Question 1

Net Terms:

Accepted Answer

This dictates the exact timeframe the buyer has to pay the total amount before the invoice is considered legally past due. "Net 30" means the payment is due exactly 30 days from the invoice issuance date. Variations include Net 15, Net 60, or "Due Upon Receipt."
Pro Forma Invoice: A preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods. It provides an exact estimate of the costs but is not a legally binding demand for payment and cannot be used for accounting tax reclamation. It is essentially a formalized quote.
Line Item: A single row on the invoice representing a distinct product or service. A proper line item must contain a SKU (Stock Keeping Unit) or description, the unit price, the quantity, and the total line amount.
Remittance Advice: A section of the invoice, usually at the bottom, detailing exactly how the payment should be made. This includes bank routing numbers, SWIFT codes for wire transfers, or mailing addresses for physical checks.
Tax Identification Number (TIN / VAT ID): A unique sequence of digits assigned by a government tax authority to a business entity. In many jurisdictions, an invoice is not considered legally valid unless both the sender's and the receiver's tax IDs are clearly printed on the document.
Days Sales Outstanding (DSO): A financial metric representing the average number of days it takes a company to collect payment after an invoice has been generated. A lower DSO indicates healthy cash flow.

Question 2

Scenario 1: The Independent Consultant

Accepted Answer

Consider a 35-year-old management consultant who charges a $15,000 flat fee for a corporate audit. Because the sum is large, the client's Accounts Payable department requires strict documentation. The consultant uses a SaaS invoice generator to create a document featuring their corporate logo, their exact LLC name, and their Employer Identification Number (EIN). They set the terms to "Net 15" and use the generator's integration to embed a secure bank transfer (ACH) payment link directly into the PDF. The generator automatically sends a polite email reminder to the client 3 days before the 15-day deadline, ensuring the $15,000 clears without the consultant having to make an awkward phone call.

Question 3

Scenario 2: The B2B SaaS Company

Accepted Answer

A software company sells enterprise project management tools for $1,200 per user per year. They have a client with 50 seats, resulting in a $60,000 annual contract. The company uses an API-driven invoice generator connected to their CRM (Customer Relationship Management) software. On the exact anniversary of the client's contract, the CRM triggers the invoice generator. The generator automatically calculates the $60,000 subtotal, applies a pre-negotiated 5% volume discount ($3,000), adds the exact local sales tax based on the client's zip code, generates the PDF, and routes it directly to the client's procurement department via email, completely hands-free.

Question 4

Scenario 3: The High-Volume E-Commerce Store

Accepted Answer

An online retailer sells 2,500 pairs of shoes daily at an average price of $85.00. Generating invoices manually is a physical impossibility. Their Shopify backend is connected to an automated receipt and invoice generator. The moment a customer clicks "Buy," the generator ingests the $85.00 price, the $12.50 shipping fee, and the $6.83 state tax. It instantly generates an electronic invoice/receipt totaling $104.33 and emails it to the customer while simultaneously logging the exact tax liabilities into the retailer's accounting database for end-of-year reporting.

Question 5

Is an invoice a legally binding contract?

Accepted Answer

No, an invoice is not a contract. An invoice is a commercial document that itemizes a transaction and serves as a formal request for payment based on previously agreed-upon terms. The actual legal obligation to pay is established by the underlying contract, purchase order, or verbal agreement made before the goods or services were delivered. If a business simply generates an invoice and sends it to a stranger without a prior agreement, the recipient has no legal obligation to pay it.

Question 6

Can I delete or edit an invoice after sending it to a client?

Accepted Answer

From a strict accounting and legal perspective, you should never delete or edit an invoice once it has been issued to a buyer. Altering an issued invoice creates discrepancies between your accounting records and the buyer's records, which is a major red flag during tax audits. If a mistake was made on an issued invoice, the correct procedure is to generate a "Credit Note" to cancel out the original incorrect invoice, and then generate a brand new invoice with a new, sequential invoice number containing the corrected information.

Question 7

What is the difference between an invoice and a receipt?

Accepted Answer

The distinction lies entirely in the timing of the payment. An invoice is a request for payment issued before the client has paid; it outlines what is owed and when it is due. A receipt is a proof of payment issued after the client has successfully paid the balance in full. When a client pays an invoice, the business should subsequently generate and send a receipt (or a copy of the invoice marked "PAID") to finalize the transaction record.

Question 8

How do I handle a client who refuses to pay an invoice?

Accepted Answer

If a client ignores an invoice past its due date, you must follow a strict escalation process. Begin with polite, automated email reminders generated by your invoicing software. If the invoice reaches 30 days past due, issue a formal demand letter outlining the late fees specified in your initial contract. If the client still refuses to pay after 60 to 90 days, your options are to write off the invoice as "bad debt" on your taxes, sell the debt to a collections agency for a fraction of its value, or pursue legal action through small claims court using the invoice and original contract as evidence.

Question 9

What does "2/10 Net 30" mean exactly?

Accepted Answer

This is a specific type of trade credit term designed to incentivize rapid payment. The "Net 30" portion means that the full, unadjusted total of the invoice is legally due exactly 30 days from the date of issuance. The "2/10" portion means that if the buyer chooses to pay the invoice within the first 10 days, they are authorized to deduct exactly 2% from the total amount due. This improves cash flow for the seller while providing a slight financial benefit to the buyer.

Question 10

Do I need to charge sales tax on my invoices?

Accepted Answer

The requirement to charge sales tax depends entirely on your physical location, your client's location, and the nature of what you are selling. In the United States, physical goods are almost always taxable, while services (like consulting or design) are often exempt, though this varies wildly by state (a concept known as "economic nexus"). In the European Union and UK, almost all goods and services are subject to VAT (Value Added Tax). You must consult a local tax professional to determine your specific tax liabilities before configuring the tax rates in your invoice generator.

Invoice Generator

Command Palette