What’s on Your Invoice?

We handle a variety of collection cases for commercial clients, and one of the common problems we encounter is the use of sales invoices which are either incomplete, lacking the proper or necessary terms, or containing ambiguities which only serve to foul up the collection process.

Extreme care should be used when preparing invoices since they often form the basis of a later collection case if the customer does not pay in a timely manner. Every invoice should contain the complete name and address of the customer, the date of the order, the date of shipping or delivery, a precise description of the quantity and nature of the goods or services sold, and, of course, the purchase price. In addition, invoices can contain the following important terms and information:

• Payment Due Date. Every invoice should specify the date by which full payment is due.
  
  
• Discount for Early Payment. Good customers are often granted a discount (usually around 2%) for payment received within a short period, typically ten days.
  
  
• Warranty Disclaimers. If the seller is disclaiming or modifying any warranty on goods or services, the disclaimer should be specified clearly and in bold print. U.C.C. disclaimers must meet specific U.C.C. requirements.
  
  
• Notice Requirements. Language can be included specifying that prompt notice (usually five to ten days) must be received in order to return goods for credit or refund if they are damaged.
  
  
• Return Policy. Language can be included which limits or eliminates the ability to return undamaged goods for credit or refund. In addition, if returns are allowed, restocking charges can be specified.
  
  
• Interest or Carrying Charges. In the event of non-payment by the due date, the invoice can alert the customer to the imposition of these charges on overdue balances. In addition, invoices can also contain language imposing collection costs, including attorneys’ fees, in the event of non-payment.
  
  
• Signature Line. Ideally the customer should be asked to sign the invoice containing the various terms and conditions of the sale. This is proof-positive that the customer has agreed to the stated terms. If this is not possible, a separate contract should be signed by the customer.

In summary, our experience shows that invoices are sometimes prepared sloppily, often in haste, resulting in poorly documented business transactions. Taking the time to prepare proper invoices reflecting all of the important terms of the relationship can yield benefits down the road when collection from the customer becomes difficult.

— Kevin Palmer