Accounting Best Practices, Fifth Edition

4–6. Issue Single, Summarized Invoices Each Period

Some companies make a business out of selling small quantities of products in small batches, which necessitates a very large quantity of invoices. For example, a company that sells nails in batches of an ounce per sale will issue 16 more invoices than one that sells nails in batches of no less than one pound. If the cost of issuing an invoice is as little as $1 (and it is usually much more), then the price at which the nails were sold will probably be far less than the cost of issuing the associated invoices. Clearly, companies that must issue enormous numbers of invoices in this manner will find that their administrative costs are excessive.

A way out of this dilemma is to group all sales for a specified time period, such as a month, and then issue a single invoice that covers all of the sales during that period. This approach is similar to the invoicing method used by credit card companies, which congregate all sales for a full month and then issue a single billing. By using this best practice, a company can eliminate a very large proportion of its total invoice volume.

There are some issues to consider before using this best practice. One is that this approach is obviously most suitable for companies that issue large quantities of low-dollar invoices. Conversely, it is not a reasonable approach if invoice volume is low and dollar volumes are high. If a billing is for a large amount of money, it makes little sense to wait until ...