You've just secured a contract to provide services to your dream client. You have agreed on a fee of £1,000,000,000. Your client is extremely happy with your services and can't stop thanking you. Now its time to put your feet up and watch the money fly into your business bank account. 4 weeks go by and you have not received a penny. You send your client an email saying "SHOW ME THE MONEY". They reply "SEND ME AN INVOICE". Then it dawns on you. You've never sent an invoice and don't know how to make one. Don't worry, we've got you.
So what is an invoice?
An invoice is a bill that is sent to a business or client to request payment for goods or services. An invoice will include a description of the items you are charging for, payment terms, and the total price of goods or services
1. Mark your invoice
How does your client know they're receiving an invoice? you must clearly write "invoice" on the document. It makes your chances of getting paid on time increase as it makes the document stand out from other documents your client may receive.
You will also need to number your invoice. Have an organised sequence of numbers or letters which can be used to reference your invoice. You can make your invoice as simple or as complicated as you wish however the simpler the better. Make sure you don't use the same numbers as a previous invoice you have sent!
1. Add Company names and details
Clearly state your company name, street address, postcode. This will allow whoever is receiving the invoice to know exactly who sent the invoice and who needs to be paid.
Also include the clients name who you provided goods/services for, company name, street address, postcode.
2. Write a clear description of the goods/service provided
Don't write a 10 page essay in the description. Keep it short but detailed enough so that the customer knows exactly what they are paying for.
Include the name of the service and any PO's (Purchase Orders) that relate to the work done.
3. Date your invoice
Include the date you created the invoice and the date(s) for which the products/services were delivered.
4. Total your invoice
You want to ensure you get paid exactly what you're owed. Sum the amounts on your invoice and clearly show the total of your work.
5. State your payment terms
Not everyone pays on time unfortunately. If you don't state your payment terms on your invoice, you may find yourself waiting months for you £1,000,000.00 invoice to be paid.
Payment terms can be however long you wish. The most common payment terms are On receipt, 7 days, 15 days and 30 days. You can extend your payment terms for longer even up to 60 days and provide incentives for fast payments such as 5% discount for invoices paid with 7 days.
State your preferred method to receive payment. If you would like to receive payment via bank transfer include your bank details.
You've just completed a job for £1,000,000,000 so you will need to register for VAT. In which case a VAT invoice must clearly show:
- the total amount excluding VAT and
- the total amount of VAT
- the price per item excluding VAT
- the rate of VAT charged per item
- the rate of any discount per item
You must also include your VAT number, to show you are VAT registered and your customers VAT number.
Only create a VAT invoice if you are VAT registered. Otherwise a simple invoice is fine.
How do I send an invoice ?
The quickest and simplest way to send an invoice is via email. Save your email as a PDF and attach the invoice in an email to your customer with a short description to let your customer know your invoice is included. Politely ask your customer to confirm they received the invoice. You never know, the invoice may end up in the wrong hands and not ever actually make it to your customer.
Accounting software like Xero allows you to create invoices and send it to your clients with ease. We recommend you automate your business and use accounting software if you aren't already. Read are blog on the two most popular software Xero and Quickbooks Online to find the best accounting software for your business.
Don't use accounting software?
We've created the simple to use invoice template below. Enjoy!
Want more bookkeeping tips? Click here for more.
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