What is an invoice? Basically an invoice is a bill you send to your customers after completing a sales transaction. In many cases as you start up, you will probably be collecting cash and providing receipts directly to your customer at the time of the sales transaction. As your business grows and you begin to consider wholesale sales to larger grocers or distributors you will be faced with the need to invoice these customers and will occasionally be receiving payment on a delayed basis.
These are the essential components of any invoice:
- A header that distinctly identifies the document as an “Invoice” to avoid any confusion on the part of your customer with the many other documents or bills they may receive during the course of the day.
- Your legal business name, business address and contact information (email, phone, website), listed accurately and included near the top and/or bottom of the invoice.
- Date the invoice was issued and the date payment is due.
- An invoice number or other unique identifier to make it easier to refer to the appropriate document should you ever need to follow up on payment with your customer or locate it should a need arise.
- A description (including quantity) and price for the goods or services provided
- Itemized fees and Total amount owed. According to the State of Hawaii Department of Taxation, “Businesses must tell their customers if they plan to visibly pass on GET and customers must agree to pay it because misrepresenting the actual price violates consumer protection laws. For example, if a customer requests a quote for an item that sells for $104.71, businesses should quote one of the following:
- Sales price plus GET rate or: $100 plus 4.712% GET
- Sales price plus GET amount: $100 plus $4.71 GET
- Total price including GET: $104.71”
- Payment Terms (Discussed in more detail below)
- Payment instructions, specifically, who to make the check out to or how to process an electronic or credit card payment (if offered)
Sample Quickbooks Invoice
Payment Terms
While you may not immediately be faced with implementing these, it is important to have a basic understanding of the different terms you will encounter. Setting these terms and holding your customers to them are key components to projecting cash flows and ensuring your farm is receiving its sales revenues on a timely basis. Some payment options you may consider are:
Prepayment – Customer pays the full amount, in advance for goods to be received.
Immediate payment – refers to a sale for where payment is due at the time your product is delivered, often referred to as “Cash on Delivery (COD)” or “Payable on Receipt.”
Subscription based – customers pay on an ongoing basis, commonly weekly or monthly
Net 10, 15, 30, 60, or 90 – Refers to the number of days in which a payment is due. One of the most common terms, Net 30 days (sometimes indicated as “N/30″), means that your customer must pay you within 30 days of the date listed on the invoice. It is also common to see phrasing such as “10/15, net 30” which is another way to say the customer will receive a 10% discount if paid in 15 days, otherwise the full amount is due within 30 days
Final Thoughts
Much like your business card, your invoice or any other correspondence or documentation from your business is a representation of your professionalism. Clear and concise invoices make it easier for your customer to pay you. Be sure the look and language of your invoice matches the rest of your branding and the message you’d like it to send. Many bookkeeping/accounting software programs have built in templates that will allow you to input your own business logo and do some limited customization. If you aren’t capturing your financial information in an accounting program yet, many spreadsheet programs typically have a template for a simple sales invoice.