Setting Up An Invoicing System
|Setting up an invoicing system|
If your business is involved in the selling of either products or service in a non retail manner, then you will of course need to work out a method of billing the customer to ensure you get paid. This is also a matter of law if you and they (the customer) are VAT registered, so you need to set up an invoicing system which follows the legal requirements.
It isn’t rocket science, but you do need a clear idea of pricing, VAT, when and how you expect to be paid, and what measures you will take to ensure that this happens.
Invoices need to include:
• Clear notice that it is an invoice
• The date of issue
• Full company name and contact details, plus an invoice / reference number
• The total amount payable, clearly showing the VAT
• A proper description of the goods or services which are charged on the invoice, including date provided
• The date by which payment must be made
• The full company name and contact details of the invoice recipient
If you are limited, then you are required to include
• The company name / registration number and address details as it appears on your certificate of incorporation.
If you are a sole trader, you need to include
• The traders name or the trading business name
• Address details for correspondence / legal documents
Payment terms or not officially prescribed, so you can create your own, including prepayment discount or pro forma payment. Unless otherwise agreed by you, payment will be due within 30 days of the customer receiving your invoice.
You can charge interest on late payment if you choose. It is wise to remember here that doing so will no doubt have a bearing of future business relationships, especially if your customer genuinely has cash flow issues which will be resolved. The rate is set at the Bank of England base rate on 31st December for the period from 1st January to 30th June, and on the base rate in force on June 30th for the period from 1st July to 31st December. You can calculate the interest payable on overdue bills by taking the relevant reference rate and adding 8 per cent. If you prefer, you can set a contractual rate either above or below this; therefore the statutory rate will not apply.
Claiming costs on late payments is also a possibility, although again it is worth bearing in mind that this method can be rather aggressive and not very conducive to good customer relations. There are set legislated conditions on charging these costs which are:
• £40 on debts on up to £999.99
• £70 on debts of up to £9,999.99 and
• £100 on debts of over £10,000
These occur when a customer who has paid by card asks their bank or credit card company to reverse a payment, and can happen if goods or services are not provided as agreed, the item is not as described, or any fraudulent use of the card has been made (except when a PIN has been provided). This can happen up to 120 days after the transaction.
Recovering funds can be a simple procedure, but in the current climate getting your customers to pay on time can be a difficult process. There are a host of methods to try to get your clients to pay on time, but unfortunately it is a fact that some customers simply always pay late. You do have certain rights under current legislation to use your discretion in charging interest and costs in late payment, but there are other ways of managing the situation and trying to prevent problems arising to start with.
Most companies start with a simple process:
• Telephone reminder
• Postal / email written reminder
• Overdue reminders
• Debt collection recovery
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