You can’t run your business effectively if you don’t know the terms and conditions of successful invoicing and payment collection. Make sure to familiarize yourself with these 10 important terms so you can get paid what you’re owed and keep your clients happy. Here’s our list of the most important billing terms to know in 2022, plus our pick for the best recurring billing software to make your invoicing easier and more profitable...

1) GST / PST
This stands for Goods and Services Tax / Provincial Sales Tax. This is a sales tax which is charged to Canadian businesses by both federal and provincial governments. It’s one of those hidden costs you need to consider as an entrepreneur, because depending on where your business is located in Canada, you may be required to charge it to your customers when they buy from you.

2) Net 30
This is one of my favorites. It’s a payment term that basically says that you won’t be paid until 30 days after your invoice is due. It’s particularly important to specify when invoices should be paid, as many companies will pay on terms other than Net 30. Make sure to have specific payment terms in your contracts with vendors and customers so you don’t end up waiting months for money! 

3) Factoring
Factoring involves companies receiving money from clients upfront, often as part of a contract. This is typically done through invoicing and recurring billing software, which means most companies are technically taking advantage of factoring (and aren’t even aware of it). Because invoicing is so common in many industries, most terms are fairly standard—meaning you won’t have any trouble finding payment terms that work for your business. This includes: factoring, invoice financing and invoice discounting.

4) Customer pays sales tax
In almost every state, businesses are required to collect taxes and remit payments to state and local tax agencies. Whether your customer is a consumer or a business, you should charge sales tax based on his or her location. All sellers that collect sales tax must provide purchasers with an invoice or receipt that states how much they owe in taxes, according to TaxJar. If your company uses a recurring billing software, you can also inform customers how their payment applies to specific invoices through their dashboard.

5) Gross and net amounts are different
When calculating your net profit (or loss), be sure to consider gross and net amounts. Gross amount refers to your total sales, while net amount refers to your total sales minus any refunds or product returns. This is particularly important in industries where you need to track returns because they affect how much money you actually take home in profit. Also, use recurring billing software or online payment services such as Paypal or Stripe so that you don’t have to deal with processing payments manually each month.

6) Canceling recurring invoices
If you’re canceling an invoice, make sure you cancel any recurring invoices that are associated with it. This is to ensure your business doesn’t get stuck paying a subscription fee for something no longer needed. Canceling recurring invoices can be tricky—especially if your clients don’t do it themselves—so read through PayPal and Stripe’s documentation to see how they handle cancellations.

7) Downstream Contractor Agreements
These are agreements which confirm a third party will act on your behalf (for example, as a courier or transporter for goods). Downstream contractor agreements are an excellent way to avoid any confusion about who is responsible for which tasks in your business. Writing these contracts is also beneficial from a legal perspective; by setting out payment terms, you can avoid potentially costly disputes later on. Contact details should be included at all times.

8) Pickup, Delivery or No Charge Fees (USD)
When you ship, even if you don’t charge for shipping, your customer might be charged a pickup fee or delivery fee (the same applies to orders sent by mail). This is not a problem, but it’s important to include it in your invoice so that you and your customer know what they can expect. It should also show up on any additional forms of communication. Since all you have here is an invoice template in Word, there are no other payment terms necessary.

9) Non-Payment Tolerance Policy Policy
A policy is a formal, written agreement. It outlines what you’ll do if you encounter a client who doesn’t pay on time or at all. This can range from putting their name on a bad-debtor list to suing them in court. Having one of these policies in place will help keep your business safe, and it’s essential if you want to run a successful business with clients who consistently pay their bills on time. More info...

10) Credit Risk Fee Structure ( CAD )
The fee is a flat dollar amount that a business has to pay if they accept credit cards as payment. The risk associated with accepting credit cards is usually shifted to retailers by way of a cost, commonly around 2-3% of total sales. It’s important to know how much you are paying in fees and be able to compare different options for card processing.

SOURCE: 10 Invoicing & Payment Terms You Need To Know for Successful Business