Many businesses don’t provide clients or customers with correctly drafted invoices. We’ve seen too often that invoices are missing critical information. This not only causes confusion for clients but also creates major difficulties in collecting a business debt. This type of invoice will negatively impact your cash flow and affect your business. To determine what is missing on your invoice, it is a good idea to review the list.

The following components are essential for an invoice that is well-planned:

Contact information and name of your business–

Include a logo for the business, address, phone, and fax numbers, as well as an e-mail address and website. This is often placed above the invoice where it can be easily seen.

The invoice’s due date-

It should contain the date of any transaction or services that your business provided.

Reference number for the bill-

It is common that the invoice to payment (AR and AP) must include a purchase order number. This is important for tracking the delivery of products.

Detail of the purchase/service–

Create an exhaustive list of all products bought/services rendered. Your clients will be less interested in your services if you have more information.

Total cost for the product/service-

It is important to clearly display this amount.

Shipping and handling fees or delivery fees-

These charges are usually added to the item and not included in the purchase price. You can separate them and label them to get a clear view. If they are included in the deal, mark them as bonus items with no charge. This is a great way for you to demonstrate value to your customer.

The amount due in taxes-

Usually, taxes are listed at the bottom. The exact tax percentage is then calculated and added to the invoice total.

Total amount to be paid-

This represents the total amount on the invoice. It’s the correct amount to note. It is usually printed at the bottom in a larger font.

Terms of Payment-

Don’t assume clients/customers know when they need to pay. You must indicate in bold print when they must pay. Although you can use other languages, it is important to be specific about the credit period. You might write “Payment due within 14 days of invoice date” or even “Payment due by 01/02/2022”. This clause is crucial if you have to go through a court or collection agency to get paid.

Methods of Payment-

Indicate which payment methods are available: cash and check, credit card or EFT, BPay, and TT. Input your business’s bank information to receive direct payments. Also include information about any merchant fees or percentages. A bonus that encourages prompt payment can be included as an incentive. It could include the following: “If credit cards are paid within 14 days of invoice, all merchant fees will be waived.” It’s possible to be surprised how many clients take advantage of this offer to get additional frequent flyer points.

Terms and conditions of trade/service–

This section often gets left out on invoices. It’s not a good idea to leave it out. Printing it might cause problems for clients and collections later on.

Late payment penalty-

Indicate the details of late payment penalties, as well as any applicable interest. This information is not too much, as clients often don’t take these matters into consideration in advance. So the client is more likely to accept the payment agreement and not complain later.

Details of warranty or guarantee–

This information could be printed on the backside of the invoice to save space in the billing section. This will help reduce the number and complexity of customer or client queries.

The return policies and associated fees–

If you deal with products, this item must be added to your invoice. A transparent return policy is the best policy as returns are common. It eliminates any ambiguity for both parties.

What happens if you fail to pay your invoice on time?

This crucial component of an invoice is often neglected. This crucial component is vital to your business’s collection and can be costly. Yet, many people overlook it. Add the following statement: “Failing to make payment within 14 calendar days of the date billed will result in a 1.5 percent monthly additional charge.” Customers are responsible for all collection costs. These may include reasonable legal expenses. If similar phrases are not used and collection becomes necessary, costs may not include legal fees and repayments may not get enforced in court. Why would anyone want to eliminate the possibility of cost recovery? This line should be added to your invoice.

Conclusion

If you think about all the points, it may seem impossible to include everything. You might think this is an “excessive” approach to your invoice. This is a mistake. Your invoice can be the most powerful debt collection tool by including all the above components. It will make a huge difference in your cash flow.