For a new business, nothing is quite as critical as ensuring a stable cash flow. Suppose you want to establish strong business foundations, cover your overhead expenses, and continue perfecting your products and services. In that case, you need to ensure that you’re always paid on time, without exceptions.
You cannot rely on your clients’ goodwill or hope you’ll remember how much you’re owed for every single order. Not only is it virtually infeasible, but it could create legal, financial, and tax problems as well.
To get a hold of your finances, you need well-structured, detailed invoice payments that provide transparency for your company and your clients.
As a new business owner, you need to familiarize yourself with invoice payments to know how to use them properly. So, let’s see what you need to know about these essential business documents.
Invoice payments will help you stabilize your cash flow and ensure timely transactions. Take a look at the essentials of invoicing for a new business.
What Are Invoices?
An invoice is a payment request. Sellers of products/services issue invoices to their buyers, detailing the goods that have been provided, the total amount owed, and the payment due date. Invoice payments can be useful to any vendor, service provider, merchant, or contractor, whether they’re acting as a company or as an individual.
Invoices enable your business to keep track of all transactions, ensuring that you have a clear overview of all the payments made by your clients and all the payments still owed. As a seller of products/services, the invoice will be a crucial part of your accounts receivable . Your clients, on the other hand, will record invoices as accounts payable .
How Are Invoices Used?
Most commonly, invoices are issued after you’ve delivered the goods/services or completed the job your client requested. However, it’s essential to keep in mind that while the invoice is sent after, you still need to discuss and agree on the terms of payment ahead of time.
With small one-time clients, most companies will opt to issue invoices on the spot, as soon as they complete the job. For this, you’d need to have a professional-looking invoice ready to go.
With more prominent one-time clients, the common practice is sending an invoice within 48 hours of job completion, while monthly invoices are used with recurring clients.
Although you’ll likely send invoices after-the-fact, some situations require invoices before you’ve delivered the service. If you require a deposit for materials (like in construction jobs), if you’re providing a large-scale job and need to ensure that your clients stay committed if the job involves predetermined milestones, and even if your client has a habit of not paying you on time, you might want to issue an invoice before you deliver products/services.
What Does an Invoice Include?
An invoice is a critical business document that contains a detailed report on all services provided. For it to provide any legal protection and allow you to keep track of all business transactions, it needs to contain the following information:
- "Invoice" at the top of the document
- Reference number
- Supply date of products/services
- Invoice issuing date
- Seller’s name and contact information
- Buyer’s name and contact information
- Terms of payment
- List of products/services provided with descriptions
- Cost per service/product
- The total amount owed (including VAT)
- Invoice due date
Additionally, you should state all forms of payment you accept.
Instant Invoice Payments
With traditional paper invoices, you’d have to send the payment request to your client, wait until they’ve analyzed it, wait until they’ve sent their payment, and wait some more until the funds have been transferred to your account. Between creating an invoice and receiving your payment, you could be waiting weeks.
That’s why it’s in your best interest to use an invoice template creator, start accepting credit cards and eChecks, and allow for instant invoice payments.
With instant invoice payments, you can receive fast payments from clients wherever they are and whichever currency they’re using. They won’t have to go through hoops to find your account number and payment information, as everything will be available directly on the invoice, allowing them to pay you with a single click.
Manually processing invoices is an arduous task that can take quite a lot of time and effort, and that leaves too much room for error. When creating an invoice, you need to extract and include all the essential information that we’ve previously discussed (the word “Invoice,” dates, names, and more). You need to use the proper formatting, ensure the dates and amounts owed are correct, examine each product/service on the list, and invest hours of your day into this menial task.
To simplify the task, save time, and ensure complete accuracy of the information, you need to use an invoice template creator.
It allows you to generate as many invoices as you need for all your clients within mere minutes. You can easily extract information from your invoices to your preferred accounting software and keep an eye on all processed and due payments.
New in Business? Your Invoice Payments System can be the difference between Profit or Loss.
Invoices, Bills, and Purchase Orders
Invoices are often used interchangeably with bills and purchase orders. However, there are a few significant differences between them.
As opposed to invoices, bills are used for immediate payments, like in a restaurant or shopping mall. They’re not nearly as detailed and simply serve as proof of transaction.
On the other hand, purchase orders are a confirmation of the order. They are a record of products/services that your client wants to purchase, so they’re sent immediately after the client’s made their order.
Purchase orders can contain similar information to invoices – list of products/services, seller information, buyer information, dare ordered, price, and more. However, they’re not used as payment requests.
Invoicing is an essential business process that will help you stay on top of your finances and ensure easy payments and transactions. It will help you receive timely payments from your clients and customers to provide you with a steady cash flow. The sooner you perfect your invoicing, the easier it will be for your business to streamline all transactions.