Whether you are a first-timer creating invoices or not, it is important to understand how to write an invoice correctly. This guide will help you create an invoice that will be paid on time, in a straightforward way.
You have established a business and sold your first goods or services. It is time to send your first invoice! But how is it done?
In this guide, you’ll find all you need to know about invoicing and a step-by-step guide on how to write your first invoice.
We will also provide you with some free tools to ease the process, and tips on how to increase your chances of getting paid on time.Get started with free invoicing
Invoice meaning: What is an invoice?
An invoice (also referred to as a bill) is a document issued by a seller to request payment from a customer.
The document describes what the buyer owes and how the seller wants to get paid. It also includes details such as the name and contact information of the seller, a description of the goods sold, prices, and other payment information.
Some people believe that invoices and receipts are the same things.
That is not the case. An invoice is a document asking for payment, whereas receipt documents that payments have been made.
Different types of invoices
The most common type of invoice is the sales invoice, which is used to request payments from customers.
In addition, there are other types of invoices, such as:
- Pro forma invoice: A preliminary invoice used to confirm the details of a sale before the goods or services are provided.
- Recurring invoice: Invoices issued on a regular basis, such as monthly or annually.
- Past due invoice: An invoice that has not been paid on time and therefore is being re-sent to the customers (sometimes with additional charges).
- Credit invoice: A negative invoice used to reduce the amount of money that the customers owe the business (mostly used to correct an error or when a customer returns goods).
What to include on an invoice: A brief checklist
In the list below, you will find the most important elements to include in an invoice>
- a unique invoice number
- your business name, address, phone number and email
- the name, address, phone number and email of the customer you’re invoicing
- invoice date
- payment due date
- description of the goods and services you are billing for
- the amount being charged
- payment terms.
- VAT amount if applicable
Creating an invoice, step by step
1. Make your invoice look professional
Using a spreadsheet or invoicing software, create an invoice that looks professional, preferably with your own logo.
Remember to clearly mark your invoice with the word invoice, to improve the likelihood of getting paid on time.
2. List company name and information
Make sure that the recipient knows who sent the invoice. Do also make sure that the customer’s information is on the invoice. In most countries, this is required for the invoice to be legally valid.
A quick tip: Invoice software, such as Conta, help you make sure that all legally required fields are in place when sending invoices. Try Conta for free.
3. Remember the dates
Dates provide your invoice context and serve as a point of reference if you need to follow up on unpaid invoices.
We advise you to include the following dates:
- The invoice issue date
- The date the goods or services were delivered
- The payment due date
Also, make sure to mention that late fees will occur if payment is not received on time. In fact, 94 per cent of invoices mentioning late fees are paid.
4. Include a cost breakdown
Make sure that the customer knows what they are paying for by breaking down the costs: List the services provided, their quantity and duration, as well as your unit price.
Next, you will need to include, the total of all goods and services without tax and discounts, discounts, tax and net total.
If you are using invoicing software, tax calculations are (in most cases) done automatically.
5. Save and send the invoice
There are several ways to ensure that an invoice gets in front of your customers:
- Email: You can send the invoice to the customer’s email address. This is a fast and convenient option, but there is a risk that the invoice could end up in the customer’s spam folder or be intercepted by third parties.
- Postal mail: You can send the invoice through the mail to the customer’s physical address. This can be more formal and professional, but it is also slower and more expensive than email.
- Online invoicing software: You can use online invoicing software to create and send invoices to your customers. This allows you to track the status of the invoice and whether it has been received and paid. Some online invoicing software also allows you to set up recurring invoices and automated payment reminders. Try Conta invoicing for free.
What to do when customers do not pay on time
On average, 16 % of small business invoices are paid late. Thus, it is vital that you have strict payment follow-up routines in place.
If a customer does not pay an invoice on time, here are some steps you can take:
- Follow up with the customer: A polite reminder email or phone call may be enough to get the payment process started.
- Consider offering a payment plan: If the customer is unable to pay the full amount due by the due date, you may be able to work out a payment plan to help them pay the invoice over time.
- Charge late payment fees: If you have specified late payment fees in the payment terms of the invoice, you may choose to charge the customer these fees.
- Take legal action: If the customer continues to refuse to pay the invoice, you may need to consider taking legal action. This may involve hiring a lawyer or taking the customer to small claims court.
By following these steps, you can help ensure that you get paid on time and avoid any issues with your cash flow.
Invoicing best practices
- Use a professional template: A well-designed invoice not only looks more professional but also helps to clearly communicate the details of the transaction and the terms of payment. You can use a template or invoicing software to create consistent and attractive invoices.
- Use clear and concise language: Avoid using jargon or technical terms that your client may not understand. Use simple and straightforward language to clearly communicate the details of the invoice.
- Set clear payment terms: Specify the due date for payment and any late fees that may be applied. You may also want to include information about your preferred methods of payment, such as electronic bank transfer or credit card.
- Follow up on overdue invoices: If an invoice becomes overdue, it’s important to follow up with the client in a timely manner. This can be done through email or phone calls. Be polite but firm, and try to resolve any issues that may be preventing payment.
By following these best practices, you can improve your chances of getting paid on time and streamline your invoicing process.
Quick tip! Conta’s invoicing software can be set up to automatically send payment reminders to customers who fall behind on their payments. Sign up for our free invoicing software.