Running a start-up business? Here’s how to get your invoices right
6 essential tips to create an invoice template that will ensure your business gets paid on time
If you’ve just started a new business and you’re selling goods or services to customers, it’s likely that you will also have to invoice those customers for the work you’ve done.
Setting up an invoice template can be an overlooked part of starting a business, but taking the time now to make sure you’re covering everything important will help you collect payments later on.
Follow these top tips to ensure you’re getting your invoicing right.
Take the time to make your invoices shine
As an invoice is an official document that you send out from your business, it’s important to ensure that it reflects your brand and is easy to understand. To give the best impression, make sure to include your logo and use colours and fonts that reflect your business’ brand.
Make sure you’re meeting the legal requirements on your invoice
There’s some specific information that businesses must legally include on their invoices. For example, if you run a limited company or LLP, your invoices must show your Companies House registered number and address – and if you put the name of one director or member on the invoice, you legally have to include the names of all the other directors or members.
HMRC also ask you to number your invoices sequentially and to give each invoice a unique number, so that they can check to see that you've reported all your income.
Get the VAT details right
If you’re registered for VAT, you must include your VAT number on your invoices, and comply with HMRC’s rules about VAT invoices. This means your invoice must show:
- an invoice number which is unique and follows on from the number of the previous invoice (remember, if you spoil or cancel a serially numbered invoice, you must keep it to show to a VAT officer at your next VAT inspection)
- the seller's (i.e. your) name (or trading name) and address
- the seller's VAT registration number
- the invoice date
- the time of supply (or ‘tax point’)
- the customer's name (or trading name) and address
- a description that identifies the goods or services supplied to the customer
- the rate of any cash discount
- the total amount of VAT charged, expressed in sterling
In addition, for each different type of item listed on the invoice, you have to show:
- the unit price or rate, excluding VAT
- the quantity of goods or the extent of the services supplied
- the rate of VAT applying to the goods/services being sold
- the total amount payable, excluding VAT
And if you issue a VAT invoice that includes zero-rated or exempt goods or services, you must:
- show clearly that there’s no VAT payable on those goods or services
- show the total of those values separately
However, the good news is that if you make retail sales and you make a sale of goods or services for £250 or less (including VAT), you will be able to issue a simplified VAT invoice. For more information, take a look at HMRC's guide.
Include the right price
The price may sound like an obvious thing to include in an invoice, but you’d be surprised at the number of businesses that accidentally issue invoices for an out-of-date price or with a typo. It can lead to a dangerous predicament for your business as you could find yourself in the very embarrassing position of either having to ask your customers for more money, or needing to give them some back.
When you include your price in your invoice, make sure you use your most recent pricing – and don’t forget any discounts or special offers that you might have promised (either to all your customers or to just this customer particularly).
Remember too that if your business is VAT registered, HMRC says that you must include the price per unit on your invoices.
Clearly describe what you’re invoicing for
There’s nothing worse than getting queries from customers who are unsure about what they’re being asked to pay for – and it’s an easy problem to avoid! Just make sure the description on the invoice of what you are selling is as clear as you can make it. It’s helpful, for example, to use terms that your customer will understand rather than terms that may make more sense within your industry.
Taking the time to make sure your invoices are crystal-clear can help you get paid on time, as a customer may take their time to query the invoice and pay.
Give full details about how they can pay you
Making it super-easy for your customers to pay you is great for both of you, so it’s worth including easy and clear payment information. If you are taking payment from online banking or by BACS, include your bank account details on your invoices. And if you’re using a service such as PayPal to collect payment from customers, remember to include a link when you email the invoice, so that customers can pay with one click.
Don’t forget to set your payment terms and highlight them clearly on your invoice. To help your clients remember to pay on time, send reminders about the payment terms if they’re overdue.
When it comes to invoicing, your aim should always be to make your customers’ lives as easy as possible, because that will help them pay you promptly!
Taking the time to design an excellent invoice template early in your business can pay dividends for you as your business grows.
Emily Coltman FCA is chief accountant to FreeAgent, the UK’s market-leading online accounting system specifically designed to meet the needs of small businesses and freelancers.