Post by
Surya Voinar
|
September 6, 2019

Why Should I Avoid Backdating Invoices?

No matter the nature of your small business, it is vital to keep your books clean and accurate. Although there are some legitimate reasons to backdate documents in general (for example, an agreement that goes into effect on a certain date but signed at a later date), backdating invoices is almost always inadvisable. At best it will muddle your accounting and make reconciliation a chore; at worst you can expose your business to audits and liability.

Some reasons for backdating invoices are simply underhanded and illegal. An example of this would be maintaining a fourteen-day payment window as company policy and backdating an invoices thirty days to try to force customers to pay late fees.

Sometimes it is tempting to backdate an invoice at the request of a customer. These requests are most likely to come early in the year or a fiscal quarter when a customer would like to apply an expenditure to the previous tax period. Although you may be happy to help, it is better to refuse such a request. 

By the time such a request comes in from a customer it is often at least a few days into a new tax period, and you have closed out the previous period. Customer service is important, but you do not owe your client the time and inconvenience of reopening and re-reconciling your books. No client is worth engaging in unethical behavior. 

Additionally, even small businesses today rely on data to manage their operations. Depending on how you measure your company performance, backdating invoices can skew your data. You may for example miscalculate your monthly cash flow, which can be catastrophic for any size operation. 

A simple way to minimize such requests and protect your business from liability is to automate your invoicing and accounts receivable. When you have clear billing policies and invoices are generated and sent automatically on a reasonable schedule and customers are notified immediately upon the assessment of a late fee, it is easier to decline your customers when they ask for a backdated invoice.

If you work in the education or childcare industry and would like to know how automated billing can help your organization, we invite you to explore Curacubby and schedule a demonstration. 

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