When should I raise my invoice? Why does it matter?
A question I sometimes get asked by my clients is “when is the best time to raise an invoice” and it can vary from client to client, depending on the type of business and the terms in their contract. Ideally, an invoice should be raised as soon as your customer wants your product or service and the invoice should include all the details your customer will need to make a payment.
You can raise an invoice which is due for payment immediately, or if you offer credit then your invoice can show the payment date when you expect to receive the money. Alternatively, you can raise an invoice marked “paid”, if your customer has paid up front.
Depending on your business processes you might invoice a customer straightaway, perhaps in person if they are in your shop, office or business premises. An example of this would be a car garage which quotes a price for an MOT. The customer agrees to the price and leaves their car for the work to be done. When the work is complete, the customer returns, they pay and receive an invoice for the work which has been carried out for their records.
An electrician on the other hand might carry out a number of jobs for different clients and then raise invoices in a batch at the end of the week. This can be helpful if the electrician makes multiple visits to the same client as all of the work can be raised on a single invoice. A single invoice typically means a single payment, which can help reduce bank charges.
Raising invoices in batches can also be cost-effective if you have a part-time accountant or bookkeeper. As long as you keep accurate records of who has bought what and when and for how much, you can hand the details over to your bookkeeper and they can raise invoices, send statements, chase payments and make sure your accounts are up-to-date.
One other thing that’s worth checking is the wording in your contract or terms of business. No matter how big or small your company is, if you have a contract then your customers are legally agreeing to abide by the payment terms you set out when they buy your product or service.
If you offer 30 days credit you can clearly show this in your contract and also on your invoices. You would need to have a “payment due” date somewhere on the invoice and your customer is then entitled to 30 days to make the payment for your products or services.
If you ask for payment up front then you can raise an invoice marked “paid”, or if you receive a partial payment or installments of payment, then you can also document this on your invoice. The key point for when to raise an invoice is tied back to the payment terms you set out in your contract.
If you have any concerns about your current contract or terms of business, or questions about invoicing and debt collection, please contact me and I will be happy to help.