Sometimes passion and efficiency are not enough to run a business: You have to closely examine every aspect of your business operations and identify bottlenecks.
Not streamlining your invoicing process leads to unnecessary delays. Fortunately, it is easy to fix.
What is an invoice?
An invoice is a document that a seller sends to a buyer specifying the quantity and cost of products or services delivered. Most companies give the customer a hard copy of the invoice. But, some like Flipkart, as part of their Go-Green initiative, will send only the soft copy of it within 24 hours of delivery completion. While it is a good idea to include a print-out of the invoice in the mail or with the package, emailing it as a backup, speeds up the invoicing process.
Why Should I Use An Invoice? How Does An Efficient Invoicing Process Help?
An invoice is basically useful for 2 reasons:
1) For the customer, it is an account of the money he has to pay to the seller and
2) For the seller, it is a document he can use for bookkeeping.
• Moreover, it is an important reference document in case of any legal discrepancies.
• Invoice information is collated for the government as a financial report at the end of the financial year.
• In trade, the seller can go through the history of purchase from a particular buyer and provide discounts or offers to loyal buyers.
In addition, the business will be able to analyze the sales patterns and make informed inventory decisions on the inventory.
Having said that, knowing how to make the perfect invoice by including all the details required is of utmost importance. Let’s go through this information.
How to set up the perfect invoicing process?
Your invoice must always reflect these things:
- What are your customers paying for? – Describe the quantity and the goods sold in detail.
- How much are they paying? – Give the summary of the payment along with the total amount including these: – 1) Unit price of the goods 2) Delivery Charges 3) Details of discount 4) Details of tax levied
- Are there any pending dues? – Include details and pending dues for goods or prior services on the subsequent invoice. This call to action for your payer also signals that you are on top of your accounting, and are remembering to collect.
- Taxes – Tax laws are modified or updated from time to time, and new tax categories get added. Your accounting software should be updated with the relevant changes as well, in order to remain compliant. Ensure regulatory compliance by taking these steps proactively:
- Clearly mention your tax number on the invoice
- Clearly describe the items billed with tax rates applicable to them
The various taxes imposed on a retailer that need to be factored in:
- VAT: Value Added Tax is a tax levied on goods at each level of the supply chain, that is paid to a particular state. The basic rates of VAT are 5% and 14.5%.
- CST: Central Sales Tax is a tax levied on goods that are involved in inter-state trade, or outside a state, or imported into, or exported from India
- Service Tax: Imposed on service-based companies or any product-related services
With invoices, clarity goes a long way:
Just looking at the invoice, these things should be clear:
- How to pay? – Provide details of the customer’s mode of payment.
- T & C: The terms and conditions that are standard to your company, or what was agreed upon should be clearly mentioned at the bottom of the invoice, or behind it.
- How can they contact you? – Do not forget to mention your company name, address, telephone number and email address in your invoice.
- What is their invoice number? – The invoice number comes in handy. It’s important to have a numbering system for an organized invoicing process.
- When did they pay you? – Mention the day, date and time of purchase of the product by the customer.
- Are you happy with them? –Don’t forget to leave a “thank you” message with your invoice for the customer.
There should be no room for confusion. It only leads to delays.
How to use invoicing smartly:
Invoice As A Branding Opportunity/ Collateral:
Since you are sending out a professional invoice, your business logo is a fixture on the masthead. Why not go one step further by adding branding (brand colors), and including future offers of interest to the client? Since invoices get attention, these extra touches will, too.
Tips To Improve Your Invoicing Process
Every invoicing process has room for improvement. Here are our top tips for doing so:
- Set your invoicing and billing terms clearly so that the vendor or buyer knows what to expect. You should also consider including a brief summary of your returns and replacement policies.
- If you are a B2B seller, spend time knowing your clients so you know more about their payment schedules, and if they’ve defaulted on payments before.
- Always send the invoice on time. This is good practice and ensures that your legal terms always apply in case of a hiccup.
- Make your invoices clear and detailed. This is the one area where the adage ‘less is more’ does not apply.
- Always send an invoice by email also in order to have a record. You can then easily settle claims of not having received an invoice, etc.
- Send gentle reminders as the deadline approaches. Often, an unpaid invoice may simply be because of forgetfulness.
- Track all of your invoices, paid and unpaid, so you can receive alerts when an invoice is overdue.
Primaseller not only logs in sales, refunds, returns and exchanges in real-time for accuracy but helps auto-generate invoices with all the payment and tax details factored in. It manages multiple currencies, too, if you have any international vendors or customers. Primaseller, integrated with Quickbooks, provides maximum ease in accounting.