This RJF Accounting guide will run you through everything you need to know about raising invoices and what to include on your invoices to ensure that they are dealt with promptly and you get paid on time!
WHAT IS AN INVOICE?
At their most basic level, invoices are a request for payment from one business to another. They usually include a description of the items you’re charging for and payment terms, amongst other information.
However, invoices are much more than just a request to pay. They are required for bookkeeping and accounting purposes as a record of payment requests and differ from receipts that acknowledge that you have received a payment.
WHAT SHOULD BE INCLUDED IN AN INVOICE?
One of the most common reasons for late invoice payment is missing information. This can be anything from a payment reference to missing payment details.
IDENTIFY THE DOCUMENT
Every invoice you send should be clear by adding the word “invoice” at the top in big letters; this way, any recipient is not in doubt about what it is. Similarly, if you send a credit note or receipt, the wording should be precise at the top of the document.
ADD A UNIQUE INVOICE NUMBER
A unique reference number should be added to all invoices sent. You must not use the same reference number twice if they are cancelled. Using a sequential numbering system is the easiest way to manage this. For instance, you could use RJF/001 and so forth.
YOUR COMPANY NAME AND CONTACT DETAILS
Every invoice should include where you can be contacted, be your trading address or registered company address, depending on which you use for correspondence etc. You should also include email addresses and telephone numbers if an accounting department or client has queries regarding the invoice being sent.
THE CLIENTS COMPANY NAME & ADDRESS
Including the client’s details on the invoice is essential to clarify whom it is intended for. This also becomes vital when VAT is included on invoices. If requested, it is also advisable to make it for the attention of a particular person to prevent any delays in processing it.
DESCRIPTION OF THE GOODS/SERVICES
You should always add to the invoice what is being charged for and a breakdown of the prices. Then both parties are aware of what is being billed for. It is also a good habit to include when the services or goods were supplied if this is different from the invoice date.
Simply the date the invoice is being sent.
THE TOTAL AMOUNT PAYABLE
The total of the goods and services provided is a lump sum figure.
A critical factor that is often overlooked is payment terms. They are usually agreed upon in advance with a client and listed in your terms and conditions, but if you do not include them on the invoice, this could cause issues.
These are the terms you agree the client has in time to pay and should be marked at the bottom of the invoice, for example, payment within 30 days.
HOW TO PAY THE INVOICE
Inform all clients on invoices how to pay the invoice via card processing services like Stripe or PayPal or via bank transfer and include your bank details.
The list above is for a basic invoice. Other factors that need to be added to a client’s invoice include PO numbers or VAT would come down to the invoicing process of your business or the client.
HOW TO SEND AN INVOICE
All invoices should be sent in an uneditable format, such as PDFs. This helps prevent fraud. Email is usually the quickest way to send them to a client, but some may require paper copies also (rare nowadays!). It is best practice to check with your client how they like to receive them before sending one, as some may have different processing methods in place, or it might need sending to an accounts payable department.
WHAT ABOUT VAT?
You should never add or even mention VAT on an invoice if you are not VAT registered. If you are raising VAT invoices, you must ensure that VAT is only applied to applicable goods and services and broken down correctly on the invoice itself.
If you have doubts about VAT on invoices, speak to a qualified accountant so that you know that you are fully complying with regulations and accounting practices.