To be compliant with the invoicing rules associated with the goods and services tax, your invoices have to include a variety of details. Once those legally required essentials are in place, it’s time to focus on the fine print. Luckily, there are several tips that can help you hone in on creating the best invoice payment terms and conditions for your situation.
1. Add a Due Date
Your invoices should always have a due date. In some cases, you may want to give clients a week to pay, but in other cases, you may want to give them two months or more. When establishing your due dates, think about the industry standard. If you give your clients longer to pay, that may give you an edge over the competitors. On the other hand, you also need to think about your cash flow. You should choose due dates that help to ensure you don’t have to wait too long for the funds.
2. Make a List of Possible Scenarios
When trying to create your terms and conditions, you may want to take some time to think about the things that could happen. There may be some of the elements that you would want to consider. These include the possibility of:
- customers not paying
- goods getting damaged in transit
- clients asking for a refund
- goods breaking soon after the purchase
- customers paying late
3. Develop Terms and Conditions Based on Likely Scenarios
Imagine that one of the possibilities you considered is a client paying late. You want to avoid that scenario, so you decide to assess late fees and interest. As a result, you write on the invoice that if the payment is made late, the buyer faces a late fee of Rs 100 as well as 3% interest on the balance. Then, to encourage early payment, you create a term that says your clients receive a 5% discount if they pay their invoices before the due date.
As you create other terms for your invoice, you may want to stick to this double-pronged approach. Create a punitive term, but pair it with a reward. This move can deter unwanted actions, while encouraging clients to do what you want.
4. Include Warranties and Guarantees
You may also want to include terms related to warranties and guarantees on your invoices. To give you an example, imagine that you’re a contractor who builds a fence for someone. You are committed to providing your clients with quality workmanship. So, you put a warranty in the invoice that says you will repair any issues that happen in the first year after installation. Then, to be on the safe side, you also note that the damage can’t be caused by the client. If wind knocks over the fence, you return and fix it, but if the client’s dog rips a hole in it, that is not covered.
Similarly, if you’re selling products, you may want to put in guarantees. For instance, you may want to offer free replacements if the goods are damaged in transit.
5. Detail Your Refund Policy
Sometimes, clients ask for refunds. To ensure everyone is on the same page, you may want to outline your refund policy on your invoices. For instance, you may want to note that all sales are final and no refunds are available. In contrast, you may decide that you want to offer refunds as long as the customer returns the item within a certain time frame.
To get help creating invoices, consider investing in GST-ready, cloud-based accounting software. With QuickBooks, you can create and send GST-compliant invoices easily from your computer. You can use an existing template or design your own custom invoices.