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An invoice is a document sent from a business to a customer indicating products sold or services executed (or agreed upon). 

The document will often include client and business information such as logos, addresses, and contact details in addition to transactional information like the type of products or services, quantities, and scope. The invoice is essentially a bill, and it will often include payment terms, timelines, and other information.

Keep reading to learn more about how to pay an invoice.

Receiving Invoices From Businesses

Every business handles invoicing differently. Some utilize invoicing software to streamline the management and tracking of paid and outstanding invoices, while others prefer creating and mailing an invoice by hand. Some businesses invoice with strict payment terms, while others provide more flexible timelines and payment options.

Simply put, you can receive many different types of invoices through various methods. While the invoice itself may be unique, there are only 2 channels to receive an invoice.

• Online: More recently, businesses are choosing to move their invoicing online for simplicity and cost savings. The most common way to receive an online invoice is via email. However, you’ll likely be directed to an online portal to pay that invoice. Many of these client portals will allow you to review and manage outstanding and paid invoices
• Offline: While online invoicing solutions are becoming more and more popular, some small businesses still prefer tangible invoices. You may receive invoices from local businesses by mail or in-person after a project is completed.

When Should You Pay an Invoice?

Paying bills on time is an important step in maintaining good relationships with businesses and vendors. If you’re frequently late on payments, the business may decide to charge you more—or to drop you entirely. If you operate in the business-to-business (B2B) space, losing a good vendor can cause bottlenecks and quality control issues throughout your business. So always pay your invoices on time.

Payment terms are often discussed before work is started and will often be outlined within the invoice. For many industries—especially B2B—it’s possible to have payment timeframes that extend weeks or even months after the work is completed or products delivered. You may also be able to negotiate discounts for up-front or early payments if the business struggles with cash flow or delinquent payments.

Most invoices will include phrasing like “payment date” or “net-payment terms” that indicates the deadline for paying an invoice. Net-payment terms are often used to express a timeframe or window to pay an invoice within. For example, if you have an invoice with net-15 terms, it means you have 15 days from the time you received that invoice to pay the balance.

If you received an invoice with no payment terms outlined, the typical timeframe of 30 days should be assumed.

How to Pay an Invoice Online

The physical process for paying an invoice online will vary based on the invoicing or payment processing software the business uses. Typically, it will flow like this:

1. Open the email with the outstanding invoice.
2. Look for a button that directs you to “Review and Pay Invoice.”
3. Confirm that all the information is accurate.
4. Find the button or area on the page that directs you to pay.
5. Input your credit card information or complete other payment method requirements.
6. Confirm that the payment amount matches the invoice and what you agreed upon.
7. Submit the payment and receive the receipt.

Paying invoices online is usually a seamless process. Best of all, most businesses allow for flexible payment methods. Some of the common ways to pay an invoice online include:

• Credit card payment: The most common way to pay an invoice online is by credit card. While most businesses will allow any type of credit card, you’ll want to confirm beforehand—some businesses do not accept credit cards like American Express or Discover because of their increased fees to companies.
• Bank transfer (ACH): Another popular method for paying an invoice online is to pull it directly from your bank account via ACH. If you can afford to pay with ACH, you can often use this fact to negotiate lower rates with businesses. ACH payments can save a business money on transaction fees, which can be quite expensive—especially on large invoices.
• PayPal payments: PayPal is another common way to pay invoices online and simply involves signing into your PayPal account within the payment processing step. To pay an invoice with PayPal, you’ll need to have an active and funded PayPal account or have it connected to your bank account.

How to Pay an Invoice Offline

If you received an invoice and are looking to pay it without using an online option, then you’re limited to a few methods. While not the most convenient, safe, or fastest way to pay invoices, offline payments usually include:

• Paying in person: You can often pay invoices in person—with COVID-19 restrictions, you’ll want to confirm this first. Typically, you can use a credit card, check, or debit card to pay a bill directly at the business.

• Paying over the phone: Many businesses will also accept payments over the phone, but this is not the most secure way to pay an invoice. The business will collect your credit card information over the phone and pay the bill manually.
• Paying by mail: You may also be able to write a check and pay your invoice through the mail. Again, this is not the safest or fastest way to pay a bill—and the customer may experience delays, which could cause your payment to arrive after the due date.

The establishment of a minimum wage first occurred in 1938 with the passing of the Fair Labor Standards Act. This act ensured that employees should be paid a minimum amount for the labor they perform and was passed to prevent employers from paying their workers next to nothing for long hours in often dangerous working conditions. 

While the minimum wage has been in effect for more than 80 years, it has recently become a controversial political issue. Some argue that it should be raised to keep workers out of poverty while others assert that it needs to remain the same—or be revoked entirely. Learn more about the minimum wage and whether it actually is a living wage.

Was minimum wage ever meant to be a living wage?

From the beginning, the minimum wage was meant to be a living wage—meaning families could live off of the pay comfortably, rather than struggling paycheck-to-paycheck. 

President Franklin Delano Roosevelt was a major proponent of the living wage, saying that “by living wages, I mean more than a bare subsistence level. I mean the wages of a decent living." With this idea, a family that earned minimum wage could not only cover the costs of food and shelter but also save for emergencies and have the funds to thrive rather than just get by.

Since the enactment of the federal minimum wage, the pay rate has increased 22 times by 12 different presidents. However, it hasn’t been raised since July 2009, when it was increased to $7.25 per hour.

Arguably, the current minimum wage is not a living wage but a poverty wage. A full-time employee who works 40 hours per week for 52 weeks per year would earn just $15,080. Meanwhile, the Census Bureau places the poverty line for 1 person under the age of 65 at $13,465. 

If that full-time employee has a single dependent, like a child, then the poverty line is $17,839. A US family cannot live under the wages of 1 person—or even 2 people—who only earn the minimum wage.  

While states can set their own minimum wage and increase them based on the state’s cost of living and other policies, most simply accept the $7.25 federal level as the bare minimum.   

Can the minimum wage keep up with the cost of living?

The main reason minimum wage workers fall below the poverty line: their income isn’t keeping up with the cost of living. For example, the median price to rent an unfurnished apartment in 2009 was $1,064 per month. In 2018, due to inflation, the cost was $1,588. 

This means that rent alone would cost a minimum wage earner $12,768 in 2009, and someone who made the minimum wage of $7.25 per hour in 2018 would have to pay $6,288 more than their 2009 counterpart ($19,056). 

Furthermore, rent isn’t the only expense that increased in the past decade—car prices, healthcare, education, food, gas, and other expenses have all increased while wages have remained stagnant. Each year, a full-time minimum wage earner has less and less buying power and a harder time caring for themselves and their families as a result. 

The minimum wage vs. cost of living tension grows even stronger in urban areas where the cost of living tends to be much higher. In San Francisco, many waiters can’t afford the cost of living, so they either commute in and out of the city—difficult when you’re working a late shift—or sleep in their cars overnight. Even with California’s minimum wage set at $12 per hour, it is nearly impossible to get by in most of the city’s downtown neighborhoods. 

Is $15 an hour a livable wage?

At present, $15 is considered the new level for a minimum wage. That amount would cover the costs of a modern living wage in most areas and give families considerably more buying power than they currently have. There are several secondary and tertiary benefits to enacting a $15 minimum wage, as explained by the New York Times. Studies have shown that:

• Low-skilled workers report fewer unmet medical needs in states with higher minimum wages. 
• Rates of smoking decrease in communities where the minimum wage rises as residents work their way out of poverty and have the time and mental health to quit. 
• Raising the minimum wage by even $1 would decrease child-neglect reports by 10%.
• Increasing the minimum wage can reduce the number of homes that have their water and lights shut off while simultaneously allowing families to keep food in the pantry so kids and older relatives can eat. 

These benefits not only help the workers who are directly affected—they can also ease the financial burden of federal, state, and local governments to cover welfare and healthcare programs like SNAP, low-income housing assistance, and Medicaid. 

Lessening the need for poverty-driven assistance can free up funds for other programs or infrastructures. It can also lead to lower taxes in communities, increasing residents’ spending power.

Does a higher minimum wage increase prices?

A primary argument against raising the minimum wage is that raising wage costs will increase operating costs for businesses, causing business owners to raise their prices and pass that burden onto customers. 

This could create a snowball effect: the government raises the minimum wage again, only for businesses to raise prices again, and so on. Opponents of raising the minimum wage also argue that employers will hire fewer workers and turn to automation to avoid hiring people entirely. 

However, preliminary studies show that all of these claims might not be as dramatic as they seem. Over a 5-year analysis of McDonald’s locations, many of which opted to pay above the minimum wage to better retain workers, a 10% minimum-wage increase led to only a 1.4% increase in the price of Big Macs but did not affect the sales of Big Macs in any way. 

Yes, the cost of paying workers was passed onto customers—but no one was forced to buy a $15 burger. 

There are benefits for employers who offer a living wage. 

Paying employees a minimum living wage of at least $15 may seem expensive, but there are long-term benefits for your business and the community. You’re more likely to retain workers who are paid well, and those employees can then shop at local businesses—giving your neighbors and customers more money to buy from you. Your workers also pay taxes that benefit your area. 

Consider your state’s minimum wage and if your team members could benefit from a raise.

Cash flow is a critical metric every small business needs to pay attention to. It reveals your company’s financial health in the immediate present by comparing money flowing in and expenses flowing out. While knowing your revenue is obviously important, cash flow shows you how much actual money is moving into and out of your bank accounts.

With some math and some informed conjecture, you can chart the expected cash flow of your business for the future.

Why Is Cash Flow Projection Important?

Cash flow projections, then, predict your cash flow in the future. A cash flow forecast can help you circumvent dreaded cash crunches, which is when your business needs to spend money but there isn’t enough cash on hand to cover the expense. Cash crunches are damaging to any business, and they can be ruinous for young or very small businesses.

Fortunately, with some preparations, you can project your future cash flow and determine how to focus on creating cash flow.

Cash Flow Forecast vs. Projection

No matter what you call your cash flow documents, you should prepare several based on different potential futures. It is a good idea to prepare one cash flow projection based on your present business, as well as a best-case cash flow projection and a worst-case cash flow projection.

How Do You Calculate Cash Flow Projections?

Accounts receivables includes money that is expected to flow into your business, such as sales and payments from client invoices. Grants, rebates, loans, and funding are all considered receivables, too.

Accounts payable is the other side of the equation. Payables include anything your business spends money on: your salary, payroll, inventory, overhead, rent, taxes, and all expenses.

A cash flow statement compares accounts receivables to accounts payable. A cash flow projection predicts your cash flow over time.

To create a cash flow projection, it can be wise to start with the past. Look at 12 months ago and record how much cash was in your bank account—this amount is your starting balance in this example. Break down the past 12 months in terms of receivables and payables. Try to categorize your income and expenses as much as possible to get a better sense of where your money is coming from and what you are spending it on.

For the first month, subtract the total amount of payables from your total receivables. This calculation gives you your cash flow for the month. If it is negative, subtract it from your starting balance. If it is positive, add it to your starting balance. This new balance is the starting balance for the following month.

Repeat these calculations for the entire 12-month span and you’ll have a cash flow chart for your business.

The Small Business Administration has several great templates you can use to make this easier, including a cash flow projection template.

To predict into the future, you can sometimes reuse a lot of the data from the previous 12 months if your business stays stable in that regard. If you know of the specific revenues, funding, and costs that your business will incur in the future, you can use that data, although you should include some contingency spending.

If you are less sure about the future, start with what you know, like rent payments and clients who pay you a specified amount on a repeating basis. Then make educated guesses about what your cash inflows and outflows will be over the next few months. Here is where it makes sense to create several different cash flow projections for your status quo, best-case, and worst-case scenarios.

The time extent of your predictions is up to you, but you should think about your available data. If your company is well-established, you can create projections for many years into the future. If your company is very young, though, it might be more accurate to think in terms of a few months to a year out.

What Is a Cash Flow Projection Example?

Is Positive Cash Flow More Important Than Profit?

You should think about and create forecasts for both profit and cash flow.

The words “flexible” and “financing” don’t seem like they should be in a sentence together. When you think of financing, you may think of a stuffy banker stamping rejections on loan applications. Maybe you think about how your business is stalled in growth because you’ve reached the end of your credit line. It is not often that you think about financing options that are flexible to your needs. They do exist, however. Here are some flexible financing options for your small business.

Does your financing plan account for unexpected losses?

As we have all seen, life is unpredictable. Your business could be performing well, but then revenue may drop off a cliff for outside reasons. Here is where that flexibility will come in handy. The pandemic has been awful to small business owners, and it has also shed light on some huge holes in small business finances. Many small business owners turn to personal funds to keep their businesses afloat because they lack cash reserves. If you want to avoid this scenario in the future, have a financing plan that is flexible and can accommodate unforeseen challenges.

Flexible financing options.

Many business owners found they were at risk of breaching their banking covenants with the sudden revenue loss. Some business owners were struggling to meet payroll. Others had to close altogether. To keep the lights on for your business, you either need a large cash reserve or flexibility in your financing. If you have maxed out a bank line of credit, do you have access to working capital from somewhere else? Is your bank willing to extend your credit limit?

Equipment financing

It is worth considering some supplemental financing options to round out your financing plan. Equipment financing is a great option that can unlock working capital to support your business growth. Equipment financing is a loan that you can use for specific reasons, like buying manufacturing gear or any other equipment you need for your business. If you are looking to upgrade your cybersecurity and tools because you have moved mostly remote, equipment financing can cover those costs. This type of financing will be a loan that probably has strict repayment terms, but you can use the money pretty flexibly for your business’s needs. 

Accounts receivable financing.

Accounts receivable financing can help you meet payroll while waiting to collect on your receivables. In simpler terms, the amount of capital you can access is based on the amount of capital you are waiting to collect from your customers. With accounts receivable financing, you can add to your team without the stress of adding to your overhead. Since it’s based on your outstanding invoices, it does not require a high credit score or lengthy time in business, which makes the approval requirements very flexible. This type of financing is similar to a line of credit, but the limit will not be as rigid. Typically, the higher your accounts receivable, the more capital you can access.

Line of credit.

A line of credit gives you some flexibility in drawing capital and repaying it. You don’t have to use all the money, and you only pay interest on the amount you use. Online lenders and traditional banks offer lines of credit, and it’s a great tool to have available if you want a more flexible financing plan.

Business cash advance.

A cash advance is basically a lump sum of cash that is repaid through daily or weekly withdrawals based on your future earnings. These are typically costly because the interest rates are high. Make sure you read your contract carefully before taking out a cash advance.

Which Flexible Funding Option Is Right for You?

Most of these financing options can work together to round out your financial plan. For example, you can use accounts receivable financing to cover your payroll and also take out an equipment loan to cover your production tools. You could use a cash advance alongside a line of credit. It is crucial to consider your business and your industry when signing up with a new lender. It’s best to choose a lender that knows your industry and can offer solutions to your unique financing challenges. Ultimately, your financing plan should include some flexibility to account for sudden gains or sudden losses.

Becoming an entrepreneur is an exciting venture that can often be the fulfillment of a life-long dream. But business owners also face a variety of challenges, and POC business owners face additional and unique challenges. New entrepreneurs wading into unchartered territory can often learn from the advice—and mistakes—of others. We asked a handful of POC business owners for their best advice to help fellow POC entrepreneurs entering the small business world.

1. Get a Minority-Owned Certification

As soon as you can, Mary Angela Munez, owner of GoLucky Studios, recommends working toward getting certified as a minority-owned business. “This makes you visible and able to accept government contracts that are set aside to provide opportunities to minority business owners,” she explains. “Right now, 5% of all federal money has been allocated to businesses that hold this designation.” State and city-level certifications can also provide access to bids on local contracts.

2. Plan for Success

You probably want to hit the ground running, but Elisabeth Jackson, a small business owner of 3 years with over 8 years of experience in the small business world, warns against rushing the process and says you should instead focus on getting your systems right. “Black women are the fastest-growing entrepreneurs but are significantly absent when it comes to long-term profitable businesses,” she notes.

“Document everything you do, and create procedures and systems that can replace your workload for you as you grow,” Jackson says. “Also, I recommend having a strong product suite that increases your client retention so you aren't relying on one product to make all your money.” In addition to not relying on one product, she advises against relying on one person—namely, yourself.  “Don't get caught up trying to do everything because that’s not sustainable in the long run.”

3. Hire Well

And since you can’t do everything yourself, Nerissa Zhang, CEO of The Bright App, recommends you hire help as soon as you can. However, she says it’s important to hire good people, and it’s equally as important to let those people go when it becomes clear that they’re not a good fit. “The reality is that there are many people in this world who will not respect the leadership of people of color, particularly if you’re also a woman,” Zhang explains. “As soon as you see any signs of disrespect from someone you’re paying, do not hesitate for a second—fire them immediately.”

4. Put Your Business Online

COVID-19 has severely hampered brick-and-mortar businesses. But even in a post-pandemic world, Ray Blakney, CEO and cofounder of LiveLingua.com, recommends putting your business online.  "In addition to the standard benefits of online business—such as lower startup costs and overhead, global reach, etc.—there are some unique benefits for POC.” 

For example, he says that since there aren’t a lot of online businesses run by POC (comparatively speaking), this is an opportunity to stand out.  “Not only can the unique point of view be shown on the website itself—it can also be used in marketing, as many journalists, podcast hosts, and websites are looking to include more voices from people of color, and they have a hard time finding people who can speak to this,” Blakney explains.

5. Be Yourself—and Be Sharp

To Tasha Booth, CEO and founder of The Launch Guild, being an entrepreneur is an opportunity to be your “authentic” self.  “Especially as a person of color, you will always be ‘too much,’ ‘too loud,’ or ‘too something’ for someone in whatever industry you’re in, and that’s okay.” But the beauty of being a small business owner is that you get to make the decisions and run the operation as you see fit. “Don’t think you have to fit a specific mold or cater to certain people to succeed and feel good about the business you’re building,” Booth says.   

Michelle Diamond, CEO and founder of Elevate Diamond Strategy, agrees. “Understand the value and uniqueness you bring as a POC,” she says. “But at the same time, unless your small business is focused on your ethnicity or heritage, lead with your skill sets and the value of your products and services only.”

6. Embrace Those Who Embrace You

You may have a target audience, but Booth recommends embracing the community that embraces you.  “When I first started running Facebook ads for my business 2.5 years ago, I noticed that the women responding to the ads and signing up for my services were primarily Black women.”

Initially, she says she was bothered that non-POC were not responding and believed it was only because she was a Black woman.  “But now, I celebrate the fact that other Black women see my success and see what the possibility can be for them,” Booth says. “Rather than thinking of it as a detriment, I see it as one of my superpowers and something that sets me apart from all other entrepreneurs in the online business/virtual support industries, so embrace the people who are embracing you.”

7. Invest in Your Professional Development

Learning is a lifelong process – especially when you’re a small business owner. And according to LaKesha Womack, a leadership development specialist, it’s important to invest in your professional education. “No, I don't mean getting another graduate degree: however, working with a business coach or consultant to help you develop a plan for your business and to hold you accountable will be one of the best decisions that you can make.”

While many entrepreneurs are great at what they do – she says being a successful business owner entails more than providing a service or product. “Working with a professional who has experience with business operations, human resource management, branding, and marketing can help your business to not only survive, even in turbulent economic environments, but they can also help to prepare you for growth.” Mentors for POC can also provide valuable support and advice to take your business to the next level and perhaps point you toward funding sources for business owners of color. 

8. Focus on the Positives

Being a POC entering the small business world will involve challenges, but that shouldn’t be your focus. “Oftentimes, POC may assume that they will encounter racism or bias, and while that does happen sometimes, the truth is if you have that mindset, you will attract more of the same,” says Diamond. However, she believes that the majority of people care more about your ability to add value to their lives than the color of your skin. “Focus on succeeding and having a great business; there is no limit to the success you can achieve for yourself, family, and community."

How much money are you making?

This is a common and succinct question small business owners often receive, however crass it might seem. The question can feel like a dagger to the heart or a point of pride, depending on how you perceive your business is faring financially.

But how do you know how your business is doing? How do you know if your business is making money or not?

There are 2 main ways to understand the cash coming into your coffers: revenue and profit.

Revenue and profit are 2 systems of defining the money your business is making. Revenue is the top line, and profit is the bottom line.

Let’s explain these concepts, how they interact, and what they mean for your business.

What Is Revenue?

Revenue is the top line because it is all the money your company makes before subtracting any costs.

For many small businesses, especially new ones, revenue is critical. If your revenue is increasing over time, you know there is a demand for your product or services.

However, judging your business’ financial health based on revenue is a bad practice because revenue is too broad of a metric.

For example, suppose an auto dealership decided to severely undercut its competitors by selling new cars for less than it paid for them from the automakers. Revenue would likely skyrocket as consumers discover that its cars are much cheaper than anywhere else. However, the dealership would probably be in deep financial trouble because it would be losing money with every sale.

Still, there are no one-size-fits-all answers about whether revenue or profit should be your focus. In the above example, the dealership might decide the good PR gleaned from the happy customers will be worth more in future sales than the money lost during this price-cutting move.  

What Is Profit?

Revenue is your company’s top line. Then, in your ledger, you subtract various expenses to receive your profit—your bottom line.

Profit usually refers to a positive bottom line. You are then “in the black”—a reference to how accountants commonly color-code their books. If your expenses are greater than your revenues, your profit is negative, although you would probably refer to this figure as a “loss.” Your business would then be “in the red.”

What expenses do you subtract to figure out your profit? There are several methods of computing this number. Gross profit is when you subtract the cost of goods sold (COGS) from your revenue. COGS are the direct expenses associated with each good or service you sell (i.e., the cost of manufacturing or acquiring your goods). This does not include indirect costs, such as rent for your office.

Operating profit subtracts overhead expenses like office rent or marketing from revenue along with COGS. Because of this, it might be a more holistic approach to analyzing your financial situation. There are even more ways to define your profit, like pre-tax profit or net profit.

Your profit margin is how much profit (or loss) you earn (or lose) with each sale; profit margin displays how your profit increases off of your revenue. To determine profit margin, take a version of profit (like gross profit or operating profit) and divide it by your revenue. This will give you the decimal expression of your profit margin percentage.

Is Profit More Important Than Revenue?

“When it comes to investors, there’s a divide,” analyst Andrew Marder of software platform Capterra explains. “In the tech startup world, revenue is often seen as the end-all, be-all of finance. Venture capitalists look for companies that can ramp up revenue regardless of cost, hoping to figure that bit out later on down the line.”

Famously, Amazon, Uber, Zillow, and many other unicorns that define our modern life took decades to turn a profit—some still have yet to be out of the red.

But the circumstances are vastly different between an app startup and a small business in retail, hospitality, or professional services. In most cases, profit is a much more accurate indicator of a company’s financial health.

“In the world of more classic, Warren Buffett-style investing, revenue is almost meaningless,” Marder continued. “These investors—which may also include your business banker—want to see money making it all the way to the bottom of the earnings statement.”

The safest position is to pay continual attention to both revenue and profit—you can’t have any profit without revenue, after all, but you probably want to be spending less money than you are bringing in through sales.

How Do You Gauge Your Business’s Financial Health?

“Looking at your bank account is a bad way to manage your business,” suggests CPA Shabir Ladha. “Many entrepreneurs do it because that’s the only piece of information they have. Having the right bookkeeping or the right information is vital for business health.”

When thinking about your company’s financial wellbeing, you also need to consider expenses, cash flow, and less tangible factors like branding or public perception.

How Do You Increase Profits and Revenue?

Easier said than done! But that is the task of running a small business. With planning and research, you can best chart a path to thrive financially. 

UPDATE: The PPP loan application period ended May 31, 2021. Apply for the Employee Retention Credit today through Lendio.

Lendio strives to provide you with the most current information as it relates to the Paycheck Protection Program, related SBA programs, and relevant regulations. The rules and regulations governing these programs are being regularly clarified by the SBA, and other agencies. In some cases, the provided guidance may directly conflict with other competing guidance, laws, rules, or regulations. Due to these changes, Lendio cannot guarantee that the information contained in this page reflects new changes or updates.

Lendio advises you to review the SBA guidelines and regulations on your own and determine your Company’s best approach to receiving SBA loans. Lendio urges you to consult your own attorneys, lawyers, and consultants to make the best decision possible. The information contained herein should not be construed as legal or tax advice, and should not be relied upon as such.