The truth is that many operating businesses do not have properly drafted and defined invoices given to their customers/clients.  

I have seen it too many times that often very important information is simply missing from the invoice.  This causes confusion with clients, but more importantly, it creates great problems when the business debt needs to be collected.  With an invoice like this, you can be certain of one thing; it will affect your business and hurt your cash flow.

So, how can you turn your invoice into your cash collecting helper?

The best thing you can do is go through the following checklist to find out what in your current invoice is missing, and if your current invoice needs adjustment.

A well-planned and designed invoice should have the following 15 key elements:

1.     Your business name and details (Include your business logo, address, phone, fax, e-mail and a website.  This is usually placed on top of the invoice, where it is highly visible).

2.     Date of the invoice (The date of the purchase /or service).

3.     Invoice number (Often the invoice should have an additional ’purchase order number’.  This is the case when there are products involved and this helps with tracing deliveries).

4.     Details of the purchase/service (Make this an itemised listing of all products purchased / services provided.  The more details given, the fewer queries will be received from your clients.  This is especially the case when service had been provided and charged on the time basis – like accountants and solicitors).

5.     Total amount of the purchase/service (Make this highly visible).

6.     Shipping costs/delivery charges (Often these costs are charged separately from the product and are additional cost.  Make sure they are listed separately and itemised for a clear overview.  If they are “thrown in the deal”, make sure you still include them and marked them as an added bonus with the charge marked as nil.  This is a great way to show your customer the value he is getting).

7.     Tax amount charged (If there are taxes involved, they are usually on the bottom of the invoice, and the exact tax percentage is calculated and added to the previous invoice total).

8.     Total amount payable (This is the last amount being shown on the invoice and is the actual amount that needs to be noted.  It is for this reason that it is usually printed on the bottom and it is in larger block font).

9.     Terms and Conditions of Payment (Do not assume that the clients /customers know when they need to pay.  Tell them in bold writing when they are expected to pay.  You can use different wording, but you have to be clear on the credit period.  For example, you can say, ‘Payment due 14 days from the date of invoice’, or ‘Payment due on 14/02/2012’.  This clause on your invoice is very important if you need to chase payment through the collection agency or the court system).

10.  Payment methods (List available options for payment; cash, cheque, credit cards, EFT, B-Pay, TT.  Include your business bank details for direct payments, as well as details of related merchant fees and percentages.  As an incentive for a prompt payment, you can include a bonus such as, ‘If Credit Card payment is made within the 14 days from invoicing, the merchant fees involved will be waived”.  You might be surprised how many clients would use this incentive to make additional Frequent Flyer points).

11.  Terms and Conditions of Trade/Service (this part is quite often neglected to be included on the invoice.  It is a bad idea to omit this, as not having it printed  can cause later problems with clients and collections).

12.  Interest on late payments (State the specifics of the late payment penalties, including interest charged.  This is not too much information, as many clients do not think in advance about these issues.  By stating it clearly, the client can see that all aspects of payment agreement have been thoroughly looked into and will be less likely to complain later).

13.  Warranty or guarantee details (These details could be printed on the back of the invoice as not to crowd the billing part of the invoice.  This inclusion will also lessen the number of queries you get from clients/ customers).

14.  Return policy and fee (If your business is dealing with products, this would be a must inclusion on your invoice.  Returns happen quite often and the best policy is a clear return policy.  It cuts confusion on both sides).

15.  Consequence for failure to pay as agreed (This is a crucial part of the invoice that many leave out.  This inclusion is important in your business collection process and a very expensive omission, yet often, it is not included.  Try to include, “Payment not received within 14 days from date billed will result in an additional charge of 1.5% per month.  In addition, the customer is responsible for costs of collection including reasonable legal fees incurred in the collection process.” If a similar phrase is not included and collection is required, then costs of collection including legal fees may not be collected and repayment for these additional expenses may not be enforced by a court of law.  Why would you want to eliminate the possibility of recovering the costs?  Merely adding this line to your invoice allows you to include the costs plus interest in your collection).

Looking back at all the points we have listed, you might think it is too difficult to include them all.  You might think it is an ‘overkill approach’ to your invoice.  However, always have this in mind; by making sure your invoice has all of the above components, you will upgrade it to your hardest working debt collecting helper.  Try it, when you see the difference it makes in your cash flow, you are going to love it!

Easy Debt Collecting