A Guide to Creating an Invoice
13/01/2021
You will have worked hard to provide a great service or product for your customer, and you should expect to be paid on time. It is important therefore to send an accurate, professional invoice to the right person to ensure prompt payment.
What is an Invoice?
An invoice is a bill that a business will send a customer for the goods or services that they have provided. The invoice will include your business’s details, information about the product or service that you have provided, and what payment terms are to be adhered to.
Invoices are not only a means to ensure that you get paid, they also form an important record for both your accounts and those of your customers. They will be required by your accountant and possibly HMRC.
Don’t get confused between an invoice and a receipt... an invoice is a request for payment, whereas a receipt is sent to acknowledge or prove that payment has been received.
What is Included in an Invoice?
All invoices must include the following:
- the word INVOICE must be clearly displayed
- a unique identification number (sometimes called the Invoice Number)
- your company name, address, and contact information
- the company name and address of the customer you’re invoicing
- a clear description of what you’re charging for
- the date the goods or service were provided (supply date)
- the date of the invoice
- the amount(s) being charged
- VAT amount if applicable
- the total amount owed
Sole trader invoices - if you are a sole trader, the invoice must also include:
- your name and any business name being used
- an address where any legal documents can be delivered to you if you are using a business name
Limited company invoices – these must include the full company name as it appears on the certificate of incorporation.
If you decide to put the names of your directors on your invoices, you must include the names of all directors.
What Else do I Need to Think About?
Invoices can be handwritten, or take the form of a word document or an excel spreadsheet. Increasingly, they are created using a piece of software which may be linked with your bank or can be accessed by your accountant.
However you create your invoice, make sure it looks professional and it is easy to read. If you have them, include your logo, correct colour scheme, and font. Remember that the word INVOICE must be clearly displayed.
Make it clear when you expect the invoice to be paid. You will usually have agreed ‘terms’ with your customer and these should be clearly stated. For example, include the date by which the invoice must be paid or state how long, from the date of issue your customer has to pay the invoice (e.g. 7 Days, 14 Days, 30 Days etc...).
Tell your customer how they can or should pay the invoice. In most cases you will ask for payment to be made into your company bank account, so make sure you include your Account Number and Sort Code.
Issuing VAT Invoices
If you’re VAT registered you need to send a VAT invoice; it will have more information on it than a standard invoice.
There are 3 different types of VAT invoices:
- a full invoice
- a modified invoice for retail supplies over £250
- a simplified invoice for supplies under £250
The information you need to include depends on the type of VAT invoice you’re issuing. However, in general, they need the same information as normal invoices, plus:
- your VAT registration number
- the tax point (time of supply) if it’s different than the invoice date
- the VAT rate and total VAT charged, if all the items are charged at the same rate
- if different items have different VAT rates, then show this for each one
How to Send an Invoice
Email is by far the fastest and easiest way to send your invoice and you can get proof of receipt. It’s important that you send your invoice as a PDF as it will prevent it being tampered with.
Use the subject line of your email to clearly state that it is an invoice and include your business name and the unique identification number.
Don’t be afraid to communicate with your customer, especially if payment is overdue. If you are using one of the many pieces of software to generate your invoices, it will probably send the customer a reminder if payment is overdue.
Software
There are plenty of choices when it comes to invoicing software. It will generally come as part of an accounting package, which you may have to purchase, but it’s worth checking with your bank as some now provide this free as part of your business banking.
There it is, your guide to creating an invoice. The most important things to remember are: to be clear and to include all relevant business details on your invoice.
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