When a buyer receives an invoice from the seller, he expects it to be accurate with all the necessary details and an easy to read format. All the elements of the invoice should be properly places with the market standards like total amount is expected to be on bottom right.
An important element of the invoice is the terms and conditions it includes. Often it is overlooked by the buyers but in invoices with large amount it may be a very critical part of invoice. It is also important for legal purposes.
There are these types of terms and conditions
1. Payment terms and conditions
These are the terms related to payment in case of credit invoices. Credit invoices are invoices for which amount is not received in advance or in cash at time of issue of invoice but will be received afterwards.
It is important to add payment terms if there is no separate agreement between buyer and seller. Even if there is an agreement between seller and buyer, it is a good practice to write due date on each invoice, as it will help the buyer to be aware of the due date.
We recommend to write due date on the invoice rather than using confusing abbreviations like Net 7.
Some of the abbreviations used in payment terms are
- Net 7 – Payment due in 7 days from invoice date
- Net 10 – Payment due in 10 days from invoice date
- Net 30 – Payment due in 30 days from invoice date
- Net 60 – Payment due in 60 days from invoice date
- Net 90 – Payment due in 90 days from invoice date
- COD – Cash on Delivery
- CIA – Cash in Advance
- PIA – Payment in Advance
- 1% 10 Net 30 – Customer is eligible for 1% discount if payment is received within 10 days. Full payment is required after 10 days and the overall due date is 30 days from the invoice date
- Contra Payment – Payment from customer being offset against supplies purchased from customer
Other than the due date, it is also important to write all modes of payment available and their details like bank details, UPI address or clickable links in case of PDF invoices.
Also, write the consequences if the payment is not made in time like interest or fixed charges payable. Or if the party purchases on regular basis then it can be written that further deliver of goods/services will be immediately stopped.
Also Read – Invoicing under GST
2. Warranty related terms and conditions
If you are selling products that carries a warranty, it is a good practice to write all terms and conditions. The below points should be clearly mentioned
- Period of warranty
- Person who is giving the warranty. You are providing the warranty or the original manufacturer is providing it.
- Contact details. In case, a third party should be contacted, his details. For example, in electronics company provides the warranty and company’s service centre needs to be contacted and not the actual seller.
- Warrant is on site or not. In case of goods which are fixed like house fittings or bulky like a refrigerator, whether service person visits the place or person has to bring it to service centre.
3. Returns/Refund related terms
It is good to be mentioned in which cases a refund is allowed. In case of goods, if returns/exchange are allowed and if allowed then on which conditions and up to which time limit. For example, it can be mentioned that goods should be in same condition and with packaging intact.
In case of software and online services subscription, it is a general practice to provide limited time money back guarantee. In such cases, what will be the terms and how the refund will be processed.
Also Read – Credit notes and debit notes under GST
4. Where is the legal jurisdiction
In case of small businesses, it is better to write whether in case of dispute where is the legal jurisdiction. So that in case of any legal dispute, business can manage the dispute in their local courts. You will find this written in many invoices – Subject to Delhi Jurisdiction only.
5. E & O.E
Errors and omissions excepted (E&OE) is a phrase used in an attempt to reduce legal liability for potentially incorrect or incomplete information supplied in a contractually related document such as a quotation or specification. It means that if any error or omission is found later in the invoice, it can be rectified with suitable adjustments.