Calculation of Invoice due dates

Businesses must include the invoice due date in every invoice, whether or not the amount due is big or small, as it encourages prompt payment without affecting their working capital. ClearOne invoicing software helps to create customised and accurate invoices as per one’s business needs.

What is an invoice due date and use?

An invoice due date is when the seller expects the buyer to make the payment for goods sold or services provided. Mentioning the invoice due date is essential as it intimates the buyer about the maximum time he has to make the payment for his purchase. The seller could levy penalties or interest. 

A seller can also mark this due date so that he can set reminders for payments due. He can also plan to manage his working capital needs according to the invoice due dates.

How are discounts related to the calculation of invoice due date?

In some cases, the seller provides a discount for making early payments. For example, 30 days is provided under payment terms in an invoice, but one may provide a 2% discount if the payment is made within 10 days of the issue of the invoice. This is done to encourage early payments. 

How to set payment terms in the invoice? 

Each party has its payment terms, which should be clearly stated on the invoice. These terms outline when the payment is due. For example, payment term = 30 days after the invoice date.

Steps to calculate invoice due date along with an illustration

The invoice due date is calculated based on payment terms mentioned in the invoice. It is essential to calculate invoice due date precisely because it is the date the buyer must pay, and it is the starting point for calculating penalties for late payments. Below are the steps to calculate invoice due dates:

1. Check the invoice date (the issue date mentioned in the invoice) and not the date the invoice is received.

2. Consolidate invoice dates (01-01-2021) in excel along with payment terms (for example, 60 days).

3. Calculate the invoice due date by adding the payment terms (in days) to the invoice date.

4. If two parties are involved, one party purchases from another party and then sell it to yet another party, and instead of paying the gross amount, he may just spend the net amount. In such cases, the earliest date between the two parties should be taken as a base date.