By Jonathan Laverentz, Head of Product, Tradeshift
Invoices are composed of five key parts. If you’re aiming to create an invoice that is accurate and compliant, you must include all parts. These five parts provide an overview of the entire cycle of a transaction, including the actual order, the payment terms, and the total amount due.
When creating or accepting an invoice, be sure all the following parts are included:
Every single invoice issued needs to be assigned an invoice number. An invoice number helps organize your materials and create a train of information that you and your customer’s tax and accounting records can follow.
Pro tip: Use a sequential order system when assigning invoice numbers. This keeps things organized by ensuring each invoice issued is one number higher than the last.
Every single invoice should have a date. This date is when the seller officially recognizes the transaction of goods or services. The invoice date should be the same as when the invoice is issued or billed to the customer. Invoice dates help you define the payment cycle's constraints and clearly list the due date and duration period.
Some extra info: In most situations, the due date for an invoice is listed as 30 days after the invoice issuance date. However, invoice payment due dates can vary based on the order and the organization. Be sure to keep a close eye on the date listed as the issuance date and when payment is expected to be completed.
Contact information seems like an obvious inclusion on the invoice. After all, if you can’t communicate with one another, how can you expect to pay or be paid for your goods and services? The most important part is to ensure that the information you have included on the invoice is up to date and accurate. You don’t want to face delays in payment processing due to a typo or error. Typically, the invoice contact information includes:
Did you know: Incorrect or missing information is one of the top six problems organizations face with invoices? Take your time to ensure the information listed is correct to reduce the chance of delays in receiving payment. Your cash flow will thank you.
Each product or service ordered needs to be included as its own line item on the invoice. This not only creates a detailed explanation of the services and products but informs the customer on what exactly is being charged, item by item. Include the price and quantity associated with each product on its line. The bottom of the invoice should show the subtotal of all the above line items listed with any tax charges, followed by the total amount owed. A complete breakdown of what should be included in the goods and services description is the:
Here’s a tip: The more you can itemize and break down the costs in your invoice, the easier it will be to keep records when it comes to processing and accounting. Include the costs associated with every invoice element, including taxes or fees!
The payment terms refer to the agreed-upon methods and measures for paying the invoice. These terms and conditions are what the buyer agreed to pay within, specifying the due date and time frame in which payment is expected to be completed. This information needs to be clearly stated for a compliant and accurate invoice. Payment terms also address how late payments are handled.
There are a few common invoice payment terms. Below, we highlight each one to prepare you for whatever you might encounter. These invoice payment terms include:
Some food for thought: Often, organizations create payment terms that encourage early payments to increase the likelihood of an invoice being paid in full.
Tradeshift offers a variety of solutions for both buyers and sellers to ensure compliant and simple invoicing.
Tradeshift Pay, our platform for buyers, automates your accounts payable process and speeds up the invoicing lifecycle. All invoices are consolidated onto a centralized digital platform, enabling quick and easy processing and approvals.
For sellers, Tradeshift Cash helps to speed up the payment process and helps you get paid on your terms. Our network funding capabilities enable you to get paid quickly, regardless of payment terms, as long as the relationship is strong. This reduces the dependency sellers feel on their buyers, giving them quicker access to greater capital.
For more information about how Tradeshift can help you quicken your invoicing process, be sure to reach out to our team.