Market Ready Farm to Restaurant – Invoicing Considerations

There are many factors to consider before selling your farm products directly to restaurant owners, managers, and chefs. Marketing management is an important component in the startup and decision-making processes for new and beginning producers interested in direct sales. The purpose of this series of publications is to inform Virginia producers about marketing and legal risk management tools, techniques, and resources available to help them prepare to sell food and food products directly to restaurant clientele.

Topics covered in this paper are expected to improve producer decision-making by providing a better understanding of product invoicing considerations to help them manage risks associated with the legal aspects specific to direct marketing relationships. The topics covered in this resource are not all-inclusive, but after reading this publication, producers should be better prepared to build relationships with restaurant clients.

This is one publication of a 7-part series, available on the Farm to Fork Direct Market portal. A resource list that include examples, resources, blog posts and case study YouTube video interviews of successful farm to restaurant business owners, and upcoming training dates is available at the end of this publication.

For questions about this or other farm startup topics, contact your local Virginia Cooperative Extension office.

People lose things, especially paperwork. When money is on the line, farmers are encouraged to develop and implement a process for tracking each individual sale and making sure that they follow up with buyers to collect timely payments. How do farmers make certain they get paid? By providing their clients with accurate and timely invoices of the sale with specifics of the deal and a transparent set of payment terms and due dates.

An invoice is simply a written document detailing the sale. An invoice can be simple or complex. Successful invoices should include the farm brand or logo, contact information for the farmer, including name, phone number, email, and address. This allows customers to get in touch with farmers if they have a question or there is a problem with payment timing, amount, or terms. The invoice must also describe the product (such as USDA organic tomatoes or natural beef) and list the quantity. The invoice should also list the product price and total end cost. Finally, the invoice should list the transaction date and an invoice number so that both parties can link the invoice to a specific sale.

Invoices allow farmers to track each sale and provide records that can be stored in a database or kept organized in a paper filing system. This document serves to itemize the sale agreement between both parties. They are particularly useful when selling to restaurants because very few restaurants pay cash upon delivery. Thus, restaurants need a document to refer to when processing payments so that they know who to pay and how much. Likewise, farmers need a document to refer to so that they can remember how much they must collect from each restaurant and when, and provide a quick way to look up this information upon request. Knowing when to expect payments is especially useful for other areas of the farm business, like structuring cash inflows and outflows.

As far as the physical form of an invoice, there are a few different ways to construct these important documents. Farmers can purchase generic paper invoice books from an office supply store, or use a template invoice provided by your computer software which may be altered with specific farm details. Some accounting software packages, in addition to allowing farmers to do their own bookkeeping, will also allow for electronic invoicing. Farmers may use laptops, tablets, or cell phones to fill out invoices on site if necessary. Restaurants may prefer one type of invoice over another, so farmers should be sure to ask.

Finally, since invoices are the recommended method to document a transaction, farmers should have a way to safely store invoices. Keep duplicates of all paper invoices, and both hard copies and backup versions of online invoices. File hard copies and electronic backups in a physical filing cabinet in chronological order. Farmers should consider organizing them by year or by customer so that they are easy to find later. Farmers should also give serious thought to keeping digital copies of paper invoices (via a scanner or photograph) and backing them up, either with external digital storage (such as thumb drives or external hard drives) or cloud storage. Keeping several backups in several places helps protect the farm’s records in case one set of invoices gets damaged, lost, stolen, or destroyed.

Invoices are a simple, effective way to improve farmer-restaurant communication with every sale. Once set up, these documents take little time to maintain, and streamline farm financial planning, accounting, and sales. Every farmer engaged in selling to restaurants will benefit from implementing an invoicing system that works well for them and their customers.

For more information about direct marketing of your farm products in Virginia, please contact Kim Morgan at klmorgan@vt.edu or 540-231-3132, or, visit the Farm to Fork Direct Marketing Resources portal at ext.vt.edu/agriculture/market-ready.html. For more information and resources directly aimed at beginning farmers, visit the Virginia Beginning Farmer and Rancher Coalition Program at www.vabeginningfarmer.org.

Acknowledgments

The Virginia Beginning Farmer and Rancher Coalition Program is a statewide, coalition-based extension program. The program is housed in Virginia Tech’s Department of Agricultural, Leadership, and Community Education and is a program of Virginia Cooperative Extension. The Virginia Market Ready Farm to Restaurant Program is sponsored by the Southern Extension Risk Management Education Center of the USDA Subaward #21667-14.

References

Nartea, T., and K.L. Morgan. 2015. "Selling Directly to Buyers: How to Price Your Products," Virginia Cooperative Extension Service Publication, AAEC-97P. Link: https://pubs.ext.vt.edu/AAEC/AAEC-97/AAEC-97-PDF.pdf

Resources

Vallotton, A., A. Battah, R. Knox, A. Vargo, T. Archibald, R. Boyer, N. Cook, and T. Drape. 2017. “Accessing Virginia’s Market Sectors: Fresh Produce Purchasing Considerations.” Virginia Cooperative Extension Service Publication, HORT272-NP. Link: https://www.pubs.ext.vt.edu/content/dam/pubs_ext_vt_edu/HORT/HORT-272NP/HORT-272NP.pdf

Virginia Cooperative Extension Market Ready Farm-to-Fork Direct Marketing Resources portal. 2019. Link: https://ext.vt.edu/agriculture/market-ready.html

Virginia Cooperative Extension Market Ready Farm-to-Fork Direct Marketing Resources YouTube Channel. 2019. Link: https://www.youtube.com/channel/UCnlhujb2Yq966WytPz4GuEw

Virginia Cooperative Extension, Virginia Beginning Farmer and Rancher Coalition Program. 2019. Link: www.vabeginningfarmer.org