The Importance of Invoice Due Date & How to Set it
January 09, 2023
You may want to create an invoice but don't know what an invoice due date means, how important it is, what the invoice due date terms are, and so on.
Well, if that's the case, you'll be glad to hear that we'll answer all of these questions while showing you how to set an invoice due date and create an invoice all together.
So, read all the way to the end to find out more.
What is The Due Date on an Invoice?
The due date on an invoice is the date by which the vendor expects to be paid for the goods or services they have or will provide.
There should be a due date on every invoice. If the invoice doesn't have a due date, the client will have to figure it out on their own. That is, they will have to look at both the date the invoice was issued and the terms of payment. There is a good chance that they will make a mistake, which can cause delays in receiving the payment. So, to avoid that, make sure your invoice has a due date.
Why is the Invoice Due Date Important?
This might be obvious, but the biggest advantage to setting a due date is to encourage your clients to pay you on time.
When there is a clear due date, clients know when they need to pay, which makes it easier for them to organize their finances. As for you, this will make sure that you get paid on time and don't have to deal with any late payment fees.
Having a clear due date also helps your business because you will know exactly when to expect the money. This will help you keep track of your income and organize your cash flow better.
What is the Issue Date on an Invoice?
People often get the issue date and the due date confused, but there is a big difference between them.
The date the invoice was created and sent to the client is the "issue date". Which differs from the “due date” depending on the payment terms you have selected. Both of these dates should be on your invoice.
But why exactly do you need to add the issue date on an invoice?
The issue date acts as a record keeper for all your agreements and issued invoices. Asides from that, it can also help you keep better track of all your invoices.
For instance, you can keep all the invoices from the same week or month in one folder, and so on. This will just make it easier for you to find them if you ever need to look them up again. Or if you need to split them by months for accounting purposes.
Best Practices for Invoice Due Date
Now that you are familiar with the invoice due date meaning and its significance, let's look at some of the best ways to set one.
Pick a Specific Date
Choosing a date is very important. Make sure you don't say things like "the first of the month." This will only confuse the client and could cause your payment to be late, which let’s face it, nobody wants.
So picking a specific date will just make everything easier, and the client will know exactly when to send the payment.
Emphasize Date of Issue
You should also draw attention to the date of the issue. This is important because it tells the client how long they have before they have to pay.
This way, they will be able to distribute their income accordingly and be ready to pay when they need to.
Choose One Billing Cycle
A billing cycle is the amount of time between two billing dates. Most of the time, the billing cycle is 30 days, but this can change depending on the services or products provided. So it can be anywhere between 20 and 45 days.
Sticking to one billing cycle will help you keep track of your payments and know when to expect them. It will also make the process easier for the client and make sure you get paid on time.
Consider the Cash Flow
You should think about your desired cash flow.
If you want to get paid more often, you could set two due dates within the same month or choose a shorter billing cycle, like 20 days. But if you'd rather get paid once for a bigger amount, you should stick with a longer billing cycle, such as 30 days.
Plan for The End of The Year
Toward the end of the year, you should think about whether any of the billing dates need to be changed.
You might want to get the payments before the new year so that you can increase Q4 revenue numbers for that year.
In that case, you might want to think about issuing invoices with a due dates that fall on the final business days of the year. Just make sure to notify the clients ahead so there aren't any problems.
How to Make an Invoice in a Few Simple Steps
By now, you should know exactly what an invoice due date is and how to work around it. So why not put that knowledge to use and create an invoice?
If you don't know how, you can do one of two things. First, you can always use Word or Excel and type all the information into the fields. We don't suggest using this method as it takes a long time and there is a high chance of making mistakes.
What else can be done, though? Well, you can always use an online invoice generator. Just do the following:
- Get our free invoice template
- Fill in the fields with the relevant information
- Check the document to make sure there are no mistakes
- Download it and send it to your client
As you can see, the steps are very easy. It won't take long, and when you're done, you'll have a professional invoice that you can use immediately!
- An invoice due date is the date when the client should make the payment for the services or the products they have purchased.
- Having a clear invoice due date, among other things, ensures that you get paid on time.
- Invoice due date is not to be confused with issue date. The issue date is the date the invoice was created and sent to the client.
- When making an invoice due date, make sure to set a specific date, put the issue date front and center, stick to one billing period, think about how you want your cash flow to work, and plan for the end of the year.
- The best way to make an invoice is to use an online invoice generator.