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Whether you own an online shop and make bespoke goods, or you offer services to other businesses, getting your first client or customer is an exciting feeling! Either way, to ensure you’re paid (correctly and on time) you might need to send out an invoice.

Sending invoices may seem scary at first, but it’s vital for both you and your clients to have a record of what’s what. It also means you can show these figures in your bookkeeping – which is vital for completing tax returns accurately, as well as claiming things like business expenses.

In some instances, sending an invoice is a legal requirement – for example, if you and your client are both VAT-registered. We’ll discuss what an invoice is, and how you can create one.

An invoice is essentially a document to request payment for work or goods sold. They normally include an itemised list of what was supplied, the cost of each unit, handling fees or shipping costs, any VAT that’s added, and the total amount to pay.

Accurate invoicing is an essential part of the record keeping process for your business. It also means you have more chance of being paid promptly and for the right amount – over or undercharging a customer or client can cause a lot of confusion, and even delay payment.

Top tip: Keep copies of your invoices to show how much you earned and any taxes you collected on the sale.
  • If you’re selling products or services to a customer who’s not VAT-registered then a receipt should suffice unless they ask you for an invoice.
  • If it’s a business-to-business transaction where you’re both VAT-registered, by law you must send them an invoice.

Is a receipt the same as an invoice?

It’s easy to get confused between a receipt and an invoice. A receipt is an acknowledgment that payment has been received, whereas an invoice shows what goods or services a payment is expected for (and when!).

It’s important you don’t miss anything out on your invoices. They must include:

  • An identification number that is unique
  • Your business name, address, and any contact information
  • Your customer or client’s name and address
  • A clear description of exactly what you’re charging for
  • The supply date (the date on which goods or services were provided)
  • The date of the invoice
  • The amounts charged
  • Your VAT number and the amount of VAT which was charged (if you’re VAT-registered)
  • The total amount
If you’re a sole trader, you also need to include your name and any business name being used, as well as an address where any legal documents can be delivered. Limited companies must include the full company name and registration number as shown on their certificate of incorporation.

 
Once you know exactly what needs to be on your invoices, it’s time to start thinking about how you want it to look. It doesn’t need to be black and white; you can personalise it to match your business. This includes adding your brand colours, logo and even a thank you message at the bottom.

Being VAT-registered comes with more requirements in general, so there are some differences in what you must show on your invoices. You’ll need to send ‘VAT invoices’, which include a breakdown of the of VAT charged, what items it was charged on, the VAT rate used, and whether there are any zero rate or exempt items (as well as the reason).

The good news is that you don’t need to create an invoice from scratch on a Word document each time you get a new client or customer.

You can use online templates (there are plenty on the likes of Canva) or even use bookkeeping software to create your invoices and automatically record them in your bookkeeping straight away (like our very own Pandle does!).

If you choose not to use software, it’s still important to ensure you keep a record of this information in your bookkeeping. This will make your life much easier when it comes to checking who has paid, and who still needs to (and it’ll allow you to give HMRC everything they need).
 

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You should always include the invoice date and its due date. The usual rule of thumb is 30 days from the invoice date – but every client is different, and some may have a shorter, or longer arrangement with you.

A lot of businesses and customers will pay the invoice within 24-48 hours, although some may take a little longer. If you use bookkeeping software, you can send automatic payment reminders, which should prompt the majority of your clients to pay if they’ve forgotten (which is the main reason many people don’t pay on time).

Late payments can really cause a strain in a business, and can be stressful to deal with. If you’ve sent email reminders, letters and tried to call the client you may consider the following:

  • Charge interest on any late payments
  • Cancel future work you have with the client, or pause anything you’re in the middle of
  • Take legal advice for late payments (you’ll likely be advised on what to do next based on how much is owed to you. For example, you may find it’s better to simply write it off if the amount is too small to be deemed worth the hassle, or you may be told to submit a Small Claims Court N1 form for larger debts).

 
Learn more about our online accounting services for businesses. Call 020 3355 4047 to chat to the team, and get an instant online quote.

About The Author

Rachael Anderson

A creative content writer specialising across business, finance and software topics. I have a love for all things writing, and creating engaging, easy to understand content that helps everyday people! Learn more about Rachael.

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