Invoicing basics - what is a sales invoice?

A sales invoice is an accounting document that records a business transaction. Sales invoices provide the business with a record of the services they’ve provided to a client, when the services were supplied and how much money the client owes the business.

What do I put on my invoice?

There are certain elements that all sales invoices must include, others that are more specific to the type of business you are and further items that you don’t have to include but you really should;

All invoices must include:

• the word ‘invoice’ on the document

• a unique identification number (sales invoice number)

• your business name, address and contact information

• the business name and address of the customer you are invoicing

• a clear description of what you are charging for

• the date the goods or service were provided (supply date)

• the date of the invoice

• the amount(s) being charged

• the total amount owed

If you’re a sole trader the invoice must also include:

• your name and any business name being used

• an address where any legal documents can be delivered to you if you are using a business name

Limited company invoices

If your company is a limited company you must also include the full company name as it appears on the certificate of incorporation.

VAT invoices

Only VAT-registered businesses can issue VAT invoices and these must include more information than a non-VAT invoice.

• include the word ‘invoice’ on the document

• a unique invoice number that follows on from the last invoice

• your business name, address and contact information

• your VAT number

• the business name and address of the customer you are invoicing

• a clear description of what you are charging for

• the date the goods or service were provided (supply date)

• the date of the invoice

• the total amount excluding VAT

• the total amount of VAT and the rate charged e.g. 20%

• the total amount owed

What else?

One very important element that is often missed from an invoice are the payment terms. Unless you agree a payment date, a customer must pay you within 30 days of getting your invoice for the goods or service but it is always a good idea to add payment terms to your invoice. Having payment terms stated on your sales invoice makes it very clear to your customer how long they have to pay you. This will also help you to chase the invoice for payment if it is not paid on time. You can set your own payment terms, give discounts for early payment and request payment upfront.

Charging interest for late payment

You have the right to charge interest for late payment Once a very common element on invoices it is becoming less so now as the cost of chasing applied interest payments can be time consuming and costly. It is becoming more common now to request a payment up front, particularly for a new customer.

How often do I invoice?

How and when you invoice very much depends on the type of business you run and what you agree with your customer. If you are providing a service for your time, such as a carer or a cleaner you may invoice the customer at regular intervals; say every week or every month. If you sell goods you will raise an invoice each time you make a sale of an item. If you are a handyman doing a one off job you will probably invoice the customer at the end of the job.

How do I keep track of what invoices I have issued and when they are paid?

It is always a good idea to make sure you invoice your customer promptly as this helps you get paid quicker. One of the best ways to do this is to use a piece of online software; from a basic invoice only template system through to an online accounts package such as FreeAgent or Xero.

Advantages of online software for invoicing

Using online software to send invoices to your customers has many advantages; it is much quicker for you, no more remembering to change the date and the invoice number if you are using a made up template on your computer. You can send the invoice as soon as you have finished the work while you are still fresh in the customers mind and they may pay you more quickly as a result. You can set up automatic chasing emails to remind customers about their unpaid invoice taking care of another admin task for you.

Final tip

Make sure that your invoices are clearly laid out, easy to read and with all the essential information a customer needs. Your aim is to make your customers' lives as easy as possible, because that way they will come back to you again. Remember, happy customers are more likely refer more people to you!