Customer invoices are an essential part of accounting and finance of any start-up business.
They act as a record of the products and services you provide to customers, and contain important sales, tax, and accounting information.
An incorrect invoice can harm customer relationships, lead to late payments and may even risk penalties opens in new window if, for example, VAT legislation is breached.
With 60% of small and medium sized businesses saying it’s taking longer for customers to pay their invoices in full compared to a year ago, ensuring your invoice contains all the necessary information to help speed payment is vital.
A great invoice goes further, with clear terms and conditions that allow you to chase up late payments more efficiently.
Creating invoices for your business transactions can be time-consuming when you’re first starting out.
While it can be tempting to download invoice templates from the internet, it pays to check that they meet UK invoicing guidelines.
So how do you write customer invoices? And how do you know if you’ve included all the correct information so you can get paid quicker?
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What is an invoice?
An invoice is a bill you send to a customer or client that asks for payment in exchange for the goods or services your business has provided.
It should list what is being charged for and how much each item costs, as well as the total sum owed.
An essential part of the bookkeeping opens in new window process, an invoice is different from a receipt (which proves payment) or a purchase order (which shows the intention to buy something).
You must keep invoices for tax and accounting purposes.
What do I need to include in customer invoices?
While an invoice format can differ depending on the goods or services involved, all invoices require the following information.
Your invoice should clearly state your business name and address, an email address, and phone number.
If you’re a sole-trader opens in new window, in addition to the above, the invoice must also include your name and an address where legal documents can be delivered to you if you are using a business name.
It should also include your customer’s full contact details.
Assign a unique number to each invoice. This makes tracking and organising invoices easier for bookkeeping purposes.
Include the date you sent the invoice to your customer.
You may need to refer to this for future audits or if a problem arises regarding payment.
Accounting periods typically include income you invoice for during that period rather than payments received from an invoice.
Costs and price breakdown
Include an itemised list of all the products/services you have provided, including individual descriptions and prices.
Your customer can then see exactly what they are paying for. Be sure to include the date the deliverables were provided and any VAT owed opens in new window.
You must include your VAT number on the invoice if your business is VAT registered.
Any VAT rates applied to prices must be included and expressed as a percentage, such as 20%.
You should include the price without VAT, the amount of VAT charged, and the total amount with VAT added if you are registered for VAT opens in new window.
This is the total amount owed to your business by the customer, including VAT if applicable.
These explain when and how your customers or clients should provide payment to your business opens in new window.
State when the invoice must be paid in full along with payment options, such as bank transfer or PayPal, and payment details, such as bank code and account numbers.
Be sure to include payment terms on every invoice, even if you have previously supplied these.
Five tips for encouraging faster payments
Have a clear invoice layout
Poorly designed customer invoices can lead to late payments and disputes if the necessary information isn’t easy to find.
Having a clear, accessible invoice layout can negate these issues.
You could make essential information, such as the amount due and due date, stand out so it is easily identifiable.
The earlier you send your customer invoices, the sooner you can be paid.
It can be useful to add reminders into your calendar and send invoices as soon as a job is completed or goods are supplied.
Accept more payment methods
It makes sense to give customers flexibility when paying your invoices as a small business or start-up.
The more options you can provide, the easier and faster the payment process can be.
Besides accepting cash and card payments, you could also consider online banking and mobile payment services like PayPal opens in new window.
Offer early payment incentives
By offering incentives, such as a discount or other rewards, for early payment you could encourage customers to pay sooner than outlined in the invoice’s payment terms.
Enforce late payment fees
Late payments can cause cashflow problems for a start-up.
One way to encourage prompt payment is to introduce a late payment fee –which sees the customer charged an additional amount if the invoice is not paid in full on time.
Businesses have a legal right opens in new window to charge late payment fees but it’s best to notify customers of these before they commit to purchasing from your business.
Invoicing software for customer invoices
There is software available that can make invoicing more manageable.
Free design tools such as Canva opens in new window have hundreds of pre-made invoice templates, as well as templates available on popular office software like Microsoft Word and Excel.
All you need to do is input the correct information, and you’re done, but you should first check that it contains all the invoice information you need.
Read our tips on bookkeeping success for start-up businesses. opens in new window
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Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.