Sadie Keljikian, Express Trade Capital
Careful and effective invoicing is crucial to any B2B business, but especially so if you are a wholesaler.
Chances are, you already know the basics: you should audit your invoices for accuracy and send them to your customers promptly. However, many businesses aren’t sure which details to include, what terms should be applied, or even how to create and process invoices. Wholesalers and vendors who sell to big box retailers must also contend with bureaucratic accounts payable departments that do not respond well to improper invoicing, which often results in payment disputes and delays. Remember that operational funds are your business’s paramount resource and efficient invoicing clears the path to that resource.
Here are a few tips to ensure that your invoices are as clear, accurate, and effective as possible:
USE A TEMPLATE
To those with some experience in the consumer goods wholesale industry, this is a no-brainer. Using a template is essential to creating invoices that look professional and consistently convey the required information. Aside from the obvious aesthetic advantage, templates allow for greater accuracy, speed, and organizational efficiency. Consequently, the wholesaler is far less likely to leave out important information, create duplicate invoices, or give incorrect details in error. Since properly formatted invoices are easier to read, your customers are also less likely to overlook or misunderstand anything. With good templates, your team won’t waste time building each invoice from scratch every time you make a sale, and your customers won’t have as many questions and will probably pay you more quickly.
INCLUDE ALL PERTINENT DETAILS
Most businesses are aware that each invoice should be itemized, numbered, and dated, but those aren’t the only important details.
Here is a brief list of the most important information to include on an invoice:
Invoice Date: should be the date on which you create the invoice. It’s important to note that this date should never precede the date on which the goods were sent. Invoicing customers before the goods have shipped is called prebilling.
Invoice Number: must be accurate and unique. Be careful to avoid duplicate invoice numbers.
Itemized List of Goods or Services: must be clear and complete, including number of items delivered or time spent on services rendered, description of items or services provided, cost per unit, and total cost.
“Bill to” and “Ship to”: Businesses often don’t overlook the significance of, and distinction between, their customers’ “bill to” and “ship to” information.
Basically, billing address and shipping address might be different and failing to include both addresses in such cases can result in incorrect shipments, payment oversights, delays, and other administrative issues that cause delays.
Payment Terms: (e.g. COD, Net 30, EOM Net 60, etc.) must be in accordance with any established contractual agreements with the customer.
Purchase Order Details: to ensure accuracy, indicate the PO number on the corresponding invoice and make sure the all details of the PO match any and all details listed in the corresponding invoice.
Shipment Date: most open payment terms relate back to the ship date so it’s important to know and indicate this date accurately. This is also important to prevent chargebacks and returns for late shipments. If goods are shipped after the cancel date indicated on the customers’ PO, vendors should ask for confirmation of extension from their customers.
SYSTEMIZE INVOICE NUMBERS
A system of organization for invoice numbers isn’t revolutionary, but mistakes are common enough that it bears mentioning. The easiest way to manage this issue, is to either use one numerical system for all customers (i.e. first order is 001, second is 002, and so on) or, use a combination of letters and numbers to create a sort of code (e.g. the first invoice for Marc Jacobs could be MJ001).
Standardizing your invoice numbering policy is important first and foremost because you must avoid duplicate invoice numbers to the best of your ability. Unique invoice numbers allow your customers to better organize their accounts payable and pay you more quickly. For example, if you distribute two invoices identified as “123”, your customer might pay only one invoice and insist that their payment obligations are satisfied. If you plan to finance your receivables, this is even more important, as institutions will not finance duplicate invoice numbers and, in fact, such oversights can trigger draconian default and fraud provisions found in most financing agreements.
AUTOMATE AS THOROUGHLY AS YOU CAN
Once you know how to create invoices effectively, the final step in developing a fool proof invoicing system is to automate as much of the process as possible. Fortunately, accounting software like QuickBooks usually includes invoicing capabilities. These programs make filling in details quick and easy. If you make certain fields mandatory, you can avoid distributing incomplete or incorrect invoices. Systems can thus reduce the margin for human error, which means businesses can spend less time, money, and energy invoicing, and more on their core competencies.
Invoicing and other back-office concerns can feel like a nuisance, but if you create a system and stick to it, your transactions will move much more quickly and smoothly. Whether issues occur in invoicing, collections, or shipping, the more quickly and clearly you communicate with your customers, the better your relationship with that customer will be.
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