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Invoice terms and conditions can cause a lot of problems especially when it is not properly prepared. Before we get into the must-include terms and conditions of an invoice, let’s first have a look at the importance of having proper terms and conditions in your invoice.
The Importance of Invoice Terms and Conditions
Tired of bad payments from clients, legal consequences and unnecessary payment follow-ups?
Many business owners may not see the importance of drafting a set of detailed terms and conditions. However, having proper and effective terms and conditions not only protects your business, but it also saves your time and money.
Apart from the critical elements to include such as the client’s name and item details, an invoice should also include several other critical components such as payment terms and conditions. Paradoxically, this is also the most neglected portion in most cases. Some terms and conditions are not prepared professionally, or lack proper information. As a result, business operational issues arise.
5 Terms & Conditions to include in your invoice
1. Terms of sale
To have a better understanding between you and the client, it is crucial that the business keep the terms clear. Be clear on cost, amount, delivery, international duties and taxes, payment method, and due date of the payment. In other words, it sets an expectation between you and the client to avoid any potential misunderstandings or disagreements between both parties.
2. Payment in Advanced
Payment in advanced or PIA, in short, is a payment buyers pay ahead of schedule. When a vendor requires full or partial payment before starting a project, or deliver a product or services, this term comes in handy. This can help vendors avoid any after-sales non-payment issue. In some cases, without payment in advanced, it leads to out-of-pocket expenses to finish the project which is harmful to a business.
3. Immediate Payment
This term is also known as “Cash on Delivery” (COD) or “Payable Receipts”. This term means that after successfully delivering the product or service, customers then make payment immediately. It can protect businesses because if the buyer fails to make payment, then the business has the right to cancel or void the deal or delivery.
4. Warranty Terms
An invoice must make clear of the terms of warranty of products or services and how long the warranty is valid for. Also, it should specify when the warranty stands void and/or clearly stated that the warranty does not mean the return of the product sold.
Here are some common terms and conditions for warranty of products or services:
Product/Service is covered under a 1-year standard warranty.
Warranty type of product is carrying
Warranty product will be null and void if:
- The product is damaged physically
- The product is repaired, maintained, modified, and disassembled
- Warranty of product is restricted to manufacturing defect
- The warranty does not cover other accessories attached to main product sold.
- The warranty does not cover replacement of product
- Warranty does not cover wear and tear
5. Late payment penalties and cancellation
To maintain a good relationship between the vendors and customers, it is best to inform the customer on cancellation, late payments or penalties fees. It is important to mention these conditions in your agreement as it informs the due date to the buyer and avoid jamming your cash flow due to delay. This also helps them expedite the payment process.
Highlighting the consequences can be mention in a well-structured manner such as:
If any invoiced amount is not received by the company by the mentioned due date, then without limiting the company’s rights, the following will be applicable:
- Those charges may accrue late interest @ 3% of the outstanding balance per week, or the maximum rate permitted by the law, whichever is lower.
- We may condition future contract renewals/service renewals or suspend our services to you until such amount is paid in full.
- In case of a cancellation, 20% non-refundable deposit converts into a cancellation fee.
It is essential to prepare a proper set of terms and conditions and include it in your invoice. This is where you can put all the details of your goods and services in case of any complaint. It will also make your business look more professional.
Remember to always be professional, and keep the terms straight forward. When you have clear, specific and steady invoice terms and conditions, not only you reach your goal in receiving your payments on time, your cash flow will always be looking great too.
Here’s how you can do it, by sending your next invoice using Enterpryze! We automate your terms and conditions to every invoice. Once set, your terms and conditions will automatically generate when an invoice is created.