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What is a ‘Good’ Invoice – Helping You Get Paid Faster

What is a ‘Good’ Invoice – Helping You Get Paid Faster

An invoice is a commercial document issued by a seller which indicates information such as details of goods or services delivered, price, taxes, when payment is due, and how payment can be made.  In this article, we shall look into what consider a good invoice practice.  The aim here is to ensure you get paid by your customer promptly here.

What information are usually included in an invoice?

The purpose of an invoice is to ensure that you get paid promptly and fully by your customer based on the agreed terms and conditions.  So, it is essential that you include all the relevant details that your customer may need to process and pay your invoice.  Information to include in your invoice are for example:

  • The word ‘Tax Invoice’ or ‘Invoice’ indicates that it is an invoice document.
  • Your business name, address, and ABN number.
  • Contact details in case your customer needs to reach out to enquire.
  • Unique invoice number, date issued, and due date.
  • Your customer’s business name and address.
  • Your customer’s purchase order, quotation, sales order, delivery order, or anything that they can link to their system to reconcile against your invoice.
  • A clear description of goods or services delivered, together with the total amount due.
  • Payment terms and payment instructions.

There are many software applications available to help you create and track invoices.  Check out our top invoicing apps for your business here.

Payment terms

If you are selling to other businesses, you are likely to have received requests for credit terms of 30 days or even as long as 90 days, especially if they are larger business entities. Whilst buying and selling on credit is common practice, it is crucial to consider the pros and cons of credit and implement the best practices when extending credit to your customers.

A way of encouraging early payment is to offer early payment discounts to your customer.  This helps keep your business cash flow healthy and not have to wait for too long to receive payment.

For example, Jolie built a website for a customer and issued an invoice with 30-day credit terms.  For her to get paid early, she can offer a 10% discount on the total amount due if her customer pays within 14 days.  This would be displayed as ‘10/14 net 30 days’ under the payment terms section of the invoice.

Some businesses may decide to add a penalty fee if invoices are paid late.  Your business may or may not want to consider this option, especially if you are dealing with large corporates, MNCs, or government bodies.

Payment instructions

Payment instructions should be clearly indicated on an invoice. Your customer can use this information to make payment to you correctly. It is advisable to offer more than one payment option to reduce any barriers to payment.  Payment options could be in the form of a bank transfer, cheque, credit card, etc. 

For your customers who are larger entities, remittance advice is usually sent to you so that you can reconcile it to your outstanding invoices.  If your customer does not provide remittance advice, then it might be best to provide your customer with a reference number on the invoice document to be entered when making a payment.  This could be just the invoice ID and/or customer ID.  This will allow you to easily reconcile it to your outstanding invoices.

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