How to Write Invoice Payment Terms

Sometimes, your invoice is the last situs slot online communication that you have with your client and its very important to leave lasting impression. At ProfitBooks, we’ve seen many businesses suffer from late payments due to improper invoice payment terms. In this post, I’ve explained how to write invoice payment terms that can help you get paid faster.

A payment term indicates the number of days that are available to the client to pay for the goods or services that have been rendered by the supplier. Any business requires a steady working capital to meet its operational expenses like salary, logistics etc. as well as funds for continued expansion. Payment delays can disrupt the cash flow resulting in shortage of cash that is required to purchase raw materials in order to manufacture the end products and / or grow the business through acquisition or merger. This is especially challenging for small businesses or start ups who cannot afford the payment lag. Hence, the need arises for optimal payment terms and clarity in payment term representation on invoices.

Here are 5 tips for writing effective invoice payment terms

1) Invoice Wording
It is important to come across as polite and professional while wording your invoice. Friendly phrases like ‘Please make the payment on time’, ‘Kindly pay your invoice within XX days’ and ‘Thank you for availing our service’ can increase the payment probability by more than 5 per cent. Politeness creates a positive image of the company and increases the likelihood of getting paid on time.

2) Itemised Layout
A detailed description of the invoiced items e.g. Date of goods receipt, description of goods delivered, price per unit, total price, tax amount etc. will ensure that that the vendor is clear about what he or she is paying for and the invoice has a better chance of getting paid on time. Likewise, it is important to ascertain with the customer as to what all details are mandatory and should be mentioned on the invoice to avoid invoice rejection and payment delay. Many vendors have specific requirements like provision of Purchase Order number, invoice to be made attention to a particular person or department, bill to / ship to addresses etc. on the invoice copy. Non-adherence to these specifications can adversely impact timely payments.

3) Days vs. Net
While terms like net 30 or net 45 are common in business parlance, yet they are less popular amongst those who have limited understanding of finance terminologies. Terms like ‘Due on receipt’ are vague and subject to one’s own interpretation. Usage of words like ‘days’ instead of ‘net’ and inclusion of specific payment terms like ‘Due in 60 days’ have a better prospect of getting through to the customer with increased chances of timely payments.