Sending invoices to consumers is one of the most significant ways for businesses to make money aside from the services and products they supply. Therefore, you need to know how to make an invoice that is proper for your business.
Invoices allow receivers to see a detailed summary of what they’re paying for, how much they owe, and when they should anticipate payment.
Invoices can also help you keep track of your company’s financial status and make tax time go more smoothly.
We’ll go over what should be on an invoice, how to make one, and the advantages and disadvantages of using a template versus software. You’ll also get answers to some of the most frequently asked questions.
Reasons Why Invoices Are Important For Your Business
Invoices are used by most enterprises around the world to ensure that payment for their services and products is paid. However, there are several other reasons to use a professional invoice document:
1. Get Paid On Time
Getting paid on time is one of the most important and obvious reasons to create them. If you have a large number of customers, you’ll need to prepare more to send them.
The more you have, the more payments you’ll receive based on the purchase time and date.
2. Reduce Billing Queries
The more organized your invoices are and the better your billing practices are, the fewer questions your consumers will have regarding their purchases.
Buyers may contact you if there is insufficient information.
3. Eliminate Invoice Tracking Issues
Each invoice generated has a unique ID, which is crucial for avoiding tracking nightmares. It’s useful to be able to trace each transaction when working on monthly, quarterly, or annual sales.
It assists in determining which products, services, and clients are beneficial to the company’s success and which are not.
How to Make An Invoice That Stands Out
Consider your business industry and special needs when billing customers and clients when selecting an invoice template for your small business. Try invoice generator here.
Choose an invoice template example that has a straightforward layout and is easy to read and understand. Here are a few things that you need to pay attention to make an invoice, check out how!
1. Make a list of your basic information
Include the company’s fundamental information, such as its name, as well as pertinent contact information, such as a phone number, address, and email address.
This information should be prominently presented at the top of the invoice, typically in the upper lefthand corner.
2. List any necessary client information
Such as the client’s company name, address, phone number, and email address. This area is usually labeled “Bill To:” and should be near the top of the invoice, often beneath your company’s information.
3. Keep the invoice number in mind
When following up with a client or doing bookkeeping, including a specific invoice number on each will make it easier to reference. The first one sent out by a company is usually branded No. 1, followed by No. 2, and so on.
4. Include the Date
You should also mention the date, which can help clients remember when the work was completed or the purchase was made.
The commencement of the grace period for payment is also indicated by the date.
5. List the Total Payment
The amount owed by a client or customer is a critical component of an invoice. After a list that explains a breakdown of charges and any applicable taxes, the amount payable is normally displayed near the bottom.
6. Provide Payment Information
When working with new customers or clients, explain how payments will be handled in advance and inform them of your payment terms, such as the grace period for payments, whether you charge late penalties, and so on.
You should also provide your payment terms. The majority of businesses expect payment within 90 days of receipt (also known as “net-90”).
What You Should Include in an Invoice?
- Name of Company
- Address
- Email & Phone Number
- Invoice Number
- Due Date
- Billing to
- Items Purchased
- SKU Number
- Quantity
- Unit Price
- Total
- Subtotal
- Sales Tax
- Total Due
How to Make An Invoice Using An Accounting Software
Automated procedures that execute duties like generating a receipt for clients when they pay, preparing automatic invoices for regular customers, and sending out invoice payment reminders can all assist to reduce your effort.
Invoicing software can also provide rapid information about your company, such as revenue breakdowns, product popularity, and customer payment trends.
Create online invoices faster and easier with personalized template options with an invoice generator from Mekari Jurnal.
Get a professional look with personalized invoices by adding your company log with 11 template choices in Mekari Jurnal.
Mekari Jurnal as an online bookkeeping software comes with many benefits for its users to support their invoicing process, so, get the free trial now and start your automatic invoicing system easily.
The Importance of Accurate Invoices
Before diving into the nitty-gritty of creating an invoice, let’s take a moment to appreciate why accurate and well-structured invoices are crucial for your business:
1. Professionalism and Brand Equity
Your invoices are not just financial documents; they are an extension of your brand and professionalism. When you send a well-crafted invoice, it communicates to your clients that you are a trustworthy and organized business. It reinforces your brand identity and fosters a positive perception of your company.
2. Customer Retention
Clear and accurate invoices enhance the customer experience. When clients receive invoices that are easy to understand and error-free, it creates a sense of transparency and trust. Satisfied customers are more likely to return, leading to higher customer retention rates.
3. Timely Payments
Invoices serve as a formal request for payment. When your invoices are accurate and contain all the necessary details, it reduces the chances of confusion on the client’s end. Clarity in invoices can lead to faster and more predictable payments, ensuring a healthy cash flow for your business.
4. Legal Compliance
Invoices also play a crucial role in legal and tax compliance. They serve as documentary evidence of financial transactions, which is essential for tax reporting and audits. Properly structured invoices help you stay compliant with tax laws and regulations.
5. Financial Tracking
Invoices are part of your financial record-keeping. They allow you to track your income, expenses, and outstanding payments. Well-maintained invoicing records are essential for financial planning and decision-making.
Now that we understand the significance of invoices, let’s embark on the journey of creating a professional invoice step by step.
How to Create an Invoice: A Simple Guide
In the realm of business, invoicing is a critical process that goes beyond being a mere financial transaction. It is a representation of professionalism, a tool for brand reinforcement, and a means to ensure that you receive timely payments for your products or services.
Unfortunately, many businesses face challenges related to incorrect or unclear invoices, which can lead to payment delays and strained customer relationships. In fact, according to a report from the Credit Research Foundation, approximately 61% of late payments are attributed to administrative issues, such as inaccurate invoices.
To maintain a successful and sustainable business, it is imperative to understand the significance of invoices and the role they play in your financial operations. In this comprehensive guide, we will walk you through the process of creating an invoice, step by step. Whether you are a freelancer, a small business owner, or part of a larger corporation, mastering the art of invoicing is essential for your financial well-being.
Step 1: Brand Your Invoice
The first step in creating an impactful invoice is to brand it. Your invoice should reflect your business identity and create a visual connection with your clients. Here’s how to do it:
Customization is Key
Customize your invoices to align with your brand. Incorporate your brand colors, fonts, and logo into the invoice design. Consistency in design elements across your website, social media, and invoices helps in brand recognition.
Professional Header
Start your invoice with a professional header. Include the following information:
- Your business name
- Business logo (if applicable)
- Business address
- Contact information (phone number, email)
Next, add the client’s business name and the name of the contact person, along with their precise contact details. If your business is required to collect sales tax, include the relevant tax identification number as per regional laws. For example, businesses in India include GST numbers, while Australian businesses use ABN numbers, and many European businesses have VAT IDs.
If your business is a limited company, it’s advisable to include the company’s registration number for added credibility.
Step 2: Include Invoice Information
With the branding in place, it’s time to dive into the core invoice details. This section is where you lay the foundation for a clear and legally compliant invoice.
Label as “Invoice”
Ensure that your document is explicitly labeled as an “Invoice.” This makes it easy for the client to identify the purpose of the document, especially if they receive various types of documents from different sources.
Unique Invoice ID
Assign a unique invoice ID number to each invoice. This ID helps you and your client track transactions accurately. Invoice IDs are typically alphanumeric and may contain specific information, such as project names or invoice issuance dates. Establish a consistent invoice numbering system for your business to avoid confusion.
Step 3: Include Important Dates
Dates are crucial in invoicing as they establish a timeline for the transaction. Include the following dates:
Date of Service or Delivery (Supply Date)
This date signifies when the goods were delivered or the services were provided. It helps in determining when the client received value for their payment.
Invoice Issuance Date
The invoice issuance date is the date when you officially send the invoice to the client. It marks the beginning of the payment period and sets expectations for when the payment is due.
Step 4: Description of Goods/Services Delivered
This is the heart of the invoice, where you provide a detailed account of the products sold or services rendered. For each line item, include the following information:
Item Description
Clearly describe each item sold or service provided. Use concise and specific language to eliminate any ambiguity.
Quantity
Specify the quantity of each item sold or the extent of the service provided.
Rate Per Unit
Indicate the rate or price per unit for each item or service. This allows the client to see the unit cost and calculate the total cost for each line item.
Subtotal
Calculate the subtotal for each line item, which is the product of the quantity and the rate per unit. This provides a clear breakdown of costs.
Transparent Pricing
Transparency in pricing builds trust with your clients. If you’re invoicing for a project, provide details on the time spent on each task or service. For example, if you’re billing for building a fence, list the cost of all fencing boards and nails separately. Breakdowns like these enhance transparency and clarity.
Step 5: Include Tax Details and Total Amount Owed
Taxes are an integral part of many transactions. Depending on your business and location, you may need to include various tax details. Here’s what to consider:
Payment Terms
Clearly specify your payment terms, which outline when and how you expect clients to make payments. Payment terms typically include:
- The invoice issuance date
- The expected payment date
- Accepted payment methods (credit card, check, PayPal, etc.)
- Late payment penalties
- Currencies accepted by your business
- Any other relevant payment conditions, such as early payment discounts
Tax Details
Include tax details applicable to the sale. Tax regulations vary by country, region, and business type. When an invoice contains multiple line items, calculate the total tax liability for the entire invoice amount and display it at the bottom. If there are different tax rates for different items, consider itemizing the tax amounts accordingly.
Once taxes and any applicable discounts are factored in, calculate the total amount owed by the client. Highlight this total prominently on the invoice.
Step 6: Add Explanatory Notes with Terms and Conditions
While invoices are designed to be self-explanatory, adding explanatory notes can be beneficial, especially when you want to clarify specific aspects of the transaction. Here’s what to consider:
Clarify Discounts
If you have applied discounts to any line items, consider adding an explanatory footnote. This helps clients understand that future invoices may reflect higher rates for the same product or service. Transparency about pricing changes is key to maintaining trust.
Additional Charges
Include any other applicable charges on your invoices. This may include payment processing fees or overdue penalty charges. Clients appreciate clarity regarding additional costs.
Return and Exchange Policies
Outline the conditions under which clients can return or exchange purchased items. For example, specify the timeframe within which returns or replacements are accepted, along with any requirements, such as a valid receipt. Clarity in your return and exchange policies builds customer confidence.
Conclusion
Creating an invoice is not just a financial formality; it’s a strategic process that influences your brand, customer relationships, and financial stability. Accurate and professionally designed invoices are essential for maintaining professionalism, ensuring timely payments, and staying compliant with legal and tax regulations.
By following the step-by-step guide outlined above, you can create invoices that not only facilitate seamless transactions but also contribute to your business’s overall success. Whether you choose to create invoices manually or opt for online invoicing software, the key is to prioritize clarity, transparency, and professionalism in your invoicing process.
