If you want people to pay you, generally you will need to be able to give or send your customer an invoice (sometimes called a sales invoice).
Ok, so you think you’ve got this one.
And maybe you do.
Issuing an invoice free from errors is your first defence in avoiding legal conflicts with customers and taxation bodies.
Got your attention?
Let’s jump right in!
What is an Invoice?
To spell it out, an invoice is a record of purchase you give to your customers in order to charge them for goods or services you are providing.
It is a document sent to a purchaser establishing an obligation for the purchaser to pay for a product or service.
Your unpaid invoices are known as “accounts receivable”, “A/R” or just simply “receivables”. These are assets for your business as they can be turned into cash.
Check out our 10 handy invoicing tips to get paid faster! to quickly get some more cash in your bank.
If you are in a country with a GST or VAT, then you may need to issue tax invoices. Tax invoices are invoices that comply with GST or VAT requirements. You can find out more about tax invoices here. Some Australian tax invoices need to deal with special situations, like GST free or input taxed supplies. You can learn more about these special situations here.
In the United States, the IRS does supply businesses with identification numbers but these are not required to be listed on invoices. Other countries would generally require a VAT number or tax identification number to be included on the invoice for sales tax.
Why should you supply an invoice or tax invoice?
Customers will be less likely to buy from you or pay you if they are not provided with a correct invoice for their records. In many cases, you will be legally required to provide an invoice with a sale.
If you are based in Australia, you need to meet these ATO requirements:
- If you do not include your ABN the supplier is required by the ATO to withhold part of payment owed to you at the top marginal rate
- When you make a GST taxable sale of more than $82.50 (including GST), your GST-registered customers need a tax invoice from you to be able to claim a credit for the GST in the purchase price.
- The ATO requires you and your customers to keep invoices as a record of their business for 5 years
How to decide what to include on your Invoice
A description of what you have provided (eg time provided, cost of goods supplied). Generally it is enough information to identify the work you have provided and provide enough detail so the customer is satisfied to make the payment.
If you provide labour and materials, it is clearest to the customer to list these separately:
- a section that details the hours worked and the hourly rate
- a section that details the materials supplied and the price the customer is being charged for these. You may need to break this down to provide enough information to the customer so they can see the charges are reasonable and so agree to pay the invoice
You may also want to provide proof of the work provided if you think this will assist
Remember, the clearer the invoice and the more it reflects the discussions and items provided, the quicker your client will pay
Always encourage the client to contact you if they have any issues with the invoice
How to create your invoice
- Simply a piece of paper or email can contain all the information above, but you need to remember that you need to keep a record of it and make sure it is paid.
- You can use a Tax Invoice Docket book and complete all the required details.
- Use a spreadsheet or Word Document . These can work for a very small business that only issues a few invoices and has a manual method such as a spreadsheet of keeping track of sales and receipts. Remember though it can be time consuming, mistakes are more likely and difficult to track what has been paid. You will also need to make sure you have all the information required for any information you need to give to the ATO.
- Most business will consider using some more systematic form of record keeping. The accessibility of technology to help small business with all aspects of their record keeping means the cost is offset by the time saved, money collected and improved running of the business and record keeping. Uwazi allows you to generate invoices directly within the software.
When to send your invoice
Ideally, as soon as possible.
- For selling goods this may be before delivery
- If you are at a job over a few days, you should do immediately once the work is completed
- If the job is longer than a week, you should be sending Progress Invoices as otherwise there is a risk of client disputes or delay in payment
You need to try to make creating and sending invoices as streamlined as possible as they are vital for your businesses success.
How can we help with invoicing?
Uwazi has the perfect plan to meet your business needs. The great news is that Uwazi plans include all features starting from just $5 USD/$7 AUD a month with no lock-in contracts. Simply choose your plan based on how much you plan to use Uwazi!
With Uwazi, you can effortlessly create tax invoices and email them to your customers. Simply click here for your free trial to set your own Uwazi account.