Everything you need to know about invoices

You might think producing an invoice is straight-forward, and it should be if you’re doing it right!

The basic invoice

An invoice is a request for payment – setting out how much needs to be paid and what has been provided in return.

Invoices are often referred to as ‘bills’ – although often a ‘bill’ can refer to a series of invoices with a total amount to be paid.

In its most basic form, an invoice should be dated and have a unique reference number, accompanied by:

– the name, address and contact details of the business;

– the name and invoice address of the customer;

– a description of what has been provided and when;

– how much needs to be paid (including VAT if applicable) and by when.

The details

Always check and use the ‘invoice address’ for your customer to ensure that correspondence goes to the correct place. It may be different to where goods were shipped or a company headquarters for example.

Similarly, make sure the payment terms are clear on the invoice as to when you expect to be paid. Usually, this is within 30 days of the invoice date, though some businesses offer more generous terms by arrangement.

VAT invoices should set out more detail, such as itemised costs, quantities and the rates and total amount of VAT payable, as well as your VAT number.

Getting paid

Overdue invoices can be a headache for your business, taking time and effort to chase up.

Make sure you issue invoices promptly and you could consider offering a small discount for early or advance payment.

Although many businesses still send out individual invoices, there is a range of software available now that will manage the whole process for you – automatically generating invoices, reducing your admin and integrating with other financial systems.

What an invoice is not

An invoice should always be labelled clearly as such. It should not be confused with a quote or a purchase order.

If a customer requests a price, a quote should be given before a product or service is provided.

A purchase order (PO) is often issued from your customer as a confirmation they want to place an order. The type of information on a PO will often be very similar to that required on an invoice. Make sure you agree to any terms and requirements as detailed on the PO from the customer before you go ahead with any work. It’s also usually a good idea to include the original purchase order number if one is provided, on your final invoice, for ease of reference, tracking and processing.

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