What Are Free Text Invoices? (Like I’m 5 Edition)
Imagine you're running your lemonade stand, and a friend asks you to come over and set up the stand at their birthday party. They don’t want to buy a lemonade—nope, they just want your help to set up the stand, and they're willing to pay you for that. When you want to bill them, you don’t write, “1 glass of lemonade.” Instead, you write, “Setup Service Fee: $10.”
This special note you give them is like a Free Text Invoice in Dynamics 365 Finance & Operations (D365 F&O). It lets you bill people for services or special charges that aren’t tied to a specific product, like that lemonade setup service. It’s the blank canvas of invoicing: you can write what you want, calculate charges and taxes, and send it out.
Why Do Free Text Invoices Exist?
You might wonder, “Why not just use a regular invoice for everything?” Well, Free Text Invoices are made for when your business doesn’t always fit neatly into selling products. Here’s why they exist:
Service Charges: You charge customers for things that aren’t physical—consultation fees, training services, installation, or even something like “customizing a widget to fit a customer’s needs.”
Quick Billing: If you only need to bill once for a specific service, creating a whole product record for it would be like setting up a new recipe for each flavor of lemonade you make. Free Text Invoices save time and make it easier.
Simplicity for One-Time Transactions: Maybe you’re doing a one-off project for a client. Free Text Invoices let you avoid all the setup hassle and quickly record your charges.
Need-to-Know Features of Free Text Invoices
Description Flexibility: Unlike product invoices, which require you to use predefined items, Free Text Invoices allow you to enter any description of what you’re billing for. You get to tell the story—just like writing a note that says, “Thanks for using my lemonade delivery service!”
Tax Calculation Options: Yes, you can still charge taxes! D365 F&O allows you to apply sales tax codes to Free Text Invoices. So if your “lemonade delivery service” needs to include a sales tax, it can be automatically calculated.
Payment Terms and Due Dates: You can still set when you want to get paid. Like telling your friend, “Pay me by next Friday!” You can customize payment terms, discounts, and due dates as needed.
Currency Flexibility: Billing a customer who’s paying in euros instead of dollars? No problem! Free Text Invoices support multi-currency transactions, which means you can bill your friend in euros for that lemonade stand setup if they happen to live in France.
Customer-Specific Charges: Let’s say you have a special deal with one of your friends where they always get a 10% discount. You can create charges and discounts directly on the Free Text Invoice for just that customer.
Free Text Invoices vs. Regular Invoices: Why Does It Matter?
Now, let’s dig a little deeper into why you’d pick a Free Text Invoice instead of a regular product invoice:
Physical vs. Non-Physical:
Free Text Invoice: Ideal for billing services, fees, or one-off charges—like the “Lemonade Stand Setup Service.”
Regular Invoice: Best for tangible products that exist in your inventory—like bottles of lemonade or boxes of lemons.
Efficiency in One-Time Services: Free Text Invoices are perfect for services that don’t need to be tracked in your product catalog. Imagine having to create a whole new product entry every time you charge for “Lemonade Tasting Consultation.” With Free Text Invoices, you skip that step, saving time.
Tracking Inventory:
With Regular Invoices, every sale reduces the stock level of your products. Sell a lemonade, and you have one less to offer.
Free Text Invoices don’t impact inventory levels. If you’re charging for a service, you don’t want it to accidentally mess with your inventory counts. It’s like saying, “Just because I helped with the lemonade stand setup doesn’t mean I lost any lemonade!”
Record Keeping & Reporting: Free Text Invoices provide a way to differentiate service-based revenue from product sales in your accounting reports. This is super useful when you want to see how much you’re making from services versus actual product sales.
How to Create a Free Text Invoice in D365 F&O (Step-by-Step Guide)
Navigate to the Free Text Invoice Module: Open D365 F&O, and head over to the Accounts Receivable module. Click on “Free Text Invoices.”
Select a Customer: Choose the customer you’re billing. It’s like deciding which friend you’re charging for the lemonade setup.
Enter the Description: This is where you describe what you’re billing for, like “Lemonade Stand Setup Fee” or “Delivery Services.”
Add the Amount and Taxes: Put in the amount they owe and select the appropriate tax code. D365 F&O will automatically calculate any taxes due.
Post and Send: Once you’ve double-checked everything, post the invoice and send it off to your customer. It’s like handing over the bill to your friend and saying, “Pay up!”
Best Practices for Using Free Text Invoices
Use Clear Descriptions: Make sure the description is detailed and easy for the customer to understand. Instead of just writing “Service,” try “On-site consultation and setup for lemonade stand.”
Apply the Correct Taxes: Double-check your tax setup to ensure the correct rates are applied to avoid any surprises at tax time.
Track One-Time Revenue Separately: Use Free Text Invoices to monitor how much of your revenue comes from services versus products. This will help you see trends in your service-based income.
Set Up Approval Workflows: If your organization handles large service invoices, you might want to set up approval workflows so that your managers can review and approve Free Text Invoices before they’re sent out.
Dad Joke of the Day
Why are elevator jokes so classic and good? They work on many levels.
So, next time you’re setting up your lemonade stand at a friend’s party or delivering a special batch of lemonade to the neighborhood, you’ll know exactly how to charge for it—with a Free Text Invoice, of course!
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DynamicsDad
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