FAQs on Recurring Billing and Invoicing

General-FAQ| 4 min read
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Q.What is an invoice?

An invoice is a transactional document that is sent to the customer by the seller. It serves as a legal document, as it is considered to be a proof of the transaction.

A typical invoice contains:

  • Products or services purchased by the customer

  • Price of the purchased items

  • Basic details like name and address of both the business and customer

  • Payment terms

Q.What is an estimate?

An estimate is a document that a business owner sends to customers that shows how much they will be expected to pay for the goods or services that they are considering purchasing.

It is not a binding document, which means the business owner can charge the customers more or even less than the amount stated in the estimate.

For example, imagine you are running a house refurnishing company and a potential customer contacts you, asking how much you would charge for refurnishing two rooms of their house. You can provide an estimate of how much you would charge the customer for this service.

Q.What is a quote?

A quote or quotation is a document that a business owner shares with potential customers to let them know the actual price of goods or services before the purchase. By sending it to the buyer, the seller commits to the proposed price in the quote. If the customer choose to accept the quoted price, it will be converted into an invoice. This is a binding document, so the costs involving raw materials and labour should be accurately estimated. A quote will also include a time frame for which it remains valid.

Q.What is a pro-forma invoice?

A pro-forma invoice is a preliminary form of bill sent to customers before the actual sale or delivery of goods. By sending a pro-forma invoice to clients, the supplier indicates that they are committed to deliver the goods promptly.

A pro-forma invoice contains details of the purchased items, expected delivery time, transport fee, and shipping status.

Q.What does recurring invoice mean?

A recurring invoice is a type of invoicing where the customer is charged or billed at regular intervals. It can be over any time duration, from days to a yearly basis.

With recurring billing, the customer is promised continuous delivery of goods or service, while the seller is assured to receive payments regularly. This type of invoicing is often used by businesses that provide products or services on a recurring basis. For example, video streaming services like Netflix send recurring invoices on a monthly or yearly basis.

Q.What is a credit note?

A credit note is a document that the supplier creates and sends to their customer to notify that they owe the customer. It’s also known as a credit memo, which is short for credit memorandum.

A credit note is raised in the following cases:

  • When the price of the product mentioned in the invoice is greater than the actual price of the product delivered due to error.

  • When the purchased goods are returned by the customer to the supplier.

Q.What are payment terms?

Payment terms in an invoice are conditions based on which a payment is expected to be made to a seller. Typically, payment terms include specifications related to the following criteria:

  • Expected date of payment

  • Preferred mode of payment

  • Discounts for early payments

  • Penalty fees for late payments

Q.What is Payment In Advance?

Payment In Advance, or PIA for short, is a type of payment where the payment is submitted prior to the delivery of goods and services.Typically, businesses collect partial or specified portion of the total bill amount in advance as down payment.

Advance payment benefits both customers and business owners. Customers can breakdown the total amount and pay in instalments. Also, sellers get initial funds to start the production.This way, both sellers and customers commit to the production and purchase.

Q.What is Cash with Order?

Cash with Order, or CWO, is a type of payment term requested by businesses where the customer is asked to pay when they place an order. This is also known as Payment In Advance (PIA) because the customer is expected to pay before the goods or services are delivered.

Q.What is Cash on Delivery?

Cash on Delivery (COD) is a mode of payment where the customer makes payment upon delivery of goods and services. This is also known by the term Payable on Receipt.

COD can be useful to provide payment flexibility to customers. The amount is paid once the product is delivered, which reduces the risks of payment fraud.

Q.What is Net D?

Net D, or Net Days, denotes the number of days within which a customer must pay for the products or services, from the date of delivery.

For instance, if you set Net 30 as your payment term, then the customer is expected to pay for the products they purchased within 30 days from the date of delivery of the product.

Q.What is End of Month?

End of Month, or EOM for short, indicates that the customer must pay within the specified number of days following the end of month in which the goods were delivered.

For instance, if the payment term is Net 20 EOM,  and the goods were delivered on the 15th of May, the payment is due 20 days after the last day of May.

Q.What does Terms of Sale mean?

Terms of sale is an agreement between a seller and a buyer on grounds of good or service price, risks associated, and special conditions involved in delivery of goods.

It’s a set of guidelines between two trading parties.

Q.What does 2/10 Net 30 mean?

The term “Net 30” implies that the customer has to pay within 30 days.

In case, the customer paid within 10 days, the customer would get a 2% discount.

The values (discount, days) can be changed, as needed.

Q.What does Interest Invoice mean?

When the customer does not pay the invoice on time, an interest is imposed on the unpaid invoice to charge the customer for the number of days the payment is past due.

For instance, let’s assume you charge 8% interest on an unpaid invoice of $500, and it is 10 days overdue.

The interest amount charged after 10 days is,

500 (Price) * 10 (Number of days) * 8 (Rate of interest) / 100 = $1.08

Q.What is Progress Payment?

Progress payment is a type of payment where the supplier can request payment from the customer for part of the work that is completed.

This is commonly used in projects with longer time spans.

Progress payment can be implemented in one of the following ways:

  • Billing by stage (also known as “Stage Payment”)

For instance, a building contractor using the stage payment method could issue an invoice after each stage, like when the clearing of the site, foundation, frame, and lock-up stage is completed.

  • Billing for the percentage of the work completed.

Similarly, the same contractor could use the percentage to gauge the completion, like 25%, 50% ,75%, and issue invoice accordingly.











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