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24th October, 2024
Head of Digital Transformation
As a business charging customers for goods or services, it’s essential to know how to write an invoice. A well-designed invoice will leave a positive impression on your customers and strengthen your reputation in your industry. Creating an invoice doesn’t have to be a complicated process, but there are some key elements every invoice should have. In this guide, we’ll be covering everything you need to know about invoices including how to write an invoice, what to include and more.
An invoice is an official business document that requests payment from your customers for products or services they have purchased from you. It should provide all the relevant details the recipient needs to know regarding the payment including a due date for the amount to be paid by.
Even though an invoice is only legally required if both you and your customer are VAT (Value Added Tax) registered, it is still best practice to send, store, and track invoices regardless. Especially if you’re selling high-value products or services as it will benefit your own accounting and tax as well as reduce the risk of costly errors and improve operational efficiency.
Your invoice should include the following information:
Every invoice your business issues should have a unique number, often increasing incrementally on each document. You must keep an accurate record of the numbers and references used in order to clearly identify the invoice and customer it has been sent to, should you need to refer back to it. The invoice number can contain letters in addition to numbers.
It’s important to include a clear breakdown of the products or services you are charging the customer for in your invoice including the costs of each item. For products, this will be quantities supplied and for services, it could be the hourly rate and hours worked to carry out the service. Each service or item should be written on a separate line to make it easily identifiable for the recipient.
This can vary if you’re a sole trader or a limited company, but generally, the details included should be your trading name, business address, and email address for the customer to contact you should they have any queries.
It’s standard process to include the customer’s name and contact details on an invoice, you may want to add the name of a main contact you communicated with when carrying out the work or selling the products. On a B2B invoice, you should include the company name and address to enable the customer to claim back any VAT.
This is the date when the invoice was generated which can be different to the date the goods or services were provided to the customer.
Often referred to as the ‘supply date’, this is when the goods or services were provided to the customer, showing the time between supply and the invoice date, which is typically within 30 days. It’s important to differentiate the two dates on your invoice document.
This is not applicable on all invoices but it is a beneficial reference code that helps with tracking some customers require for payment authorisation.
This is the total of all items listed on the invoice and the exact amount you are billing the customer for. It should also state whether the amount includes or excludes VAT and if VAT is chargeable, the rate and amount.
Your payment terms will typically be outlined in your terms and conditions and agreed upon by the customer. This includes the length of time they have to pay (e.g., within 30 days), the exact due date for the payment, any late payment fees that may apply, and details for how to pay such as a bank sort code and account number.
There can be different types of invoices depending on the type of company you operate e.g., a sole trader, VAT-registered business, or limited company. The examples below detail each invoice type and the core features to include.
If sending a sole trader invoice, you must include your name, the business trading name, and your address or address of the business premises if using a trading name.
VAT-registered businesses are legally required to keep all copies of issued VAT invoices, including those that have been cancelled or created by mistake. These invoices should typically contain more details than a standard (non-VAT) invoice. There are three types of VAT invoices:
If sending a limited company invoice you must include the full company name, the registered office address (or correspondence address), and the registered company number on your certificate of incorporation. It is not a requirement to include the names of the company directors, but if you choose to do so all the names should be listed.
Sending your invoice at the right time and in the right way can make a significant difference in ensuring you get paid on time. There are different approaches you can take with sending an invoice such as by email or through invoicing software.
If you choose to email the invoice it is good practice to ask your customer for the details of the person in accounts who will be making the payment. By doing so you can address the email to them directly and chase up late payments with them as they are the one with the ability to push it through. Also, it is best to use a document type that can be universally opened and is editable such as PDFs, to avoid reformatting on the recipient’s device.
Even though email is a common way to send invoices, many companies often choose to use a digital document platform for the additional benefits it can provide. For example, using invoicing software can help to automate the process, making it more streamlined and efficient. Additionally, it can incorporate built-in payment options that are highly secure, offering customers a quick and seamless way to pay their invoices. Some invoicing softwares can also be integrated with other applications like contract management software (CMS) to optimise transactions even further.
As a leading provider of secure electronic signatures and digital document solutions, E-Sign can be integrated with a wide range of systems, so be sure to speak to our digital transformation team if you’d like to increase the efficiency of your invoicing with our e-signature platform. Some examples of invoicing software we can integrate with are Square and QuickBooks.
Also, we have various pre-built templates that can support your business with its transactions, allowing you to create and send relevant documents in just a few clicks.
You can decide when the best time is to send out invoices depending on the type of product or service you are providing, but generally, it is common to issue them as soon as work is completed or the goods are supplied. By being proactive, you will inform your customer that payment is due and keep your business on track to getting paid on time and maintaining a healthy cash flow.
An example of when you might have different times for invoicing is if your business does retainer work for a client. In this case, you might prefer to send out invoices on a more regular basis such as monthly, rather than directly after the work has been completed. Alternatively, if the customer is making an upfront payment, you would typically invoice them earlier on in the process.
A frustrating part of running a business is chasing late payments from customers, it can cause a lot of stress and take your valuable time and energy away from other important parts of your business operations. Whilst there are no guarantees that every invoice will be paid on time, there are things you can do to minimise the risk of late payments as much as possible. These include:
Knowing how to write, format, and send an invoice is a fundamental part of business processes and by making it seamless you can provide customers with a positive experience. E-Sign understands the importance of creating and sending high-quality documents like invoices for signature, ensuring businesses can collect payments as efficiently as possible without delays or having to chase late payments.
Contact us today to discuss your digital document requirements and we will be able to provide you with a tailored solution that perfectly suits your business needs. You can also get started with E-Sign by registering for our 14-day free trial. This will allow you to try the features and functionality of the platform yourself and see how it can benefit your document workflows.