Invoicing can be a tricky and time-consuming process, especially if you’re new to the game or haven’t started using accounting software yet.
To help you out, we’ve put together a list of invoicing basics you should know that you may have been too embarrassed to ask.
What is an invoice?
An invoice is possibly the most important document in your business. It contains the details of a sale, including what was sold, how much it cost, and when payment is due. An invoice is typically generated by the seller (i.e., the business) and sent to the buyer (i.e., the customer).
An invoice is not the same as a receipt. You are asking your customer to pay you by sending them an invoice, telling them what and when they need to pay, whereabouts receipt is an acknowledgement of payment.
What information should be included on an invoice?
If you want to make sure, you get paid on time, include all of the following:
- 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
You can find out more information about what your invoice must include on the Government website.
What kinds of invoices are there?
Yes, there are different types of invoices depending on the type of sale. For example, a sales invoice is used for goods that are sold on credit, while a service invoice is used for services that are rendered.
You may have heard about Proforma invoices. A Proforma invoice is an invoice to confirm an order and to request payment before the goods or service is delivered and is replaced by an invoice when the payment is sent. This is especially important to know because you can’t use the Proforma invoice to reclaim your VAT. You need a “proper” invoice to do so.
Do I need to use a specific format or template for my invoices?
While there’s no hard and fast rule, it’s generally a good idea to use a standard invoice template so that your invoices are easy to read and understand. This will also help you to avoid any potential mistakes that could delay payment.
Your invoicing template is also an opportunity to display your logo and branding. Remember, your invoices form part of your overall customer experience, so make sure that they look attractive and professional.
Using accounting software will make invoicing a breeze. You won’t have to worry about including all the required information because you can set it all upfront and keep it uniformed.
Sending your invoice
These days, you can send invoices electronically via email or an online invoicing system. This is often the quickest and most efficient way to get paid, as your invoices can be sent directly to your customers’ inboxes.
If you’re sending invoices via email, be sure to use a PDF format so that your invoice looks exactly as you intended. You don’t want customers amending your invoices. You can also include a payment link to make it even easier for your customers to pay. The easier it is, the faster they are likely to pay you!
Again, sending invoices and making it easy for customers to pay couldn’t be easier with accounting software. Research shows customers are three times as likely to pay your invoice right away if there is a simple option to do it, and nobody likes to chase unpaid invoices.
What is invoice reconciliation?
Invoice reconciliation is the process of matching the invoices you’ve sent to your customers with the payments that you’ve received. This is important to ensure that you’ve been paid in full and on time for the work that you’ve done.
Reconciling your invoices also allows you to identify any discrepancies, such as late payments or incorrect amounts. Seeing unpaid invoices is simple when you use accounting software. You can even set up the software to send a reminder to pay because life is busy, and automation is key to a successful business.
Final thoughts
Invoicing and keeping records of your sales can be a tricky process, but it’s not actually that difficult to get it right with the right support. My advice would be, as always, to work smarter, not harder and use the accounting software to save time. If you have any other questions, be sure to message us.
