Invoicing and payment terms

The key to developing a healthy cash flow depends on your ability to implement a good invoicing system. You must gather the funds from your customers in a timely manner in order to sustain your cash flow and to avoid losing money as you wait on your customers to pay you for the products they have already ordered. When you implement a strong invoicing and payment term policy, your customers will easily be able to see what is expected of them. This way they will pay their invoices on time so you are losing money from your cash flow. This article will help you implement the right type of payment terms and develop an invoicing method.

Start with the format of the invoice. Here are some things that must be included on the invoice:

• The term "invoice" this way the customer knows it is not an estimate and that they need to pay on the invoice.


• Your contact information. Always include your address, email, website, and phone number. Offering them multiple contact methods will help you keep in touch with your customers better.


• Customer information. If you plan to invoice by mail you want to have all of the customers contact information clearly visible. Their name, address, and even phone number should be included on the invoice.


• The amount the customer owes and a clear description of what you are charging the customer for.


• The date. This way the customer knows when the order was placed and they can research their records if necessary.

Check with the Small Business Administration along with your state to find out if there is additional information you must include on the invoice. Sometimes you must provide your ID number depending upon the nature of the sale. For example, if you are operating as a limited company you need to include the complete company name on the invoice along with the legal address of the business and any other business names that you may be affiliated with. Sometimes limited companies are required to include their director's names on the invoices as well.

Clearly establish the terms and conditions of the invoice in order to show your customers when they are expected to pay. You need to include the terms before you sell the product to the customer so they don't have the ability to dispute it claiming that they were not informed. Always include the terms on the invoice as this helps to protect your business.

Use a quality invoicing program to generate a professional invoice. Some companies still use the old paper and pencil method but this isn't a great option in today's society. There are new high-tech devices you can purchase that allow you to input the information into a small portable device and print it out right there, providing you with a chance to maintain a level of professionalism. A good software program is also essential. Peachtree and QuickBooks are two of the most popular accounting programs to use that generate invoices for you and they will even electronically deliver them to the customers for you.

Be careful about the payment terms you extend to your customers. If you offer payment terms that are upwards of 30 days, it will cause you to lose money on your cash flow for a longer duration of time. Keep your payment terms shorter so you don't lose money and so you don't need to turn to a collection agency to help you acquire the money you need from your customers.

Make the payment terms binding with your customers in order to ensure that you have been able to provide them with all the legal information they need to see. This protects your company and will allow you collect the funds in a timely manner.