In order to minimize the risk of bad debts and late payments, it is necessary to take care of the drafting of invoices.
The stakes of a good billingThe invoice must be the exact reflect of the commercial negotiations and in perfect consistency with the general sales conditions. Any discrepancies may generate a late payment and a deterioration of the relationship with your customer.
The invoice must follow some legal obligations otherwise wrongdoing businesses risk high financial penalties.
The bill must meet with three conditions to be recoverable. It is under seller’s responsibility to prove these three conditions in case of dispute:
Invoices must be retained for 10 years in many countries. Beware tax audit!
You may display on your bills penalties rate for late payment (mandatory is some countries like in Europe) which will be due the day after the due date of your invoice. This rate should be setup between 12% and 15%.
The due dateThe due date must imperatively appear on your bills.
The collection is based around this date which must be conformed to the payment term negotiated with your client.
The calculation of the due date is based on of date of issuance of invoice plus the payment term period.
Prescription of invoicesThe prescription is a mode of extinguishing obligations of the buyer at the end of a certain time. To be recovered, the bill should not be prescribed, ie not older than X years (depending on the country). If this is the case, the buyer may invoke this provision to oppose the final payment.
The chances of recovering a bill strongly decrease gradually as time passes, whatever the reason for non-payment. At 6 months of delays, the energy expended to collect a bill is very high and inversely proportional to the chances of success drop to only 20%.
The most common disputes
|All these errors cause delays of payment and require time to be resolved.
Invoicing right the first time is essential!
Next: collection prior due date
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Very interesting, helpful website!