How exciting, you have just completed the work and your customer is pleased. All you have to do now is produce your first invoice.
But what do you need to include in your invoice. It depends! Are you a limited company, a sole trader or vat registered? Let’s start at the minimum.
All invoices must have:
• a title that highlights it is an invoice (not a quote etc.)
• a unique number
• your business name (or your name and business name if different and a sole trader)
• your address and contact information (telephone and email)
• the business name and address of the customer
• a clear description of what was provided
• the date of the invoice
• your payment terms – when do you want to be paid by
• the total amount owed (you don’t have to specify the method of payment but always include your bank details)
For a Limited Company:
The full company name must be displayed as it appears on the certificate of incorporation and if you’re VAT registered you must include:
• vat registration number
• price per item, excluding VAT
• quantity of each type of item
• rate of any discount per item
• rate of VAT charged per item
• total amount excluding VAT
• total amount of VAT
• And don’t forget your terms and conditions
Also make sure you keep copies of all invoices issued even if you cancel them or produce one in error. Normally VAT information needs to be kept for 6 years (and don’t forget this includes the invoices from your suppliers). Even if you’re not VAT registered HMRC recommends 5 years. The good news is that invoices can be kept electronically.
Now to create that first Invoice
You can build your own invoices in Word but most accounting programs or apps make it much easier by having simple templates that cover all the legal requirements. And to make sure you are noticed you can personalise them by uploading your logo and any logos related to any industry qualifications. You can also add a personalised terms and conditions which clearly sets out when you expect to be paid.
Tip: If you are sending it by email make sure you create a personalised message to help your invoice stand out from the crowd so payment comes more quickly. If possible try to get known within that business because it will help with payments and also getting repeat business.
By using a professional template it ensures that all the details are set out in an easy to read format. It also shows your business in a good light as it covers all the information that your customer would expect. No searching around to see what was supplied or whether any discount has been applied. All of which help towards actually getting your invoice paid.
Tip: Check how they want your invoice – if they want it by snail mail and it means you will get paid quicker then be flexible.
Tip: If you are dealing with a larger business make sure you are sending your invoice to the best person for getting it paid – call them to check.
Tip: Always make sure the details are completely correct so your customer can’t use the excuse of inaccuracies to delay payment. To minimise any excuses make sure that you have an email and telephone numbers so it’s easy for them to query anything on the invoice.
Tip:Get your invoice to the customer as soon as possible as from their point of view the clock starts from the date of the invoice not when you did the job.
Hooray your invoice has been sent but what next?
Hopefully you have been busy and you have sent out lots of invoices so the challenge now is actually keeping an eye on who has not paid. If you have produced them in an accounting program the invoice details will automatically trigger a warning if a customer is taking too long to pay (or if you need to pay a critical supplier). By combining your accounts with your bank transactions you can see the up to date position so there are no embarrassing or wasted calls to people who have already paid.
If you are VAT registered your invoice information goes straight into your VAT report which can be checked and automatically sent to HMRC. Keeping you on the right side of the law.
Finally, it’s never one of the most fun jobs chasing invoice payments but…
• you have done the work
• your invoice is clearly set out
• it highlights when you expect payment and your bank details
• it complies with the legal guidelines
• And your contact information make it easy to query any details
… so it’s time you stopped giving them a free overdraft and time to get on the phone and get the money in. Your suppliers will be doing exactly the same to you!
To see how Sage One Accounting can help you, sign up for a free 30 day trial or skip the trial and ‘Buy Now’ to get 20% off for 12 months at http://uk.sageone.com/accounting/