You’ve set up a small business and sold your first batch of goods to a customer. What next? You send them an invoice.
Writing an invoice is as dull as watching paint dry. However, invoices form an essential part of the global supply chain.
The good news is that creating an invoice is simple and after completing your first invoice, you can use a basic template to streamline your invoicing process.
If you want to be paid on time, you send an invoice. Necessary details include invoice number, company name, contact details, invoice date and the due date for payment.
An invoice is a document issued by a business to a customer, requesting payment for a service or product. It’s sent to the customer before or after a transaction, establishing the customer’s obligation to pay. It’s also known as a sales invoice or a bill.
Additionally, if your business is registered for Value-Added Tax (VAT), you’re required to send out invoices in line with HM Revenue & Customs (HMRC) requirements. But more on that later.
Invoicing is crucial to a business. It ensures that you:
There are nifty online tools that provide pre-made templates for invoices. Check out this one for more information.
Without further ado, let’s get started.
Every invoice should come with a unique identification number. This will allow you to easily discuss sales invoices and payments with your accounts payable teams.
Establish a systematic order in which you create your invoice numbering system. For instance, your invoices can be sequential with numbers or letters.
Name each invoice in a way that works for you, such as the following:
Including your company name is obviously important. Moreover, it validates your business and reflects your brand as a whole. Go the extra mile by creating a simple company logo with design tools such as Canva.
As a business, you should remain readily available to your customers. Be sure to include your name, trading address, email address, and phone number for potential clarifications about the invoice.
For limited liability partnerships (LLPs) or limited companies, you will also have to put in your Companies House registered address and number.
Include your customer’s contact information under the ‘Bill to' section. This section should state your customer’s name, company name (if applicable), address, email address, and contact information, like a phone number.
Include the date of the invoice whenever you create one. This will be a huge time saver, especially when it comes to tax season. The invoice date will be the date you send out your invoice, so your customers are aware of the date the invoice was created and how long they have to fulfil the payment.
This is the important part — the description of goods sold. For clarity, neat line items are easy to read. Just make sure you include columns such as quantity, description, unit price, VAT sum (if applicable), and line total.
Quantity Description Unit Price VAT (%) Line Total 1 Customised Mask Chain £30 10% £33 7. Discounts
Depending on the relationship you have with your customer, you could also offer goodwill discounts. If you do, remember to include the discount in the invoice. This discount can be in the form of a percentage or an actual amount.
The payment terms are usually outlined in your terms and conditions, and accepted by your customer. Include the period to pay stated clearly at the bottom of the invoice. For instance, within 30 days. Some of the typical invoice payment terms include the following:
Remember to include the different payment modes that you accept, along with your bank details. International transfers require you to provide your BIC code.
If your business is registered for VAT, you are required to issue a VAT invoice. For each line description of goods, you will have to state:
Additionally, your VAT invoice should include your VAT registration number, a unique invoice identification number, date of goods supply, and more.
State the total payment required at the bottom of the invoice and highlight this with bold font. Avoid any confusion by clearly stating the payment deadline. For example, “Payment due June 15, 2022”.
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