Important Invoicing Terms Everyone Must Be Aware Of

important invoicing terms manage invoice payments

Invoicing can be tricky, especially if you are new to it. But don’t worry as we share with you some important invoicing terms that will help you understand the process better. 

1. TOS: Terms Of Sale 

As the name suggests, it is the terms used when customers make a sale or purchase anything. In the Terms of Sale, you must mention what is expected of the buyer when they are willing to buy. It must also define what is needed of you as a seller. 

Hence, the TOS must define your products or services, expected time of delivery, acceptable methods of payment, information on guarantees, warranties, and who is responsible for fees and taxes. 

2. Invoices Or Recurring Payments 

If you have frequent buyers, it is best to establish a recurring model of payment. Popular brands like Amazon, Netflix, and others do this often. 

Recurring payments are important if you are not automatically subtracting payments from the bank account of customers or their credit or debit cards. Also, recurring payments can be set up bi-weekly, monthly or weekly. Such a set up helps you better assess monthly income. 

3. Estimates and Quotes 

Most of the businesses are aware of such terms as quotes or estimates are sent regularly. However, make sure you don’t use quotes and estimates interchangeably. There is a difference between the two. 

Estimates reflect what service or product may cost. It is not the actual price. There is a possibility that estimate may differ from the actual price that a person gets. 

Alternatively, quotes are handy. They are detailed and outline items that a customer can avail. Quotes often define the exact amount of the product. 

4. 2/10 Net 30 

Might be you have a Net 30 payment plan with clients but you wish to encourage customers to pay before. 

In such a situation, you can establish a 2/10 Net 30 plan. Within the arrangement, you enable clients to pay the invoice earlier than 30 days to avail the discount. For example, if they make payments within 10 days, they can gain a 2& discount offer on the bill. 

Depending on your preference, you can establish different variations like 2/7 Net 20 and more. Include the same on the invoice as a reminder so they are encouraged more to avail the offer. 

5. Net 30 

This is another common and vital invoice term used commonly by bigger companies. The term states that the buyers are allowed to make payments against the invoice within 30 days. 

An important thing to note is that this setup is not feasible for every business. Hence, depending on your business set up, you may choose distinct arrangements like Net 15, Net 7, and more. It all depends on how long you can allow your customers to pay more. 

Make sure you pick a plan that works well for you as well as your clients. 

6. Payment On Receipt 

If you don’t want to offer your customers weeks or days to pay the invoice, you can create receipts, which demand payment instantly. It is a common practice for medium or small businesses and for freelancers. 

The term is useful for retail business where you need immediate payment before shipment of the product. Using this term lets you create a consistent flow of cash. Do mention the penalties if the arrangement is broken. 

7. Invoice Factoring 

It is difficult for invoices to be paid, especially when you depend on cash flow to maintain inventory. Hence, use invoice factoring to get instant money in your account. 

It occurs when you sell the unpaid receipts to third-party companies. They purchase your debt and let you maintain a steady flow of cash. 

Interest Invoice 

This term is used when charging interest to the clients. The interest can be used to penalize clients that make late payments. It is important to let the buyers know in advance that they will experience a penalty charge for payments due after the date.

It is best to breakdown the fee you charge with each invoice. Also, you can establish it up on a monthly or weekly basis. 

It is vital to know about these invoicing terms, especially when you are managing or handling invoices. Hope this list is useful! If still, you have any questions Contact us to avail a streamlined invoicing process for you as well as your clients.

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