Invoicing is one of the most important aspects of running a successful business, yet it’s often the most overlooked. If you’re a sole trader who has recently opened a business or you plan on opening one in the near future, you may be wondering how to create an invoice.
This is a question that every business owner should ask themselves before providing goods and services. To help, we’ve put together this comprehensive beginner’s guide. It covers everything you need to include in a basic invoice, such as:
- An invoice number
- Payment terms
- Your contact information
- A description of the goods/services provided
- A cost breakdown and total cost
Why your business should be using invoices
As you’re probably aware, an invoice is a legal document that’s used to record transactions between you (the seller) and your client (the buyer). While you’re not legally obliged to create an invoice unless you are VAT registered (we are dealing with non-vat registered business in this blog), it could help you out in difficult situations, such as when a client refuses to make a payment.
Touch wood this never happens, but if it does, certain invoices can be used as legal proof that the agreement was broken. Nowadays, there are thousands of free invoice templates for small businesses, so there’s really no reason not to start using invoices today.
What type of invoices your business should be using
There are several different types of invoices layouts that small businesses can send to their clients, though the type and style of invoice you should use will ultimately depend on your industry.
The most common type of invoice used by small businesses is widely known as a basic invoice. This type of invoice is suitable for almost every industry and includes the total price to be paid for goods or services supplied. It also typically contains details such as an invoice number and the contact information of both you and the client.
What you should include in a basic invoice
When designing an invoice for your small self-employed business, you can choose to make it as plain or as quirky as you would like. Having said that, there are specific ‘must-have’ details that you should include in every single invoice you create:
A unique invoice number
One of the most important pieces of information that you must include in every invoice you create is a unique invoice number. This number is used to easily track and file invoices, which is especially important if you ever need to send them to HMRC.
How you decide to number your invoice is ultimately up to you. While some sole traders choose to include specific reference numbers for each individual client, others simplify matters by numbering them in chronological order. However you decide to number your invoices, make sure that the unique invoice number is clear.
Another important piece of information that should not be left off your invoice is the date you created it.
You may also want to include the supply date, which is essentially the date that you provided the goods or services. This is useful for both collections and your own personal accounts, as it’ll allow you to quickly refer back to previous invoices when necessary.
Before sending an invoice, you should have already agreed on payment terms with your client, but it’s always a good idea to note the terms on the invoice again. This will allow you to know exactly when you should be getting paid and to let your client know when they must pay you.
While ‘net 30’ is often included in the payment terms on an invoice (that is, you want to be paid within 30 days of the invoice date), your specific payment terms will differ depending on your industry and client relationship.
Your company’s name and contact information
Even if your client knows exactly who you are, there’s a strong chance that their accountant doesn’t. It’s therefore important to include your company name, address and contact information (such as an email address or phone number) on all of your invoices.
It’s recommended that you make your company name either large or bold so that it stands out at the top of your invoice, alternatively add your business logo. This will make it easier for both your client and their accountant (if applicable) to understand exactly who they need to pay.
Of course, you’ll also need to include the name of either the individual or company you’re billing, as well as their address and contact information.
A description of the goods or services
Every invoice you create should include a clear breakdown of the goods or services you intend to sell. This doesn’t need to be unnecessarily long – it simply needs to detail exactly what your customer needs to pay for. After all, if your client doesn’t know what they’re specifically being charged for, how do you expect them to pay for it?
Once you’ve included a short yet detailed description, you may choose to add the quantity of the products or the hours for the services provided.
The price of the goods or services
In addition to the quantity of each product or the service hours, you must include the cost per unit or your hourly rate for individual goods and services. If you don’t, you won’t be able to work out exactly how much you’re making and your client won’t know how much they owe.
Include the price of goods and services next to the quantity/hours. Then, work out the total amount owed. Put this total amount next to the unit price or hourly rate, and then tot up all the total amounts together for the full amount due.
The benefits of invoicing for small businesses
Time is an important asset to us all. But for small self-employed businesses, time is money.
You see, invoices are a great way to increase productivity and effectively manage your time by monitoring all of your payments. By adopting efficient online invoicing software, you’ll be able to free up time by creating and sending invoices in a matter of minutes.
GoSimpleTax provides the perfect invoice management software for small businesses: GoSimpleTax Invoicing.
Our billing solution is an easier way to record income and expenses. It can send a populated invoice to your clients if needed, and it then links seamlessly with our tax return tool. This way, you spend less time manually inputting your figures, and more time focusing on running your business.
Ready to get started? Sign up and discover the benefits! GoSimpleTax Invoicing is free to use until April 2021.