Whatever type of business you run, your system of billing your customers is one of the most important aspects of making a profit. Without an effective system for collecting on accounts receivable, you will have a difficult time receiving payment. Without payment, your business cannot run. There are several potential systems you can employ to bill your customers; the one that is right for you will depend largely on the type of business you run.
Credit and Debit Memos
Credit and debit memos are not suitable as a sole billing system, but are important in case of changes to an account or payments, or errors made. You will issue credit memos to customers who paid for services or products they did not use or receive, or if an error in your billing caused the customer to overpay. Debit memos will be used in the opposite manner; when a customer uses more than his prepaid allowance, or if he is otherwise undercharged for his services. Debit memos essentially request more money from the customer, while credit memos, or credits, translate into money returned or service credits rolled over to the next billing cycle.
Order-based billing can be likened to prepaid billing for products. If your business is a supplier or wholesaler, you may choose to require your customers to pay in full or in part when they place their order. This carries the previous benefits of prepaid billing. You can also require only partial payment in advance and full payment at a later date, at which point you will need to send your customers an invoice requesting the remainder of the payment. To use this method, you must keep accurate records of what customers have already paid.
In this system of billing, you would send an invoice and purchase order detailing each item and quantity to your customer along with their delivery. You may choose to require full payment upon delivery, or specify a payment due date on the invoice. Be sure to include order desk contact information in case of any discrepancy between the purchase order and invoice.
- payslip image by Christopher Hall from Fotolia.com