Col­lect­ive invoice: settling multiple collected orders

The prin­ciples of proper ac­count­ing state that each and every trans­ac­tion made by a business must be proved by means of an invoice. The same cal­cu­la­tion however, can be used for multiple business trans­ac­tions. When doing so, the term col­lect­ive invoice is used.  

A col­lect­ive invoice is an invoice for several goods or services provided to a customer within the agreed upon invoicing period. But what is the advantage of col­lect­ive invoicing versus in­di­vidu­al state­ments? And what do en­tre­pren­eurs need to consider when they combine several trans­ac­tions into a single invoice?

As a summary invoice for several orders, a col­lect­ive invoice can always be made available if a business provides regular services for a single customer over a longer period of time, and wants to settle these peri­od­ic­ally. The goal is effective, low-cost ac­count­ing. If several business trans­ac­tions ac­cu­mu­late and are then paid off by the customer, there are fewer account trans­ac­tions. In turn, this leads to fewer trans­ac­tion fees for busi­nesses and customers alike, as well as saving money.

In practice, col­lect­ive invoices are always used when de­liv­er­ies to regular customers need to be billed ef­fi­ciently and cost-ef­fect­ively for both suppliers, and customers. Here is an example:

Mr. Smith, the master painter, ordered paints, brushes and other materials for his company from the same whole­saler. Instead of paying for each material in­di­vidu­ally, he settles out­stand­ing invoices on a monthly basis. As a result of this, the whole­saler completes each order with a separate delivery note, and issues Mr. Smith with a col­lect­ive invoice for all services incurred during the invoicing period (the last month).

Another area where col­lect­ive invoices are helpful is long-term supply agree­ments. For example, the invoice from the elec­tri­city provider rep­res­ents a col­lect­ive bill over the agreed upon billing period. Phys­i­cians and hospitals generally issue col­lect­ive invoices to health insurance companies, which summarise the in­di­vidu­al state­ments on the health services provided. The same is done for any billing which may fall directly to the patients them­selves if their health insurance does not cover a specific procedure.

Col­lect­ive invoicing is subject to the same re­quire­ments as in­di­vidu­al invoices. While there are no separate legal re­quire­ments for col­lect­ive invoices in the UK, your business may be subject to different reg­u­la­tions depending on the industry, so it would be in your interest to consult these before taking steps towards creating a col­lect­ive invoice. That having been said, it is best practice to ensure that your col­lect­ive invoice provides the same in­form­a­tion as an in­di­vidu­al invoice for each item or service.

In­form­a­tion provided to the supplier should include:

• Supplier Name
• Supplier Address
• Unique Invoice iden­ti­fic­a­tion number
• Supplier’s VAT re­gis­tra­tion number
• Supplier’s telephone number, contact person and email address
• Bank In­form­a­tion (IBAN code in the UK, bank name, address and account number)

In­form­a­tion provided to the account holder should include:

• Name of legal entity and invoice address as stated in the purchase order
• Account holder’s purchase order number (one purchase order per invoice).

 Re­com­men­ded in­form­a­tion:

• The word INVOICE or CREDIT
• Invoice number
• Invoice date
• Currency type (monetary code, eg. GBP). This will be the same currency as stated in the Purchase Order
• Spe­cific­a­tion of goods and services delivered; line items in the purchase order should match the invoice
• Total net amount
• Tax amount. If multiple taxes are ap­plic­able, the tax rate for every net amount should be specified.
• For credit notes, invoice numbers being credited must be stated (one credit note per invoice).

In addition, HMRC (Her Majesty’s Revenues and Customs) stresses the following ad­di­tion­al re­quire­ments for summary invoices:

• The col­lect­ive invoice must summarise the charges for the in­di­vidu­al sales of a transfer period. The same applies for any ad­di­tion­al tax amounts accrued.
• If this in­form­a­tion is not provided on the col­lect­ive invoice, you can refer to the sup­ple­ment­ary documents.

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