How to create an invoice
As an entrepreneur just starting out, it is important to understand the right way to raise an invoice when it comes time to bill your customer. This article includes all the details about when, how, and why invoices are used, as well as outlines the information needed to create legal, professional invoices.
What is an invoice?
To put it simply: an invoice is the document required for you to get paid. In other words, when you finish a job and it’s time for your customers to pay, the invoice lays out the goods or services provided.
It is a commercial document that must meet a series of requirements to be considered a legal invoice. And it is a pillar of the sales process: a ‘must’ if you’re in the business of selling goods or services of any kind.
Accurate, legal invoices are not only important for helping you get paid promptly, they’re also pivotal for proper record-keeping, maintaining the financial health of your business, and filing accurate tax returns.
How to write an invoice
If you’re reading this now, it’s likely that you need to create invoices to send to customers. Whether it’s your first sale or your thousandth, each invoice you create needs to meet the same set of requirements.
While sitting down with a paper and pen might seem the obvious and fast way to write an invoice, we suggest a more modern approach that can save you time, tedious calculations, as well as ensure your invoice meets the most recent regulations. The classics most turn to are Word and Excel, but in fact, these are missing some crucial features.
This is where invoicing software comes in. More functional, more automated, more exact, and always up-to-date. The advantages of invoicing through software like Debitoor are manifold. Create, customise, organise, send and track invoices, all from one hub - a considerable increase in convenience and efficiency when compared with Word or Excel invoice templates.
Want to give it a try? Take a trial and see just how easy it can be to manage your invoices as an entrepreneur.
Not to worry, we will still go over how to create an invoice.
Here at Debitoor, we recognise that many who work in handicrafts or in more creative fields might be tempted to create invoices by hand, but we have designed software that can also meet your business needs to customise your invoices
But in order for your invoice to be valid in the UK, it must also meet a certain set of requirements. Each and every invoice you create should include:
- The name and contact details of your business
- The name and contact details of your customer
- A unique invoice number that fits in your invoice number sequence
- The issue date of the invoice
- A description of each product or service you’re providing
- The costs of each product or service
- Your VAT details, if applicable
- The date the goods or service were provided
- The total amount due
This basic set of requirements is common for most countries, though if you’re located outside the UK, either double check that your invoices don’t require any extra details, or simply use invoicing software that is localised to your country.
Types of invoices
It’s important to understand that there are different types of invoices. Here we list the most common:
- Standard invoice: This is your everyday invoice, which is the legal document that accompanies a sale.
- VAT invoice: A VAT invoice is also a standard invoice, but one that includes VAT details for business to business transactions when both businesses are VAT registered.
- Proforma invoice: A proforma invoice is essentially a draft invoice that is often used in place of a sale before the full details of the sale have been finalised.
- Electronic invoice: Also known as an e-invoice, this is an invoice created and sent online that meets a series of security clearances.
- Amending invoice: We’re all human, and sometimes mistakes are made. An amending invoices corrects a mistake made on a previous invoice.
In addition, HMRC distinguishes between three different types of accepted invoices: full invoices, simplified invoices and modified invoices. Full invoices include standard and VAT invoices. A simplified invoice is for any retail supplies with a value under £250, while a modified invoice can be used for retail supplies over £250.
Who can issue an invoice?
In order to issue an invoice, you must be eligible for taxation. This means that you must be legally allowed to work under sole trader status before or within 90 days after you begin issuing invoices, and in many cases, must register as self-employed.
If your business falls above the current VAT threshold, or if you choose to voluntarily register for VAT, your invoices should always reflect this by including your VAT details, and the appropriate VAT rate should be added to your products or services.
Invoicing shouldn’t be intimidating or tedious. We believe it should be a fast, simple process that gives you more control over your business. And we’ve designed invoicing software that reflects this belief.
Tips for creating invoices
A couple of closing tips for when it comes to raising invoices:
- Organisation is often synonymous with success, so the more organised your invoices, the more easily you’ll be able to stay on top of your business.
- Each new invoice should always be reviewed before it’s sent out to your customer, reducing the chance of errors.