. The important thing to realise here is that a trust is also not a legal entity and again like a business name they cannot be sued. It is the trustees that are the legal entity and their names are what must be on your contracts and invoices.
This is another common problem for businesses, in particular for accountants as they may be preparing taxation, financial planning and various services for trust, super funds or businesses and invoicing to the same, however again none of these are enforceable entities and cannot be sued, ensure your contracts and invoices are contracted to the correct entity. When you are working for these types of entities you still must invoice the original owner of the entities.
I know this is a big problem when it comes to enforcing payment, so ensure you are billing, invoicing and signing up a legal entity that is enforceable.
The simple way to avoid this is to check on ASICs website that the name on your contract is a legal entity before going ahead with any work and then invoice that entity.
3 common mistake businesses make with invoicing:
- They don’t check ABN numbers or the entity on ASIC
- The invoices don’t match the contracted entity
- There is not process for updating information on a regular basis.
We recently had a client come to us who was a graphic designer and printing firm, they had a client sign up for a job, they did a job for them under the name on the contract and that was all good.
The same person came back and asked for more work to be done, for two addition jobs but they were for different companies and they asked to have the invoices made out to the separate companies. The graphic design and printing company never got them to complete new contracts for the two additional companies. When it came time to pay there was an argument over who was being billed.
They went to court and because there was no contract he only got a portion of his money back and that was from the entity on his contract. It just goes to show that when you get a job, double check who is paying the bill.