When it comes to invoicing your customers, knowing when to send the invoice is critical. Too late and you may run into cash flow problems. Too soon and you may find yourself in hot water with the client. So, when is the invoice issued for businesses in the UK? Find out everything you need to know about how and when to issue an invoice. But first off, what is an invoice?
What is an invoice?
An invoice is a document issued by a seller to a buyer that lists all the goods and services that have been provided, along with a cost breakdown. They’re used to bill businesses for one-off projects, as well as recurring work, and while invoices may be issued with B2C transactions, they’re most commonly used for B2B payments. In short, it’s a formal demand that helps to prompt payment from your customer, while also acting as a useful tool for record-keeping.
When to send an invoice
Next question: when is the invoice issued? There’s no single answer to this question, as many businesses have different practices around when to send an invoice. Here’s a rundown of your options:
In advance – If you’re billing a very expensive project, you may choose to request payment upfront. This confirms that the client is serious about the work and means that if the project does end up getting cancelled unexpectedly, you won’t find yourself out of pocket for the work you’ve already completed.
At an agreed milestone – In some cases, especially if you’re working on a long-term project, invoices can be sent at specific milestones. For example, if you’re working on a particularly complex piece of work for a customer, you might agree to invoice a certain billable amount at an agreed-upon interval, like one-third of the way through. This is beneficial for both vendor and customer, as it helps to improve your cash flow while avoiding an enormous bill at the end of the project for the client to deal with.
After the work is complete – This is the most common time to issue an invoice. Simply put, after your services have been rendered or goods have been delivered to the client, you’ll send over an invoice for your work.
On a recurring basis – For businesses offering a repeat service for work that has a fixed cost, you may decide to set up a recurring invoice. In this case, you’ll send the invoice out at specific intervals (weekly, monthly, etc.), although if you are completing work on a weekly or bi-weekly basis, you may find it easier to send a monthly invoice that includes all the services you provided for the month.
How to issue invoice
In the past, invoices used to be issued on paper and mailed to their recipient. Today, many businesses use online automating invoicing software that can be used to schedule invoices in advance and send them out at a specific time and date. This tends to speed up the payments process, as invoices can be issued as soon as work has been delivered. Plus, customers may choose to pay immediately, as it minimises their account processing time.
When will the invoice be paid?
The date that your customer is required to pay your invoice is determined by the payment terms outlined in the invoice itself. In the UK, most invoices outline net 30 payment terms, which means that the customer has 30 calendar days after the invoice has been issued to pay the invoice. Of course, you can offer other payment terms, such as net 15 (15 calendar days to pay) or net 60 (60 calendar days to pay), depending on your business’s financial situation.
However, it’s always worth remembering that late invoice payments are a serious issue for many UK SMEs. Just because you’ve stipulated that the customer has 30 days to pay, doesn’t mean that you’ll automatically receive payment after 30 days. According to research from GoCardless, on average UK SMEs are paid 18 days late, while 2 in 5 SMEs are facing serious cash flow problems as a result of late payments. To get paid on time, every time, consider using a Direct Debit payments service like GoCardless.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.