Once you enter the business world you often come across various types of invoices. Invoices are vital financial documents that ease up your procurement process. Vendor invoice is one such tool that denotes what your customer owes to you after you fulfill the order. Moreover, it also helps in maintaining or tracking the financial record of your business, thereby providing a sound accounting system.
So, let’s start with the basics!
What is a vendor invoice?
This is a financial document that highlights the total amount the customer owes to the supplier. It is generated and issued by the vendor after completing the transaction, which could be supplying certain products or providing specified services as requested by the clients. As soon as the client receives the vendor invoice it gets recorded into their accounting software which is then scheduled for payment.
Vendor invoices and supplier invoices are synonymous and hold the same information. Here it is!
What does the vendor invoice include?
In order to generate a professional invoice, it is essential to understand what to include in it. Let’s discuss!
- Total amount owed
- Sales tax
- Delivery and freight charges
- Payment address
- Payment due date
- Payment method
Following are the terms that are directly related to vendor invoices:
10 most important invoice terms
Term of sale:
The invoice consists of ‘Term of sale’ which is basically the payment terms that both the vendor and the client agree on. This is an agreement made between the customer and the supplier and includes information like per item cost, total amount, delivery date, payment due date, and payment method. It clarifies the sale requirement to avoid misunderstanding. These are also vital for international trade that includes the shipping details.
Payment in advance:
Some vendor invoices also highlight information like ‘payment in advance’. Some suppliers require upfront payment of maybe 50% of the total amount before starting the project. Advance payments are demanded by the supplier either for purchasing certain goods for the project or simply to avoid the hassle of non-payment or delayed payment.
‘COD’ or ‘Payable on receipt’ is another vital term related to vendor invoices. This indicates that the customer or the client is liable to clear the payment on receiving the goods. On refusing to do so, the seller or the vendor can repossess the goods.
Net-7, 10, 30, 60, 90:
This is quite common with invoices that indicate payment due in 7, 10, 30, 60 or 90 days after the invoice date. Net-30 is the most common payment term that is practiced by most businesses. While some may use the other types as well as per their business policy and convenience.
This is an amazing policy implied by some of the business owners to get their due cleared on time. Besides the 30 days payment term, the business owner offers a discount of 2% on account receivables that are cleared within 10 days. These not only speed up the procurement process but also sweetens the customer relationship.
Line of credit pay:
This technique helps the customer to settle the bill over a period of time. Line of credit pay allows the customer to buy a good on credit and clear the payment on a monthly or quarterly basis. But as it involves the risk of non-payment in some cases, most small business owners avoid this process.
Quotes and estimates:
Quotes and estimates are the most common terms in the invoicing arena. These documents highlight a ballpark price of goods and services that allows customers to compare the amount with the competitors. Though it does not contain the final amount, it is often near accurate data and thus helps both customer and buyer to proceed with the invoicing process.
This is simply an ongoing invoicing process that is often involved in some business sectors like web hosting, website maintenance, house cleaning, and others. This type of invoice guarantees cash flow and saves time invoicing for regular customers.
This is a unique method to send payment reminders to your clients for past-due invoices. To be more specific, this is not just a simple reminder, it also informs about the additional interest charges incurred on the due invoices on a per-day basis. Sending an interest invoice clarifies the payment due date and the additional charges that are added on the invoice amount for late payment.
Recovering overdue invoices may seem daunting which gets seamless by implementing the process of invoice factoring. Factoring companies charge a factoring fee on the total invoice amount and pay the rest 85% upfront and the remaining upon recovering the pending invoices. This is a great way to get rid of the hassle of chasing clients for payments.
Why is it beneficial to automate vendor invoice processing?
Going digital is the biggest trend nowadays. COVID-19 has just fueled the growth of various digital platforms that benefit not only entertainment platforms but also the Business sectors.
When you can generate an invoice within seconds by automating the entire process, why waste time doing it manually? Still not convinced? Check out the below points to know more!
- For improving workflow: Automating the vendor invoice processing improves workflow efficiency by reducing the risk of mistakes. Dealing with vendor information manually tends to apply a heavy risk of erroneous calculations that leads to redoing the same task. Tracking back the same data over and over again seems daunting and that’s when an automated process routes the accounting task to get faster approval.
- Speed up payment: Chasing clients for late payments not just affects business relationships, but also slows down the business operation due to a lack of steady flow of cash. As a result, that impacts business credit value and may pull down the reputation of the company. On the other hand, an automated process could be beneficial in terms of tracking outstanding vendor invoices and offers a better user experience.
- Ease up auditing process: Auditing account payables have gotten much easier with automated processes. Online software enables you to generate financial reports beforehand to study the data. While these can also be done simultaneously with the auditing process to check on certain information. Automating business financial tasks speeds up business audits and reduces the chances of missing out on important files.
- Cut down unwanted expenses: Almost 63% of the account payable goes into labor payment. A lot of money also goes in ink and paper. Going digital can save unforeseen expenses and drop your business expenditure drastically.
Creating invoices is no anymore a headache! Get your invoices ready within 60 secs with fast and easy online invoice software, Billbooks.
Vendor invoices are pretty similar to the ones you are used to. Just get accustomed to related terms to generate flawless, effective, and professional invoices for the betterment of your business finances.