What exactly is an invoice? What does it do and what are the core building blocks that make one? Don’t worry, this article will run through the crucial steps to be aware of when it comes to invoicing for your business so you don’t miss a trick!
It’s really important to make sure you get invoicing right. If there’s a mistake, it can cause some serious issues like delays or your customer paying you the wrong amount. An invoice should include a list of the goods or services you provided to your customer, along with what they owe you and when they need to pay you.
Keep in mind that in some places, invoices also double as tax documents and need to comply with HMRC requirements. Don’t forget to keep copies so you can show how much revenue you earned and any taxes you collected on the sale.
What is an invoice
An invoice is a document that asks for payment, and the whole process of invoicing starts before the document is sent and continues until payment is received. It can involve a lot of steps, but the important thing is that it makes everything clear between the customer and supplier. By having a good invoicing process, both parties can be sure of what the customer is getting, how much they’re paying, and when the payment is expected. This way, everyone is on the same page and there’s less chance of any confusion or misunderstandings.
Types of invoice
After learning about the basic components of an invoice, let’s explore some different types of invoices:
• Sales invoice: This is the type of invoice that you send to your customer. If you receive it, then it’s referred to as a purchase invoice.
• Tax invoice: When an invoice includes VAT, it may also be known as a tax invoice. These types of invoices are sent by VAT-registered businesses.
• Interim invoice: In the case of a large project that requires progress payments, you may choose to send one or more interim invoices.
• Final invoice: The last in a series of interim invoices, a final invoice indicates that the project is complete and that no further invoices will be sent.
• Recurring invoice: If you charge your customer the same amount on a regular basis, you can utilize a recurring invoice. These are particularly useful for subscriptions or leases.
• Pro forma invoice: This type of invoice is used to show the price of goods before a sale is finalized, allowing a buyer to arrange finance or customs clearance. It is not considered a record of sale.
• Commercial invoice: Importers and exporters use commercial invoices to clarify each party’s responsibilities when conducting business across borders. They may also include customs duties and fees or provide information to assist local customs officials in calculating those fees.
• Credit memo or credit note: These invoices reverse a charge from a previous invoice. They are.
Invoice Checklist
When creating an invoice, it’s important to include certain key information to ensure accurate payment processing.
Here’s a list of what to put on an invoice:
- A unique identification 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
- Explain if any late payment fees will apply. By including all of this information, you can help ensure smooth and timely payment processing while also maintaining good relationships with your customers.
The unbreakable rule of invoicing
When it comes to invoicing, the number one rule is to remember to do it! It might seem like a no-brainer, but business owners do tend to forget at times. So, it’s important to find a regular time that works for you to tackle your invoicing tasks. Maybe it’s at the end of the day, or at the end of the week – whatever works best for your schedule. Once you’ve set that time aside, just get it done!
To make things easier, consider using a mobile app for invoicing. This way, you can easily create and send invoices from your phone, which can save you time and hassle. And, if you keep things quick and simple, you’ll be less likely to put it off. So, don’t forget to invoice and make it as easy as possible for yourself!
Final Words
Invoicing can be done using accountancy software such as QuickBooks, Xero, and Sage which make it really easy to prepare, send, and track invoices. Kenwright Accountants provide experience in all these software solutions for Freelancers, Contractors, and small business owners. If you would like more information, just give us a call or drop us an email. We’re happy to help!
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