Making a sale is only half of the job. Until the money arrives, you have given a free loan to your customer, and a business that is slow to collect is a business short of cash. A simple routine for invoicing and follow-up makes a large difference.

What a good invoice contains

  • Your business name, address and KRA PIN
  • The customer's name and PIN where relevant
  • A unique invoice number and the date
  • A clear description of what was supplied
  • The quantity, price, any discount and VAT shown separately if you are registered
  • The payment terms, such as "payable within 14 days"
  • How to pay: bank details, paybill or till number

If you are VAT-registered, invoices must be issued through eTIMS; see eTIMS e-invoicing explained. The free invoice with VAT template works out the tax on every line, and the VAT calculator adds or removes VAT from any amount.

Agree the terms before you start

Tell customers when they must pay, what happens if they are late and whether you take a deposit. For big jobs, ask for a deposit upfront and stage payments. Put the terms on the quotation; the free quotation with VAT template has a place for them.

Invoice quickly

Send the invoice the day the work is done or the goods are delivered, not at month end. A delivery note signed by the customer helps if there is a dispute; the free delivery note records what was delivered.

Follow up on a schedule

  1. Before the due date: a friendly reminder.
  2. The day after: a polite message with the invoice attached.
  3. After a week: a phone call.
  4. After 30 days: send a statement; the free customer statement of account shows invoices, payments and the balance.
  5. After 60 days: a final demand and stop supply until the account is settled.

Track what is owed

A list of unpaid invoices, with ages, shows where to focus. The customer invoices and aged receivables tracker and the credit control and bad debt tracker group invoices by age and suggest the next action, and calculate a provision for debts you may not collect.

Make it easy to pay

Offer M-Pesa, bank transfer and cheque, and put the details on every invoice. Reconcile receipts weekly; the free M-Pesa till reconciliation matches payments to sales.

Taxes and invoices

Output VAT is due when you issue the invoice, even if the customer has not paid, so slow payers can leave you paying tax on money you do not have. Plan for it; see how to file a VAT return and the VAT return calculator. Late tax payments are expensive, as in KRA penalties and interest explained.

Protect your cash flow

Forecast what you expect to collect; the cash flow forecast guide shows how, and the 12-month cash flow forecast does the arithmetic.

Late payers affect your tax as well as your cash, because output VAT falls due when you invoice. Read how to file a VAT return for the timing, and the KRA filing calendar for small businesses so the date is in your diary. The free sales receipts book records cash and M-Pesa sales as they happen.

Terms and legal remedies depend on your contract. Seek advice before taking legal action.

Common questions

What should be on every invoice? Your business name and PIN, the customer's details, a unique invoice number, the date, a description of what was supplied, the amount, any VAT and the payment terms and methods. VAT-registered businesses issue eTIMS invoices.

How do I chase a late payer politely? Send a friendly reminder a few days before the due date, another on the day and a firm one a week later, each stating the amount, the invoice number and how to pay. Pick up the phone for large amounts.

Can I charge interest on late invoices? Only if you stated it in your terms before the work was done. Many small businesses use early-payment discounts or deposits instead, which cause less friction.