Benefits of Using Consolidated Invoices w/ Examples
January 06, 2023
When your business is doing well, you will get a lot of orders, and some of them may come from the same customer.
Of course, you need to send an invoice for all of these purchases, but what if we told you there was an easier way than making invoices one by one?
Well, the answer is consolidated invoicing! If you want to know what a consolidated invoice is, what some of its benefits are, and how to make one for yourself, read this article all the way to the end.
What is a Consolidated Invoice?
A consolidated invoice is a financial document that combines multiple charges from a single customer.
Imagine this: You have a customer who, over a period of time, has bought a number of your products or signed up for more than one of your services. Now, instead of making things hard on yourself by sending out many different invoices, you can combine all the charges and send a single invoice.
Consolidated invoicing is not to be confused with consolidated billing. Even though the two terms are used interchangeably, the way they work is different. With consolidated billing, you can put all of your charges on one bill, which you can then use to make a consolidated invoice that shows the date, amount, and other details for each charge.
Benefits of Consolidated Invoices
As mentioned previously, consolidated invoicing saves you the trouble of sending out multiple invoices because it lets you put all of a client's charges on one invoice. Yet, this isn't the only benefit it comes with. This kind of invoicing can also help you:
- Stay organized. You won't have to keep track of as many financial documents if you just cut down on them. This won't hurt your business in any way. On the contrary, it will be easier for you to manage your cash flow and keep everything else in order.
- Improve cash flow. If your customers get a bunch of different invoices for all the money they owe, they will probably feel overwhelmed. Yet, this can be prevented with consolidated invoicing. That way, your clients will only get one invoice, which will make it easier for them to keep track of all their purchases or subscriptions and pay for them on time.
- Increase work efficiency. Making invoices takes a lot of time and may not even be necessary if you can put all the charges on one document. It can also be expensive if you use paid software and full of mistakes if you do it manually. So, if you choose consolidated invoicing, you can get rid of some of the extra hassles and spend more time working and promoting your business.
What to Include in a Consolidated Invoice
Now that you know what a consolidated invoice is and what some of its benefits are, let's go over all the things you should include in it!
#1. Contact Information
The consolidated invoice should include your and the clients’ contact information, as it’s supposed to gives both parties an idea of who to communicate with if necessary. Some of the details you should add to the invoice would be both parties’ full names, email addresses, physical addresses, and phone numbers
It is also a good idea to add a company logo to the document—it gives your business more credibility and helps you distinguish yourself from the competition.
#2. Consolidated Invoice Number and Dates
No invoice is complete without its unique number, which gives the document its legal form and helps with accounting.
To stay more organized, use the same numbering system. For example, use three digits and keep the numbers in order from one invoice to the next.
As for the dates, you should put the date the invoice was sent out and the date payment is due. If you don't include a payment date, it is assumed that you are giving your client 30 days to deliver the payment.
#3. Service or Product Description
In this section, you should provide more information about the service or product you are selling. So, you can include the following details:
- The type of service or product
- Quantity (if applicable)
- Detailed description
- The expected time of delivery
#4. The Sum of all Charges
Since you are issuing a consolidated invoice, you need to include the details of all the charges you want to combine in one document.
- The specifics you should include are:
- The billing date(s)
- A list of the services or products
- How much do you charge for each
- The total amount (including all relevant fees and taxes)
#5. Payment Terms
Lastly, you should define how the client will pay you.
Not only do you have to think about the payment periods and due dates, but you should also consider different payment options.
Make sure you list a few payment methods so that you can avoid any late payments. Depending on your preferences, the client can pay you with cash, a credit card, a check, direct deposit, wire transfer, or a service like PayPal.
How to Create a Consolidated Invoice
So, you want to create a consolidated invoice, but you don't know how or where to start. Well, you can do this in two ways!
The first option is to use either Word or Excel and create the invoice by manually entering all the necessary information. However, we do not recommend this method—you might make a lot of mistakes, which isn't good in any situation, especially when working with a legal document. Also, it can take a lot of time because you have to think about so many different fees.
For this reason, we suggest opting for the second method—using an online invoice generator. It will make the process easier and less stressful—all you have to do is:
- Open the free consolidated invoice template
- Fill out the form with essential information
- Review the finalized invoice and download it
That’s It! In just a few simple steps, you will have a consolidated invoice that you can send to your clients immediately.
Tips to Create Better Consolidated Invoices
Here are some additional tips you can follow to create a proper consolidated invoice:
#1. Consider if Consolidated Invoicing is the Best Option
Creating advance invoices might be tempting, but you should think about whether it's best for your business and, more importantly, for the client you're working with.
Some customers might not be willing to pay for the services ahead of time. And if you insist on using only advance invoices, you will lose customers and money. You can decide if it's worth it to work with clients who don't want to pay you in advance. Moreover, you can always try to make your approach fit the needs of each client so that everyone is happy.
#2. Determine the Billing Cycle
The billing cycle refers to the period of time between two billing dates. Most of the time, these cycles last one month, but the length can change depending on the service or product.
Having a set billing cycle is helpful for two reasons. It tells the owner of the business when to charge the customers, and it also helps figure out how much money will be coming in. The cycle helps customers keep track of when their payments are due so that they don't miss one and have to pay late fees.
#3. Double-Check All Information
One of the most important things you can do to improve your consolidated invoices is to double-check everything once you fill out your invoice template. It’s easy to get caught up and make a mistake when doing paperwork, so go over the invoice again once you make it.
Pay extra attention to the payment terms and the breakdown of your services, as these two sections are the most important bits of your invoice.
#4. Add Multiple Payment Options
Let’s face it: no one can predict whether their client will pay them on time or, even worse, pay them at all. But, what you can do to maximize your chances of receiving a payment is to add as many payment options for your client as you can.
By having multiple payment options, such as PayPal, Skrill, debit cards, credit cards, or bank transfers, it will be much more convenient for your client to pay what they owe you.
#5. Include Late Fees
Sometimes, even if you accept multiple payment methods, there will be clients who won’t pay or will be late. That’s why you should always include fees for late payment, as nothing encourages people to pay their bills as much as fees do.
Different Types of Invoices
There are a few different types of invoices available. Knowing the differences between them will allow you to choose the right one for your business. Some of these include:
- Freelance invoice. This is a legal contract between you and the client that makes sure you'll get paid for the freelance work you've already done or will do.
- Small business invoice. Small businesses that want to streamline their accounting procedures and keep track of all of their payments use this kind of invoice.
- Credit invoice. Credit invoices are issued at the client’s request. Their main purpose is to exchange an item or get a discount.
- Deposit invoice. This type of invoice is used when the seller wants to get part of the total amount upfront, before the service or product has been delivered.
- Writer invoice. All writers, whether they work full-time or not, should send out this type of invoice. It helps keep their work safe and makes sure they get paid for all their efforts.
- Photography invoice. Just like writers, photographers also need to issue an invoice for the services they provide.
- Construction invoice. A construction invoice is given for any work done on-site to keep track of the hours worked and any costs that went along with it.
- A consolidated invoice is the type of legal document that combines all of the charges from a single client.
- Typically, consolidated invoices include contact information, a number and due date, a service or product description, the sum of all charges, and the payment terms.
- If you want to ask for a prepayment, you can use an advance invoice. But you should consider whether that’s the best option for you and the client.
- The easiest way to make a consolidated invoice is to use an online invoice generator.