An invoice is a bill providing the client with necessary details on how to pay for goods or services he or she purchased. An invoice should also feature the necessary information and instruction on how the payment should be completed.
Usually, invoices are sent before the goods are shipped but some mid-size and big businesses prefer to invoice the customer as soon as the goods are shipped.
A reasonable approach for printing and sending the invoices is once a week, although some businesses prefer to do this operation twice or 3 times a week to avoid possible payment delays.
The terms of an invoice
Terms are usually dictated by the industry. They show when an invoice must be paid. The credit department is usually dealing with the invoices. Their main goal is customers to pay as soon as possible according to the terms states in the invoice. In many industries, the terms are net 30 so the client is expected to make the payment within 30 days but no longer. As an example, the food industry has shorter payment terms (5 to 10 days) while other industries, like computer manufacturers have longer terms-up to 3 months.
Sometimes companies are giving out some discounts for invoices being paid quickly. The terms that usually apply here are 2/10 net 30; it means that the time-frame the customer is expected to pay is 30 days but if he pays in max. 10 days, will be awarded with a 2% discount from the entire amount due. Not all companies can take the benefits of this rule, especially those having poor payment history or bad credit history. In such situations, the terms that apply are either cash in advance-CIA or cash on delivery-COD. CIA is preferable because COD has some pitfalls:
1. No check available when the goods are delivered
2. After accepting the goods, the customer changes his mind and puts a stop-payment on the check
3. The person responsible for signing the check is not available when the goods are delivered
4. The delivery guy forgets to pick up the check after it has been signed.
COD is useful when the payment is not consistent.
The due date
Basically meaning the payment deadline, the best option for companies is to clearly state it on the invoice to avoid any misinterpretation or miscalculation. There are several ways to make the date crystal clear on an invoice:
1. The date should be written black on white with bold characters.
2. The statement “Pay this invoice by…” should appear on the invoice.
What should be written on an invoice
1. Full company address
2. Description of goods along with quantities and the delivery date and place
3. The amount customer has to pay
4. The order date and the reference number (or the transaction number)
5. The department or the person in charge with ordering: name and phone number.
6. The payment terms and conditions and the payment method.
Here is an example of a basic invoice form: