The key parts of any invoice
More money, more problems.
That’s what the old saying says.
But it isn’t one you should hold on to when it comes to your business.
It’s in your interest to get paid in a timely manner, and for that, you’ll need to create invoices.
An invoice is both a record of services or products provided and a prompt for payment to be made for them.
Invoices are a legal requirement when both your business and your customer are registered for VAT. As such, most transactions between two businesses require an invoice.
What does an invoice need to include?
There are 9 fields that any invoice needs to include, which we’ll cover below before talking about payment terms and sending your invoice.
Unique identification number
Each invoice you generate must have its own reference so that it can be uniquely identified. This can be a mix of characters. Using a sequential system where invoice numbers increase in numerical order can help to make your record keeping easier.
Your company name, address and contact information
While the specifics can vary a little here, the gist is that your customers need to know who you are and how to contact you. Limited companies must include their full company name, while sole traders should include their name and that of their business.
Your customer’s name and address
Ensuring that your customer’s details also appear on the invoice is important, since many customers need this to claim back VAT.
A clear description of the products or services
This field details what you provided in the first place and what the invoice is charging for. Your customer should be able to understand exactly what they are paying for. Including each item as a separate entry will ensure clarity here.
The date they were supplied
This is the date that the product or service was delivered to the customer, which may be different from both the date on which the invoice was created and when payment is due.
The invoice date
This is simply the date on which the invoice itself was generated.
The amount
Quite an important field! If you have listed out items or services separately in the description, then each entry will have its own amount.
VAT if applicable
If your business is VAT-registered, then you will likely need to add VAT to most of the products and services you sell. VAT registration also comes with several responsibilities.
Total
This is the full amount that takes into account all the items within the invoice and any VAT added.
What payment terms to include on your invoice
You are responsible for agreeing payment terms with your customers in advance, and your invoices should include these terms so that you are more likely to be paid on time.
While you can agree on any payment terms you like, it is often best to stick to the most common forms of agreement to avoid confusion.
Payment in full or in stages
Most often, you’ll want full payment in one go for the services you’ve provided. But for larger payments or to maintain more consistent cash flow, you may use a payment plan.
This may require your customer to make regular payments over a period of time until the total amount is paid.
Payment due date
When you expect the customer to make the payment will depend on the terms you agreed with them. It is common for invoices to be due ‘on receipt’ or ‘within 30 days’, but many other options are also available.
Payment may be due at the end of the month in which the invoice is received or at a specified date in the following month.
While there are various acronyms and codes, from 13 MFI (due on the 13th of the following month) to 2% 7 Net 30 (2% discount on payments made within 7 days, otherwise full payment is due within 30 days), being clear with your customers is the key.
Payment options and details
Whenever you want your payment due, you also need to tell your customers how to do so. Larger companies and clients may have payment portals in place, but for smaller businesses, providing bank details, taking card payments, or even using PayPal could be an option.
Whatever decisions you make on the terms of your invoice, ensure it has all the essential information so that you’re ready to get paid and keep making profit!