An invoice has one sole purpose – get the seller paid by the buyer. Unfortunately even in today’s data driven world, the invoice is one of the most-traveled documents. Its mission to ensure the billing company receives payment for goods and/or services provided, is a long journey fraught with opportunities for things to go wrong. That’s why it’s important an invoice be properly prepared — so its mission isn’t compromised.
Incorrectly prepared invoices cost time and money for all parties. The good news is Accounts Receivable and Accounts Payable share a common interest in making sure the invoice achieves its mission as quickly and seamlessly as possible. To make sure the invoices you are sending out can accomplish their mission in the most efficient manner possible, let’s discuss the key information and format an invoice must reflect to meet that goal.
Right Destination – The first thing an invoice needs to achieve its mission is the right destination. Typically, invoices are sent to one of two destinations: the accounts payable department or the original purchaser. It is considered an accounts payable best practice to send invoices directly to accounts payable. Invoices sent to purchasers are likely to be misplaced or forgotten, causing payment delays. AP can input the invoice and then forward to the purchaser for approval. Once AP has recorded the invoice, they can track it and make sure the purchaser does their job of approving or rejecting the invoice. Plus, AP becomes your one stop shop for questions on open invoices.
Purchaser Information – Help the AP department route your invoice quickly by including the full name of the purchaser. Let’s face it, most companies have a lot of “Bobs”. While you are at it, add the phone number and email address of the purchaser. A majority of payment delays occur because the name of the original requestor didn’t appear on the invoice.
Purchase Order – Whenever a purchase order is issued by the customer, the invoice should include a purchase order number. When an AP department receives a bill, it performs a three-way match among: the invoice, the packing slip, and the purchase order. Delays occur when an invoice is missing a P.O. number, and AP has to hunt for the original order.
Itemization – Also critical is line itemization of everything purchased, the unit cost, extensions, and applicable discounts so that the AP department can see exactly what it’s paying for. Make sure the invoice itemization ties to the purchase order. Otherwise, the invoice will be kicked out and cause further delays.
Terms and Conditions – A “terms and conditions” field should show when the payment is due and other payment terms.
Deposits and Credits – If the invoice has been paid or deposits given, reflect credits on the invoice and make sure the amount due is correct.
Tax Information – Tax information should be clear and correct. Sales and use taxes improperly charged or not charged can delay an invoice. The biller’s tax ID number and the original shipping point are also necessary for tax payment purposes.
Remittance Information – The billing company’s remittance address should be clearly presented. Try highlighting or making the remittance information bolded. The biller’s bank account information is important if the customer pays by direct deposit.
Invoice Presentation – If you are sending a paper invoice, make sure it is an original and readable. A much more efficient method of sending an invoice would be via email so you can track who you sent the invoice to, when it was sent and can quickly send out again if needed.
Good Communication – Practice good communication between the sales team and the AR departments, making sure the billing department knows what discounts and other agreements the sales people have reached with customers so those agreements are correctly reflected on invoices. Also, respectful phone and email communication can make a big difference. Remember, you catch more flies with honey than vinegar and disrespectful communication disrupts the customer relations and encourages the purchasing company to change vendors.