Handling Orders and Invoices

by Moira Allen

One of the primary differences between self-publishing and subsidy publishing is the fact that, as a self-publisher, you are responsible for receiving, processing, and fulfilling orders. When you subsidy-publish, you don't have to handle this (and frankly, this is one of the best arguments for subsidy publishing). This is not a task to be handled haphazardly; besides the importance of providing good service to your customers, you also need to maintain good records for tax purposes.

Receiving Orders

Before you can receive orders, you need to develop a means by which a customer can place an order. You have four basic options for receiving/accepting orders:

• Direct mail
• Fax
• Telephone
• Electronic (e-mail and/or online order form)

Each of these systems has its advantages, disadvantages, and challenges.

Direct Mail Orders. Direct mail orders are most often generated by direct-mail promotions (i.e., you send out ads to a mailing list, and customers respond by mail). Direct mail enables a customer to send you a check or money order -- which is helpful if you have no means of accepting credit cards. You may also receive commercial orders (from retail outlets, bookstores, libraries, etc.) by direct mail; most often, these orders will have to be invoiced.

Fax Orders. The option of faxing an order to you should be reserved for regular, invoiced customers. If, for example, you regularly receive orders from a retail outlet, or a professional organization, or a school, etc., you can authorize that customer to fax orders to you. Unless you can accept credit cards, however, this is not a good idea for individual customers or any customer that you don't already know.

Telephone Orders. You can set up a capability to receive telephone orders in several ways. The simplest and least expensive, of course, is to accept such orders from your own home office. This generally means setting up a second line, or at least a separate number (e.g., having a second number that gives a "distinctive ring" on your main line), so that you can answer with your "business" voice. Having a separate line also enables you to set up an answering machine with a business message, so that callers don't hear "Hi, the Johnsons are out, leave a message!"

If you are "out of the office" for large parts of the day, however, this may not be a good idea. Customers want to talk to a live person, not an answering machine -- and having no one to answer calls sends the message that you are a very, very small company! Even if a customer does leave a message, you'll have to call back on your own nickel. Accepting telephone orders is also unwise if you have a noisy office environment (barking dogs, screaming children, etc.) -- which also sends an unprofessional message. Many people are reluctant to deal with individuals rather than large companies, particularly when it comes to handing over credit card information. Finally, accepting orders at home is unwise if you wish to spend your time writing and don't want to be disturbed by phone calls.

A second option is to hire an answering service. An answering service can take down a customer's information, and pass all messages to you at the end of the day. The advantage of such a service is that it will generally sound professional (often more professional than you might at home). The disadvantage is that it will cost you money. A third option is to sign up for an actual 800-number order-fulfillment service. This kind of service can actually accept orders and process credit card transactions. However, it can also be expensive, so use this option only if you anticipate selling a lot of books to direct callers.

Online Orders These days, many customers expect to be able to place orders directly through your website. You can handle this type of order in one of two ways: By e-mail or through an online form. E-mail cannot be "secured" -- so many customers will not want to send their credit card information by e-mail. If you use an online order form, you should make sure that it is secured and encrypted; otherwise, you can be liable if anything happens to the customer's information.

Make sure that your order form solicits all the information necessary to complete an order; if possible, program it to "bounce back" to the customer if necessary fields are not filled. However, be sure that it will also accommodate international orders, which will have a different address format (or create a separate form for such orders).

Customers who order online expect to be able to pay via credit card, so you will need some means of accepting credit card orders. Unfortunately, it is very difficult for small presses (or any home-based business) to obtain the ability to process credit cards directly. One of the easiest and least expensive ways to accept credit cards online is to set up a business account through PayPal. PayPal can accept credit card payments not only from accounts in the U.S., but from several other countries, and the payor does not need to have a PayPal account to order from you; they only need a credit card.

Processing Orders

When an order is received, your first task is to check it to determine the following:

• Is the address complete? Can you read it? (Many orders sent by mail are handwritten and difficult to decipher.)
• Is the order quantity clear?
• Is the price for the product correct? (If you offer discounts, have appropriate discounts been taken?)
• Has the correct sales tax been applied?
• Has the correct shipping been applied? (In many cases, customers will overlook your shipping discounts for multiple books; in other cases, customers will "forget" shipping entirely.
• Is payment included? If payment is not included, is this a customer you're willing to invoice?

Once you've checked the order and determined that it can be filled, you are required to fill it within 30 business days (unless you have specified a longer delivery time in your sales materials). If you cannot fill it within that time, you must send the customer a notice that the order will be delivered late, and give them the option of asking for a refund.

Order Tracking and Bookkeeping

An important part of your business bookkeeping is keeping track of orders received, invoices, payments, etc. Every order that you receive should be entered into some type of log, so that you have an ongoing record of the number of orders you've received, the amounts paid, etc. You may also wish to enter the names and addresses of your customers into a mailing list, as your previous customers are often your best "new" customers.

The easiest way to keep track of orders is to prepare a simple spreadsheet, on which you can enter the basic data. It might look as follows:

Such a record will help you keep track of individual orders, in case anyone raises a question (such as "when was my book shipped?"). Note that you can include any additional columns that you need -- e.g., columns to indicate when you follow up on invoices, when you actually ship books, prices before and after discounts, dates invoices are paid, etc. Total the amount received each month and enter it into your income-and-expense spreadsheet.

You'll also need to keep copies of all your orders; these are important tax records, proving that you are, in fact, running a business (and proving the amount of income you've received). I found that the simplest method was to use a 24-pocket expandable file for "completed" orders, filing them alphabetically. Invoices were kept in a separate file until paid, then filed in the "completed" file (see Invoicing Customers for more details). Keep all supporting materials with each order; if, for example, a customer sends a purchase order or other documentation, attach it to the order form. When an invoice is paid, attach the check "stub" (if any) to the invoice. At the end of the year, you can either store the expandable file "as is" and buy a new one for the next year, or pull the orders out and store them in a box separately. You'll need to store these orders for several years (my accountant suggested seven). As an alternative, you can scan hardcopy orders and store them as electronic files.

Invoicing Customers

Self-publishing is not a "cash in advance" business. While most of your individual customers will pay up front, most commercial customers (including bookstores, libraries, retail stores, distributors, etc.) will expect to be invoiced. One of the first things you'll need to do, therefore, is set up a system for invoicing commercial customers (and any individual customers who have not provided the correct payment).

A good way to get started is to buy a package of invoice forms at an office supply store. (Unfortunately, you'll need to use a typewriter to fill them out, as most are multiple-part forms that can't be run through a printer.) However, these forms will give you an idea of the information you'll need to design your own, computer-generated form (or to have an invoice custom-designed and printed).

An invoice requires the following information:

• Your company name and address
• An invoice number (so that you can track and reference your invoices)
• The customer's name and address
• The customer's purchase order number, if provided
• The date that the invoice is issued
• A listing of products ordered -- e.g., the title(s) of your book(s)
• The quantity of each product ordered
• The base price (before discount) of each product
• The subtotal (before discounts) for each product (quantity x base price)
• A subtotal of all products ordered
• Discounts, if any
• Sales tax, if any (see Establishing Your Self-Publishing Business for more information on sales tax)
• Shipping cost (some states charge sales tax on shipping as well as on the products sold; be sure you know the regulations for your state)
• Total cost

Your invoice should also include a due date. Typically, an invoice is considered due and payable within 30 days of the invoice date. (For exceptions, see "invoicing distributors and bookstores," below.)

Thus, a typical invoice might look something like this:

Exceptions to the Rule

Sadly, "payment in 30 days" is an ideal rarely met in the self-publishing industry. Bookstores and distributors typically state that they will make payment in 90 days. Unfortunately, most rarely do that -- this simply means that at the end of 90 days, you can start nagging them for payment. You'll be lucky to see a check in less than 120 days, in most cases.

Some distributors (and bookstores) have another nasty way of bypassing invoices: Returning the merchandise before the invoice comes due. In the 1990's, several distributors were accused of using the method of "return/reorder" to avoid ever having to pay a publisher. This is how it works: A distributor orders 10 copies of your book. You send an invoice. At around the due date (90 days later), if the books haven't actually been sold, the distributor returns them for "credit" -- effectively canceling that invoice. Then, a week or so later, the distributor orders another ten copies of your book, requiring another 90-day invoice -- and so on. This basically enables the distributor to keep your book in its warehouse in case it sells -- but to avoid ever paying you if it doesn't.

Needless to say, all the distributors who were accused of this practice vehemently denied it. However, my own experience with one distributor confirms that this practice does occur -- the distributor, actually a regional office of a major distributor, not only consistently returned books whenever an invoice came due, but actually reordered new books before sending the old ones back. Since the books generally arrived in such battered condition that I could not resell them, this meant not only lost sales to that particular distributor, but lost inventory as well. (Fortunately, the primary distributor eventually shut down the "ordering" departments of its regional offices and handled all ordering and returns centrally, which eliminated the problem.)

Invoicing Individuals

While it is customary to invoice commercial accounts, it is risky to invoice individual customers. Unless you know an individual, or have reason to be confident that the individual will pay, it's best to have a "no credit" policy for individual sales. After all, no individual customer expects to walk into a bookstore and be "invoiced" for his or her purchases -- so why should he or she expect that service when ordering books by mail? As a small business, you have virtually no effective means of collecting an overdue or unpaid account (no collection agency is going to go after $10 plus shipping), so if you're stiffed, you're stiffed.

The exception is when a customer has simply miscalculated the amount of an order, and has failed to remit a small amount (such as postage or sales tax). In this case, since you have the bulk of the payment, you are better off shipping the order and invoicing for the difference -- even if you never receive it -- than holding up the order for payment and perhaps losing it entirely. In most cases, the customer has made an honest mistake, and will quickly pay the difference. (See the Fulfillment section, below, for a sample form to collect small amounts.)

Mailing Invoices

Technically, you should not mail an invoice with the book itself, as an invoice is "first class" mail and should not be included in a media-mail shipment. Send your invoice first-class, with a self-addressed return envelope.

Filing and Following Up

Always keep a copy of every invoice. You'll need it in case you need to follow up on an overdue account. When an account becomes overdue (30 days, 60 days, or 90 days, depending on the payment terms you've agreed upon with that client), send a copy of the invoice, with some notification that it is overdue. The easiest method is to purchase a "Past Due" stamp (available at any office supply store) and stamp the copy that you're sending to the client. You can also obtain stamps that indicate whether an invoice is 30 days, 60 days, or 90 days past due.

For many clients, a single follow-up is all that is needed. For others, you may have to follow up more than once. Follow-ups should occur every 30 days. If you've followed up twice with no response, your third follow-up should consist of a short, polite, firm personal letter. You may also need to call the client directly and ask for payment.

Keep in mind that, as a small publisher, your options for collecting unpaid amounts are limited. In most cases, the cost of collection will exceed the amount owed. If an account is worth several hundred dollars, you may be able to turn it over to a collection agent, or ask your attorney to write a letter -- otherwise, it generally won't be worth the expense. However, you can't allow that to "scare you off" from selling to customers who must be invoiced -- as these customers will often be your largest source of profit. Keep in mind that most customers are honest and will pay their bills -- and don't allow yourself to get too upset over the rare client who doesn't.

Bookkeeping

Invoices require an effective bookkeeping strategy, as you need to know who has paid and who needs to be sent a past-due notice.

The section on Accepting Orders describes a system for logging in all your orders, including those that are invoiced. By recording your orders on a spreadsheet, you can tell at a glance (by looking at the appropriate column) whether an invoice has been paid or is past due.

Another good reminder is to file all unpaid invoices in a single folder. Whenever an invoice is paid, remove it from that folder, stamp it "PAID" (with the date), and file it in your "completed orders" file. At the beginning of each month, go through your folder and pull out those invoices that are overdue, and send out reminder notices. Put a note on your copy indicating when the first (and second) notices have been sent. Also, make a note in the appropriate column of your bookkeeping spreadsheet to indicate when an overdue notice was sent.

Generally, overdue notices are sent around the first of the month -- rather than literally 30 days after the invoice is issued. Thus, if you send an invoice on the 15th of the month, it will not be considered overdue until the first of the month after the month immediately following. (OK, I tried to write that sentence three different ways and it still sounded garbled). Here's how it works. You mail an invoice on the 15th of October. You handle your "overdue" notices on the 1st of November -- but as the invoice is, at this point, only 15 days old, it's not considered overdue. However, instead of sending an overdue notice on the 15th of November, you'd actually wait until the 1st of December, when you send out your next round of notices.

Your next step is to actually mail those orders to the customer! To find out more, see Fullfillment: How to Get Your Books to Your Customers.

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