In order to get paid most businesses need to produce an invoice of some sort although it’s not compulsory to do this. You could just ask your customers and clients to pay you. However it looks much more professional to produce one and at least make it obvious that it’s an invoice by putting that word in big letters at the top. The best advice is to keep the invoice format simple. You could spend hours designing a lovely looking document but by far the simplest way is to use the templates available for a standard invoice format that you can find in any good accounting software or a free design from the internet. Your invoice won’t get paid any quicker just because it’s a nice design.
Invoice Templates
If you are uncertain about your invoice format then have a look at some templates online. Useful links to explore are:
FreeAgent
How to choose a default theme for your invoices found at https://support.freeagent.com/hc/en-gb/articles/115001219270-How-to-choose-a-default-theme-for-your-invoices
QuickBooks
How to customise an invoice found at https://quickbooks.intuit.com/uk/get-started-tutorials/how-to-customise-an-invoice/
Xero
Free invoice template found at https://www.xero.com/uk/templates/invoice-template/
Rocket Lawyer
How to make an invoice template found at https://www.rocketlawyer.com/gb/en/sem/invoice-template
Go Cardless
Free invoice template found at https://gocardless.com/guides/invoicing/templates/
What information to put on your invoice
There’s quite a lot of information that you will need to put on your invoice including the name of your business, address, phone number, e-mail address, your customer’s name and address, date of the invoice, what goods or services have been supplied and of course the price highlighting the total amount due.
You should also give your invoice a unique number. Using a simple sequential numbering system works best for this. This is especially important if you have many invoices with one customer so that you can uniquely identify a particular transaction.
If you operate via a limited company by law you must include the full company name, the company registration number, the registered office address and which part of the United Kingdom the company is registered in (England or Wales, or Scotland or Northern Ireland). If you are using a trading name this must also be shown on the invoice.
If you are VAT registered you must include the VAT registration number on your invoice. In addition you must also detail the amount of VAT on each item and the VAT rate charged, unless the same amount of VAT has been applied to each item, in which case an overall amount and rate is sufficient. You must include a net unit price or rate, quantity, rate of VAT applicable, total net amount payable and the total amount of VAT charged.
Getting paid
Having prepared your invoice you need to get it sent to your client or customer as soon as possible. If you have produced your invoice via an accounting system this will often allow you to e-mail the invoice directly to your customer (assuming you have their e-mail address of course) and sometimes the system will allow you to include a link which enables the customer to pay the invoice directly by credit card.
If you haven’t set up this type of functionality then it’s paramount to include your bank account details on your invoice. Generally the recommendation would be to include this at the top and also, for a belt and braces approach, at the bottom too. In fact putting your bank account details in bold or even in a different colour will help the process of getting your invoices paid. You want to do everything that you can to make it as easy as possible for your customers to pay your invoices quickly.
A further option is to use a facility like PayMe offered by NatWest and others. This is a feature available for those on Mobile Banking. It allows users to request a payment from anyone who also uses mobile or online banking with a UK bank account. A link can be sent or, even simpler, a QR code (quick response code) can be sent to your customers which they scan for easier settlement of invoices.
Terms and Conditions
Again whilst it’s not a legal requirement it’s recommended that you should always have terms and conditions in place with your customers and clients. Your terms and conditions will make your customers aware of the key conditions when conducting business with your organisation. Documenting these will leave your customers in no doubt as to what your terms are and can be useful to have to refer to should an issue arise in the future.
The terms and conditions should at least address your payment terms and what would happen in the case of late payment or late delivery etc. These do not need to be too onerous to produce. Free sample terms and conditions are widely available online although it is wise to tailor these to your specific needs. In line with your terms and conditions it’s worthwhile including your standard payment terms on your invoice. Further, in any commercial conversations that you may have with customers upfront before you agree a sale, it’s advisable to make them aware of what your standard terms and conditions are and to ask them what the process is for getting your invoices paid. In larger organisations the payment process can sometimes be convoluted and take an enormous amount of time. Therefore it’s worth knowing what this is before you start work so that you can at least address any set up that may need to be done in advance of you sending out an invoice.
Managing cashflow
Managing your cash flow doesn’t stop once you’ve sent the invoice out. You need to make sure that your invoices get paid on time and within your payment terms. This is known as credit control which is the accounting term given to managing the payment of your invoices. Don’t be afraid of chasing up your customers where payment hasn’t been made. A friendly phone call or e-mail in the first instance is a good prompter that there are amounts outstanding. If that doesn’t work then you may need to take a more robust approach to chasing up unpaid invoices such as sending a letter or a stronger worded email. It’s worth bearing in mind that further work to customers should be carefully considered where there are debts outstanding. A customer is only a customer if they actually pay your invoices. There is no point in doing more work and adding to an already overdue balance of unpaid invoices.
Don’t be afraid to ask for a deposit or payments on account from a customer before you do any work or as you progress through the schedule of works. Once you’ve started the work invoice often and follow these up with a friendly e-mail to highlight that these have been sent. A good tip is to try and link your payments to a deliverable, for example a phase of work, only releasing this once your invoices have been settled. Of course sometimes this can be hard to do but it is worthwhile thinking through your invoice points before you start any work with a customer. Setting these out in your terms of work is a good way of making sure that customers appreciate your payment schedules. Many businesses fail because they make sales without receiving payment. Make sure that your business isn’t one of these failures.
Turnover is vanity, profit is sanity and cash is reality is a well coined phrase in the world of accounting. It’s pretty easy to sell stuff (turnover) but only worthwhile if each sale generates profit and moreover the cash needs to be collected for the sales so that there’s money to pay the bills and take out of the business to live on. Anything less than making a profit and collecting the cash simply is not a business.