What is an invoice and why is it used?
An invoice is a list of the sum of goods/services that you have provided. It serves to request money from clients and record the exchange. As such, it is an important document for keeping track of the sales transactions of your business.
How to make an invoice:
1. Invoice Requirements
According to HMRC, invoices must contain the following information:
- You and your client’s company name and address
- A unique ID number
- Your contact details
- The invoice and supply date
- The subtotal price of each item
- The subtotal price of tax
- The total amount owed
- A description of any additional charges
These requirements are covered in the rest of this article, however, it is important to recognise that they cannot be overlooked.
2. Invoice Header
In the header of your invoice, list your business information. Here you should have the name of your business, your business address, your email address and your phone number.
You should also include a unique invoice number. When you’re using an invoice numbering system, it becomes very easy to organise your invoices. This should also allow you to track down both paid and unpaid invoices.
If your business has a logo, include this in your header.m
If you’re a freelancer, you’d want to put your name as the business name.
3. Client’s Contact Details
Next list your clients’ contact details. This will include emails, phone numbers and addresses.
4. Service Provided
Next, list the services you provided for the invoiced period. These are usually set out in a table giving information such as:
Here you can often give more information on the calculation of your invoice, such as adding columns for “hours worked” and “rate” – this is not necessary, however.
At the bottom of your table make sure you clearly display the total cost for the services you provided.
Next, list how much tax you should charge your clients. These should similarly be presented in a table with the subtotals of the tax usually aligning with the subtotals of the services.
Including a total amount of tax underneath the subtotals is often helpful.
Research with your local tax bureau whether there is any tax on your services and what that looks like.
6. Grand Total
The total typically goes underneath the subtotals of the tax and services section. It is typically more legible than the other totals of the tax and services section as it is the sum of the whole invoice. Making it more legible may include putting the total in bold for example.
Similarly, many invoices put the total twice, once underneath the various subtotals of tax and services, then again in large writing nearer the top of the invoice.
7. Method of Payment
State the methods of payment you will accept in the invoice. For example, you may only accept debit or credit card payments while rejecting PayPal payments.
Similarly, you may offer discounts for invoices paid in cash, for example.
8. Terms of Payment
Here you specify when and how you want your invoice to be paid. Firstly, you set out which date you would like the buyer to pay you by. Secondly, you give information about items such as an early payment discount or a late payment fee.
Any other payment terms, outlined with your client, should be restated here.
9. Bank Details
At the bottom of the page, you should put your bank account details. You should look over your bank details twice, as you won’t receive any money from the invoice if you get these wrong. Similarly, make sure the details you provide are extensive enough to incorporate all the methods of payment you are accepting.
Although it is not necessary to have a short thank you message at the end of your invoice, they often go a long way. A good message can not only decrease the time it takes to get paid, but it is also good for your brand image. It is a simple sign of courtesy in an otherwise mundane document.
Did you find this helpful?
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If so, there is plenty of more business-oriented advice on our blogs.
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