Did you know that over 40% of invoices are paid late? A late invoice is a frustrating occurrence and one that can lead to unnecessary delays within your finance department. This is why ensuring that your business invoicing terms and conditions are rock solid is so important. Terms and conditions on an invoice are a fantastic way to ensure that your invoices get paid on time. In today’s article, we look at some business invoicing terms and conditions that should be enforced, so read on to find out more!
1. Interest on Late Payments
Let’s be real – no one wants to have to fork out interest. This is why it is so important that your invoice terms include interest on late payments. Late payments can be an absolute headache, so advising your clients that there will be a penalty for delayed payments is one of the best ways to ensure that a higher percentage of invoices sent out are paid on time. When it comes to the small percentage that still fail to pay on time, you can be ensured that you will be compensated for every single extra day that your clients take to pay their bills.
2. Payment Due Date
Most invoices that you have seen have probably come with a due date. One of the most common payment terms indicates that payments are due in 14 days. Of course, it is not uncommon for clients to negotiate past 14 days, so it is important that you state your terms and conditions clearly. If you are looking for payment upon receipt, it is important that you state this clearly and come to an agreement with your clients prior to sending your invoice out. Otherwise, the general public will usually assume that they are expected to make payment within 14-30 days.
3. Early Payment Discounts
It is no secret that incentives are often used to ensure that invoices get paid on time. This is why many businesses offer payment discounts for early birds. Most NET30 invoices are coupled with payment discounts. This can range from anywhere between 2-10% discounts for invoices paid before the payment due date. It is important that you include this term in your invoice in order to encourage your clients to pay up as soon as possible. For example, if you’re offering a 5% discount for those who pay within 10 of the 30 days granted, you would state this under the terms as “5/10 – NET 30”.
4. What Currency Should Payments Be Made In?
One of the most important terms to include in any invoice is the currency you expect to be paid in. The last thing you want is to be paid in a different currency that turns out to convert to an amount that is less than what you agreed on. This is especially important for those who are doing business across borders, as it is not uncommon for people to just assume that they will be paying in their own currency. If your business is situated in Australia and you are looking to be paid in Australian Dollars, it is important that you include this as a term on your invoice in order to prevent any delays or errors in payment.
Regardless of what you choose to do with your invoices, it is incredibly important that you ensure your terms are clear. Terms should also always be agreed upon beforehand so that both you and your clients are on the same page. We hope that this article has given you some insight into some of the terms and conditions that should be enforced in your invoices.