A company that believes in online transition always uses invoices as a regular part of their business. An invoice is simply a payment guarantee that you provide to your client or someone you do business with. Here, in this article, we will discuss the open invoice method.
What is an Open Invoice?
There can be a gap of time between issuing an invoice and delivering the payment. And here comes the word open invoice, which is an invoice method between the whole idea of invoicing in business. Simply, an invoice that has not been paid a hundred percent is called an open invoice. To be more precise, an online payment that is pending in your billing is known as an open invoice. Once a client clears the pending online payments, the open invoice will turn into a closed invoice.
Once a company collects an open invoice, its accounting department evaluates the statements to ensure the invoice is correct. If the invoice is flawed, the department contacts the seller or client to discuss the difference. Some businesses work with vendors to disburse a set amount each time.
Different Types of Open Invoices
There are four different types of open invoices in total. Those are:
1. Pending Online Payments: These are the pending invoices that are to be paid online by the client. Until the payments are made, these invoices take place in the ‘Pending Online Payments’ section. Basically, you do not have to worry about the payment at this point.
2. Pending Offline Payments: Simply, these are the payments that are to be paid in an offline process, such as cash or check. In this case, you have to manually add, check, and change its status as per the client’s payment procedure.
3. Bills: There is a basic difference in bills from the pending online payments or pending offline payments. It is an open invoice method that is to be provided only after the client clears a payment successfully.
4. Failed Payments: Here, we need most of the attention. When a client fails to clear the payment for various reasons such as card declination, lack of money, etc. is called a failed payment.
The Work Procedure of Open Invoice
The work procedure for an open invoice is simple. As soon as an open invoice is created, it will become a liability for a customer and an asset for the merchant or service provider. As the open invoice guarantees a payment that is to be done in the future, both the merchant and the customer will have a specific account in the balance sheet for that open invoice.
Open Invoice to Closed Invoice
The journey of an open invoice to a closed invoice depends on the customer’s payment timing. In simple words, when a client clears a pending payment, the open invoice sanctioned for that automatically becomes a closed invoice.
The basic and first fear you realize at the starting point of your business is that you might not get the payments you work for. This creates tension and, of course, anxiety. That is why knowing the open invoice method can be a real help for you and your business.