Invoicing Terms to Know7 min readReading Time: 3 minutes
It is not surprising for people who receive financial services from a financial services company or own one, to see a vast area of terminology in their daily business lives. Every industry has its own terms in professional life. There are also many terms for invoicing encountered in different branches such as finance, accounting and sales. In this article, we will talk about many terms that business owners should know about invoicing. Your communication and management skills will be enhanced once you learn the basic invoicing terms you need to know to better understand customer requests and better manage your business.
Basic Terminology of Invoicing
As starters, we should remember that business owners often use the words “Quotes” and “Estimates”. The term ‘estimates’ does not express the exact price of a product, but expresses the expectation about the value of that product. The terms ‘quoted’ and ‘quotation’ show the cost of a product to the customer in detail. Thus, the customers can see how much they will pay.
With the Terms of Sale, the terms of the seller are specified and the buyer accepts these terms and makes a purchase. What is sold as a product or service, delivery time, who will pay for which cost, which method of payment, warranties and all other details that both parties are responsible for should be included in the terms of sale. This can be seen as a kind of sales agreement.
The term Recurring Payments means that customers make continuous purchases. Subscription can be given as an example. If you have customers who use your products and services with periodic subscriptions, you should offer them a payment plan and determine a subscription rate that is suitable for both parties. Along with this term, recurring invoices should also be learned.
Terms such as Net 30, Net 15, Net 90 indicate the duration in which the payment should be made to the other party. In the agreement with the customer, it is determined within how many days the customer will pay the money. This agreement, which is mostly made between customers and manufacturers or distributors, prevents large companies from wasting time with constant payments and invoices. Both parties offer the appropriate conditions for them and the payment is made within the specified number of days from the invoice date.
The Payment of Receipt option is also frequently used. However, if this term is to be preferred, many things must be well calculated. Various things should be foreseen that can change in the process that starts after the deal is made and until the invoices are issued. Payment of receipt is commonly preferred instead of waiting for days to receive payment after the invoice is issued.
The 2/10 Net30 payment plan is similar to Net 30. The difference is that although the customers can pay within 30 days, if they choose to pay within 10 days, they can get an extra 2% discount on the invoice amount. The number of days here may vary depending on the agreement.
Line of Credit Pay is known as the credit of companies providing products or services to their customers. Thus, customers who do not pay within the specified day will have to pay interest.
Interest Invoice is prepared by companies that give credits to their customers. If the payment is not made within the required number of days, an interest invoice is issued.
Invoice Factoring is an option that can be preferred to keep the cash flow sustainable. Invoice Factoring is when a company selling as Net 30 sells the invoice to a different company to meet its cash needs without waiting for the payment deadline.
Advance Payment is one of the most valid terms used by small businesses. With this agreement, the seller receives the money upfront before offering the product or service.
The term ‘Progress Payment’ indicates sending of invoices to the buyer once the requirements agreed upon by the buyer and seller are met. It is mostly preferred for long-term projects.
Whether you are a business or a customer, you should know the basic terminology of invoicing as you will do business within the framework of certain conditions and rules. Please keep in mind that these terms form the basis of invoicing and payment conditions while doing business in any market.