Last editedJun 20235 min read
Creating an invoice is a vital skill for any business owner, as it ensures timely and accurate payment for products and services. To create an effective invoice, start by including crucial details such as your business name, contact information, and recipient’s details. The next step would be to outline the goods/services provided, calculate applicable taxes or discounts and finalise with a clear payment due date along with accepted payment methods.
In this article, you will learn:
What is an invoice
How to create your invoices to be as efficient as possible
How can invoices be created?
How your business will benefit from effective invoices
How to Eliminate late payments on invoices
What is an invoice?
An invoice is a formal document used in business to request payment. Usually, it includes details about what was sold, the cost, and when payment is due. More information present might include the seller and buyer’s information, a unique invoice number, a descriptive breakdown of products and services provided (quantity, prices, taxes or discounts), and finally, what payment methods are accepted.
An invoice helps keep track of transactions, ensures timely payment, and promotes clear communication between the buyer and seller.
Here’s a simple, step-by-step guide to writing invoices:
1. Decide how you want to create your invoice
There are several ways that you can create an invoice. Many people decide to put it together in Word, Excel, or Google Docs. You can do this manually if you want, but depending on what you’re using, there may be templates installed already. Alternatively, there is a broad range of free, customisable templates available online.
2. Ensure your invoice is clearly marked
It’s important to label the document as an invoice, as this may help speed along the payment process. You also need to include a unique identification number on your invoice, which helps you to identify transactions. The unique identification number can be structured in any way you want – while it can also contain letters and numbers – so many companies include specific information such as the date of issue or the name of the project.
3. Include company name, address, and contact information
Another important element of the invoice is company information. You need to include the name, address, and contact information of both your company and the company you’re invoicing. If you’re a limited company, you should also add your company registration number and the formally registered name of your company.
4. Add a description of the goods and services you’re charging for
You also need to add a short description of the goods/services you’re invoicing for. It doesn’t need to be too long, but it should contain enough detail for your customers to know exactly what they’re being charged for. This way, there’s less likely to be unwanted follow-ups from your customer, and your invoice will be processed more quickly. As well as the description, you should add the quantity and price of each item.
5. Include dates
Dates are another essential part of the invoice. There are a couple of dates that need to be included somewhere on the invoice:
Date the goods/services were provided, also known as the supply date
Date of the invoice
6. Insert the amount of money you’re charging
In addition to the cost of the individual goods/services, you need to add the total amount owed. If any discounted rates were agreed with the customer, these should be noted and subtracted from the total cost.
7. Make sure payment terms are enclosed
Finally, you need to include payment terms. This means that the following pieces of information should all be included in the invoice:
Accepted forms of payment
Accepted currency
Late-payment penalties
Due date
If you don’t let the customer know when you expect a payment, it’s likely to cause issues down the line, so payment terms are a major part of any invoice.
To avoid chasing invoice payments and needing awkward conversations about money with clients, why don’t you join 75,000 other businesses that collect payments with GoCardless? GoCardless merchants are able to automate invoice payment collection to eliminate late payments and manual admin from their business, saving them time, money and stress.
8. Double-check everything’s included
So, just to recap, here’s all the information you need to include in a standard invoice:
Unique identification number
Your company’s name, address, and contact information
Your customer’s company name, address, and contact information
Description of the goods/services you’re charging for
Date the goods/services were provided (supply date)
Date of the invoice
Amount charged
Total amount owed
Check those off your invoice one by one, and if they’re all there, then you’re good to go.
What about VAT invoices?
If you or your customer are VAT registered, you need to use a VAT invoice rather than a standard invoice. There are a couple of different types of VAT invoices: full invoice, modified invoice (for retail supplies over £250), and simplified invoice (for retail supplies under £250). Different information is required depending on which form of VAT invoice you need to use. Generally, you should include everything we’ve listed for the standard invoice, as well as the following items:
VAT registration number
Tax point (or “time of supply”)
Total amount excluding VAT
Total amount of VAT
VAT rate charged per item (as well as notes for any exempt items)
How can invoices be created?
Invoices can be created using various methods depending on the preference and needs of your business. Below you will find the most common ways to create invoices:
Manual creation: using tools like Google Docs/Microsoft Word or Google Spreadsheets/Microsoft Excel, you can design a template and input the necessary information for each invoice. Although it offers a good level of flexibility, this method can be very time-consuming for larger volumes of invoices.
Accounting software: accounting software or dedicated invoicing tools can streamline the invoice creation process. Many of these tools/software include features to automatically calculate totals, apply taxes, generate sequential invoice numbers, and integrate with GoCardless.
Online invoicing platforms: these platforms offer intuitive interfaces, ready-to-use templates, and automated features like recurring invoices and payment reminders. Online invoicing platforms often integrate with payment gateways, allowing customers to make payments directly through the invoice.
Key takeaways:
There are multiple ways to create an invoice, such as using Word, Excel, or Google Docs.
Effective invoices help ensure that your business gets paid on time.
Help your customers by creating detailed and helpful invoices that not only gives them accurate information about products and services sold but also on how to pay for them.
Invoicing tools integrated with GoCardless greatly streamline your invoicing process.
Save money by reducing the administrative labour required to create and chase invoices.
Case study: Eliminate late payments on invoices
GrowFactor is a highly acclaimed digital chartered accountancy practice renowned for its expertise in offering strategic growth advice to small business owners. Their primary objective is to empower clients to achieve success on their own terms through a fresh and modern approach to accounting.
Using cutting-edge cloud-based tools, GrowFactor provides small businesses with real-time information, enabling them to make informed decisions promptly and efficiently. However, collecting regular payments on their invoices was an issue, and late payments were beginning to negatively impact cash flow.
GoCardless, a payment solution discovered through their partnership with the popular cloud-based accounting software Xero, became an evident choice for Managing Partner Simon Kallu.
"Now, with GoCardless, our invoices are sent out and payments are automatically collected without the hassle of chasing clients for late payments.”
By embracing GoCardless, GrowFactor effectively tackled several challenges it previously encountered. These challenges included spending too much time on manual admin tasks and the arduous process of chasing late payments from clients.
“GoCardless is fundamental to the way we run our business. Xero and QuickBooks integrations allow us to remain a paperless practice, while also providing the security that invoices will be sent and collected. Plus, using GoCardless saves us two days in administration each month!”
How to use GoCardless
Using GoCardless is a straightforward process that empowers merchants to set up payments and send authorisation forms effortlessly. Through the user-friendly online merchant dashboard, you can accomplish these tasks with just a few clicks.
The dashboard provides clear visibility on the status of payments, allowing you to stay informed. Once your customer has granted authorisation, payments will commence as per the specified date and follow a schedule set by you.
For those seeking further customisation, GoCardless offers the option of accessing the API for seamless integration with your current payment stack. Moreover, GoCardless boasts compatibility with more than 350 software packages, including leading accounting software such as Xero and QuickBooks, enabling more functionality and automation
With no contracts or upfront commitment required GoCardless offers a risk-free option for businesses looking to automate invoice collection and eliminate late payments.
We can help
Over 70,000 businesses use GoCardless to get paid on time, automate financial admin processes and optimise cash flow - helping business owners and finance managers to reduce stress. Learn more about how you can improve payment processing at your business today.
