You've started your own business, got the relevant funding and are about to begin selling goods or services to your customers. The next thing on the list? Invoicing.
Invoicing is just a part of your startup's accounting needs. And while it might feel like just one small cog, without a professional invoicing template, you'll not only fail to look the part, but could be violating the sales of goods and services legislature in the United Kingdom.
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A lot of startups opt for an inclusive accounting and bookkeeping platform to handle all invoices, as well as payroll, tax returns and other business expenditures. However, these are often costly and for microbusinesses especially - those with no more than two employees - managing your own invoices is just one way of keeping costs down.
Read on for best practices on writing the perfect invoice.
Use a template
While it's not necessary for businesses to use a set template from an invoicing app or word processor, it could be a good idea for businesses wanting to get a quick start on invoicing.
If you're a Microsoft user, MS Publisher actually has invoicing templates, and while basic, they offer a good jumping off place and can be personalised as much or as little as you want.
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There are also lots of templates on the internet, many of which are free to use.
Unique ID numbers
All invoices should have a unique identification number displayed clearly on it.
You, the business chooses the ID number on your invoices, but having a procedure in place for assigning them could help keep things in order and ensure you can differentiate between customers and departments.
One option is to use gradually increasing numbers, or have a set of letters at the beginning of the number to categorise customers.
You'll need to keep a record of all ID numbers in order to make sure there's no duplication.
According to Gov.UK guidelines it's mandatory for invoices to clearly display the word 'Invoice' on it.
And although this is a legal requirement, by making sure it is displayed in large letters at the top of your invoice, you're more likely to be paid promptly.
Your invoice will need to include a description of the item or service being sold. This doesn't have to be a long description but something that is clear to both you and the customer.
While invoices can and should be personalised, there are a number of things which an invoice must contain. General invoices - not sole trader, VAT or Limited company invoices - must make reference to nine key things (some of which have already been outlined). Summarised on Gov.UK, they are as follows:
- A unique identification number
- Your company name, address and contact information
- The company name and address of the customer you’re invoicing
- A clear description of what you're charging for
- The date the goods or service were provided (supply date)
- The date of the invoice
- The amount(s) being charged
- VAT amount if applicable
- The total amount owed
Sole trader invoices must include any business name being used and an address for legal documents to be delivered.
Limited companies will need to include their business name as it appears on the certification of incorporation, as well as all the names of all your directors if you wish to include them.
Finally, if either you or your customers use VAT invoices, there are strict guidelines to follow including unique invoice number, trading names, description of goods, total excluding VAT, Total VAT, to name a few. See here for more details.