How do I create an invoice?

Contributor -

Elaine Clark


A man completes his bookkeeping and generates his customer invoices

It might seem simple, but if you've never produced an invoice before, how would you know what to include? Chartered accountant Elaine Clark of cheapaccounting.co.uk answers the key questions about invoices

Should I include the word 'Invoice'?

All invoices should be clearly marked with the word 'invoice' to make it obvious to the recipient that it is a request for payment. Using sufficiently large letters at the top of the page is a good way to do this; then there can be no confusion. Don't overly design your invoices; keep them simple. Most accounting software will provide templates that you can customise with your company logo and information.

What information do I need to include on an invoice?

For a start, you must include your business name, address and contact details – including phone number and email address. Many small firms use accounting software and apps to create their invoices which often provide templates that help ensure you include the essential information.

You should also include an invoice number, which should be unique. That means it refers specifically to one invoice only.

You also should state the customer's name and address, the name and job title of the person who placed the order and a thorough description of the items they bought and the date the order was placed. The invoice itself should have a date of issue, if this is different, but your terms and conditions [T&Cs] should make clear when payment is expected.

What payment information should I include on my invoices?

You must include your bank account details – bank, account name, account number and sort code. Direct payment is better because you don't have to worry about having to pay money into your bank, which can be a hassle. There are more ways than ever to get paid from direct bank transfer, card payments and apps such as PayPal. Make it as easy as possible for customers to pay you to minimise the risk of late payment.

If you are using accounting software, you may be able to include a QR code or link that allows the customer to pay the invoice directly.

What price information should I include on a invoice?

Obviously, the total amount you are requesting needs detailing. It must also be broken down, if various goods or service have been supplied. If a discount has been given, this should be detailed, too. If you are VAT-registered, you will need to include VAT details, too (see the next question).

What information must I include on invoices if I'm VAT registered?

Firstly, you must include your VAT Registration Number. You must also detail the amount of VAT on each item and the VAT rate charged, unless the same amount of VAT has been applied to each item, in which case an overall amount and rate is sufficient. You must include: a net unit price or rate; quantity; rate of VAT applicable; total net amount payable; rate of any cash discount and total amount of VAT charged.

What information must limited companies include on invoices?

By law, you must include the full company name, its registered number, registered address and part of the United Kingdom in which the company is registered (ie England and Wales, or Wales, or Scotland, or Northern Ireland). If you're using a trading name, this must also be shown.

What invoice numbering system should I use?

If you are creating invoices manually, keep it simple – a sequential numbering system works best. Accounting software and apps will automatically number your invoices for you.

You might be instructed to include a purchase order number, too, if the customer has provided you with one. It helps them to cross-reference when they receive your invoice.

Do I need to include terms and conditions?

You should always have T&Cs in place with your customers and make sure they're aware of the key requirements. These explain payment terms, what happens in the case of late payment or late delivery, etc.

Free sample terms are available online, although it's wise to seek tailored advice. If you do not have terms in place and something goes wrong, you might not get paid. On your invoice, I'd recommend giving a simple deadline, for example, "Please pay within 30 days".

When should I send out my invoice?

In accordance with the T&Cs you've agreed. To help with the business cash flow and administration, get them out as soon as possible and favour quick payment terms if possible, but such things can depend on your sector and type of business.

Can I set my own payment terms?

You can do this, but it must be set out in your T&Cs and agreed by the customer.

If you have not agreed payment terms with your customer, the default payment period is 30 days from date of invoice. The maximum payment period that can be agreed is 60 days. It's best to have your T&Cs specifically agreed before the goods or services are supplied. As soon as an invoice becomes overdue, you should chase up payment.

Written by Elaine Clark of CheapAccounting.co.uk.

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