How To Create an Invoice
It is indisputable fact that cash is the lifeblood of any business. No matter what you sell or offer. Money makes the business world go round.
It’s crucial that you get paid for what you do, but it’s even more important that you’re getting paid on time for what you do. By devising a clear, concise and effective invoice you can take strides toward ensuring that you are getting paid the right amount, always on time.
Invoice VS Receipt
Firstly, what’s an invoice? Well an invoice is a documentation issued to your customers and clients that states the products and services provided, and the final cost incurred to themselves.
However, that sounds incredibly similar to a receipt right?
The key distinction to make between a receipt and an invoice is the time when your customer receives them. An invoice is issued before your customer has paid, whereas a receipt is issued after your customer has paid.
The first step to getting paid more consistently and on time is to make sure that your customers are receiving their invoices as soon as possible, so they have little to no reason to pay late
What makes a good Invoice
As a business, it’s important that your invoices are designed well. Poorly designed invoices carry the potential of confusing your customers, leading them to be unsure surrounding what exactly they owe and why they owe it.
So what exactly stipulates a well designed invoice:
Heading - Your customers need to know exactly what they’re looking at. Clearly defining the document will allow your customers to do this.
Invoice Number - Each invoice you issue should have an entirely unique invoice number to make it easily identifiable by both yourself and your customers. It can also be used as a reference number.
Company Details and Contact - Your company address and contact details need to be on your invoice by law. This is so that your customers have a reference in case they wish to query or dispute.
Customer Contact Details - It’s standard practice to also put your customers company name & address on your invoices. This is so that they can claim back to VAT if they wish to do so.
Description of goods & service with their price & quantity - This is a crucial element of your invoice. Your invoice should contain a clearly formatted and spaced list of services and goods, with their quantity and unit price next to them. It’s imperative that this is as clear as possible so that your customers have as little as possible between them and paying.
Date of supply - Your date of supply refers to the date that you issued your customers with the goods or services.
Invoice Date - This is the date on which the invoice was issued
Total Amount - The total amount that is to be paid by your customer
Payment terms - How long your customer has to pay their invoice. This is typically 30 days.
Payment methods - Offering a variety of payment methods (Direct Debit, Credit & Debit Card, etc) can encourage your customers to pay quicker and on time, as it allows more flexibility for them to pay.
Where should I use an invoice?
There are a multitude of potential use cases for Invoices; however they aren’t appropriate for every type of transaction in every business.
For example, if you’re a restaurant business , you wouldn’t use an invoice in order to outline what your customers owe. That would be considered slightly over the top. That being said, if you were contracted to do a large scale catering event you would use an invoice in place of a bill.
Use due diligence and common sense to determine whether or not you should use an invoice for your customers. However, typically larger amounts and larger scale goods & services (often in business to business relationships) are appropriate for invoicing.
With the development of new payment technology, the humble invoice has been rocketed into the 21st century with the advent of e-invoicing. Attaching a “Pay Now” button to virtual invoices sent via your accounting software slickens and smooths the invoicing process as it allows virtually instant payment.
E-invoicing has become somewhat a staple now amongst modern businesses. As industries and verticals have changed, agility and efficacy is demanded of businesses by customers and suppliers like it never has been before. Suppliers want to be paid sooner, and customers want to be able to pay quickly, smoothly and on their terms.
By implementing e-invoicing into your business, you can cater to the growing needs and demands of both your customers and your suppliers. This will in turn ensure that your suppliers are getting paid when they want to be paid, and that your customers and clients are able to pay on their own terms.
Getting paid and on time is crucial to running a business, and it always has been. However, this rings more true now than ever before. In a consistently altering business climate, where businesses are unsure of their future in a Britain outside of the EU, making the way you do things clear and concise (starting with how you take payments) will be infinitely beneficial for your business.