Everything There Is To Know About Invoice Payment – A Complete & Comprehensive Guide
Invoice is a document that serves as a proof of transaction between two parties, i.e., Buyer and Supplier. It is usually used to request or receive payments to balance the accounts and books. However, it has legal importance, as well as terms and conditions of contracts, are written on it. Either of the parties can use this document as proof in case the other party fails to acknowledge agreed upon terms.
How To Create Invoices
You can create invoices using applications like Microsoft Word or excel but that is taxing and time consuming. It is better to get the tailor-made templates from the free invoice builder instead of grounding yourself in grunt work. The website has tons of templates and caters to almost all professions.
Essential Elements of Invoice
Invoice can have hundreds of things written on it but as long as it does not meet the bare minimum requirements it has no legal standing. For an invoice to be eligible as a legal document it needs to have the following elements:
The Word “Invoice”
The word “Invoice” must be written in bold and large fonts at the top of the document. Inability to write it can render the invoice null and void in court.
Details of Seller & Buyer
Details of seller and buyers should be written on the invoice irrespective of which party drafts the invoice. The details include the name, address, and contact information of both parties. Distinction must be made between the details of both parties for the sake of identification.
Unique Invoice Number
Every invoice has a number and it is unique. You cannot use the same number on multiple invoices as it renders the document useless in courts.
Date and Time
Time and Date stamps are also important and must not be forgotten. Some invoice generators stamp the document automatically while you have to manually write on others.
Description of Goods and Price Per Product
The purpose of the invoice is to balance books and accounts. You need to write a description of each product including its name, type of goods, and price per product. In case, you have rendered services to the buyer, mention the type of service and charges per hour.
Total Amount with Applicable Taxes
At the bottom of the section that entails the description of goods and price per product, there should be a section for the total price. In addition to the total amount, applicable taxes must also be stated. And in the next box, there must be a section that adds the total amount of goods and the applicable taxes. Lastly, the name of the currency is also a must next to the total amount.
The invoice should include the preferred payment methods of the suppliers. A bank account number and a unique identification number should be written on the document.
Terms and Conditions
Terms and conditions of the contract and deadlines of the payment should be written clearly on the back page of the invoice.
Practices For Suppliers To Ensure Invoices Are Paid on Time
For a business to grow it must get invoices paid on time. These are a few tips that will help in it:
Vet The Buyers
Small businesses cannot afford delays in payment as it reduces the procurement capacity which is already low. Hence, it is important to know everything about the buyer’s party before signing a contract with them. You can ask about their reputation from the companies that they have worked with in the past. It will help in understanding the attitude of buyers in invoice payments.
Furthermore, take an in-depth look at the finances of the company. If it is requesting a product that is beyond its financial capacity, it is likely that payment would not be released on time. You can get such information about companies from the small courts.
Make The Client Acknowledge Terms and Conditions
Writing terms and conditions in writing or saying them out loud has no significance until the client acknowledges them. Both parties should understand each other’s reservations and make efforts to provide a solution.
Keep the Payment Short
It is easier for clients to release the payments in small portions instead of giving a big chunk of their profit to you. Hence, it is better to schedule small payments. You can have weekly payments for projects that will last about a month. You can also have monthly payments if the project is spread out in years.
This strategy also cuts down losses. You can stop working on the project when the client fails to release payments of two to three consecutive deadlines.
Take Advance Payments
Most clients would agree on advance payments provided that your business enjoys a decent reputation. Thus, they must demand at least half of the payment before the start of the project. The advance payment should be enough for you to procure everything that is required for the project.
Send The Invoice To Right Department
If the invoice has not been reached the right department, it would not be paid on time. So, if a client misses a payment deadline, contact the department that is handling their finances. Hence, after sending the invoice contact the relevant department and make sure they have received the invoice. This way the client would not even have an excuse if the matter reaches the court.
Schedule Routine Reminders For Clients
There should be a system in place to remind the client routinely about the invoice payment. This should activate whenever a client fails to meet the deadline. First step should be a friendly email to remind the client about the payment. Second, suppliers should call the buyer and remind them of the payment. If the client is not responding despite all of it, send a legal notice. It may cost you the client but at least you would receive the payment that is owed.
Practices For Buyers To Ensure Invoices Are Paid Within The Deadline
Releasing the payment on time is just as important for buyers as it is important for the suppliers. The buyer’s reputation is at stake which can sustain damage if payment is not made on time. So, these are the tips to make payments on time:
Review The Invoice When It Is Received
It is important to review the invoice when it is received to ensure that everything is in the right order. The quantity and price written on the invoice should be cross checked before releasing the payment. Furthermore, make sure that the invoice meets all the legal criteria and has the payment method written on it. After a thorough review, send it to the accounts department and clear it as soon as possible.
Organize Invoices According To Payment Schedule
It is best that invoices are paid as soon as they are issued. But most businesses cannot afford it and need an alternative system. The better amongst those is the organizational system that arranges invoices according to their due date. It works on a “first in first out” mechanism and ensures that all the invoices are paid on time.
Try To Avail Early Discounts
Many suppliers have a special discount for buyers that can make payments early. So, if you do not have other expenses to take care of, it is best to take the discount. It not only clears the invoices early but also saves a decent sum of the budget.
Automate Bill Payment
If you are in business with another party for a long time then it is best to automate the bill payment. You can sign up for recurring payments at a predetermined time and date. This way, you do not even have to think about bill payments. That said, this system should be used only for the suppliers that you trust. As the system release payment before cross checking the procured goods or services, there is a risk involved. You can take the risk with entrusted suppliers but not with others.
Create an Invoice Filing System
Come up with an invoice filing system that is appropriate for the business. It will help you keep track of the invoices including when, how, and the total amount that is paid. The system would generate accurate reports to balance the accounts. Furthermore, in case of a legal dispute, it would be easier to find the relevant invoice from the system.
Choose The Right Payment Method
While dealing with a contract with a supplier, try to add a method of payment that you prefer. It could be a cheque, debit or credit card, wire transfer, or physical cash. You should choose the method that is most appropriate and profitable for you.
For example, some debit cards offer cash back on fund transfers. Similarly, a wire transfer or cheque can increase the eligible loan limit of your account. So, while deciding the method of payment, keep all of this under consideration.
Payoneer As The Best Mean To Clear Invoices
Payoneer is a digital payment processing company that offers some of the best services to clear invoices. It is available worldwide which means regardless of where the invoice comes from it can be paid. Mind you, this is not common and most companies do not operate all around the world. Almost all other major payment transaction services have certain restricted locations. But with Payoneer, everyone needs just an internet connection and the money would be paid to them.
What sets it apart from the competition is the fact it facilitates invoices payment like no other means. It offers a set of invoice templates in its built-in invoice builder which can be accessed by anyone. The templates cater to almost all the professions in the world. Sellers just have to pick the relevant format and fill in all the details. You would attach it to the payment request that is generated via the seller. Hence, you not only have the record of the transaction but also the record of services which were rendered in exchange for that payment.
Furthermore, the security on the platform is advanced and protects the users at every level. Each transaction goes through a layer of firewalls and anti-hacking techniques to eliminate cyber security risks. The platform also offers advance on the future payment which can be used to clear invoices and avail early discounts.
Long story short, it is an ideal means of requesting and clearing the invoices. Maintenance of records and balancing the book would be much simpler by using Payoneer than any other banking channel.