Guide to invoicing

Delivering top quality goods and services is just one part of your business journey; the next crucial step is ensuring you get paid for your hard work. Cash is vital to your business, and timely payments keep it thriving. This cash flow depends on the effectiveness of your invoicing process. Invoices are requests for payment, essential for maintaining financial health. However, a single error in your invoice can lead to delayed payment, an incorrect payment amount, or even the inability of your client to process the payment. In this article, we will go through how to invoice correctly, ensuring you get paid on time and keep your cash flow healthy.

What to include on an invoice

HMRC require certain details in every invoice, your invoice must include:

• a unique identification number
• your company name, address and contact information
• the company name and address of the customer you are invoicing
• a clear description of what you are charging for
• the date the goods or service was provided (supply date)
• the date of the invoice
• the amount(s) being charged
• VAT amount if applicable
• the total amount owed

Sole trader invoices

If you are a sole trader, the invoice must also include:

• your name and any business name being used
• an address where any legal documents can be delivered to you if you are using a business name

Limited company invoices

If your company is a limited company, you must include the full company name as it appears on the certificate of incorporation.

If you decide to put names of your directors on your invoices, you must include the names of all directors.

Sending the invoice

Send your invoice as soon as the goods or services have been delivered; better still use an app to send the invoice while you are still at the client’s premises. Do not delay; the sooner you invoice your client, the sooner you will be paid. This is good news for your cash flow.

Ensure the payment terms are clearly stated on the invoice. Payment terms should have been agreed in advance, typically via email.

Make sure the invoice is accurate. Include a detailed description of the goods and services, quantities provided, and associated costs. Calculate the subtotal and grand total, and double-check these figures.

If available use the purchase order number supplied by you client. This clarifies the purpose of the invoice and confirms that the purchase has been pre-approved.

Send the invoice to the correct person or department. In larger companies, this is usually the accounts department. If there is no accounts department, send it to the person who authorised the purchase. These details should have been confirmed in advance.

Make your invoice easy to settle. Offer your clients multiple payment options.

How to send the invoice

There are several options for delivering an invoice to your customers.

In the Post
Mail may be preferable for customers who tend to overlook emails or do not use email. However, it is slower, less secure, more costly and prone to errors due to changing addresses compared to electronic methods.

By Email
Emailing is efficient as email addresses are more accurate and the delivery quicker. The risk of losing an invoice in minimal. Just ensure you sending it to the appropriate person or department.

Online invoicing
Creating an invoice online and providing your customer with a secure link simplifies the process. This method is easy for the customer, and it allows you to track when the invoice is opened. An added advantage is the inclusion of a ‘Pay Now’ button. This feature enables customers to effortlessly make payments using credit cards, debit cards, or services like Stripe or GoCardless.

Writing an invoice email

The subject line is the most important element of your invoice email. Including a reference, such as the purchase order number, in the subject line may encourage the customer to make a faster payment. Consider consulting your customer’s accounts payable department to inquire about their preferred email subject format. Keep the email body concise; a simple greeting and a brief message are sufficient. The invoice itself provides all the necessary details for the customer.

Dealing with late payments

Receiving payment should ideally be straightforward and hassle-free, but unfortunately, that is not always the case. Even when invoices are sent promptly and accurately, with correct details and contact information, some of them may still become overdue.

Poor cash flow is the primary reason many businesses cease trading. Therefore, effectively dealing with late payments is essential.

You might find it uncomfortable chasing payment. You are not asking for a favour; you have delivered goods and services, and your customer should fulfil their part of the transaction.

Here are a few options for overdue invoices:

Start chasing payment right away
Begin pursuing payment on the due date. The longer you wait to contact your customer, the lower your invoice will rank in their priorities.

Make a phone call
Making a phone call can be uncomfortable but is highly effective. This approach may feel awkward for the customer as well, but it works. Take notes to remember the commitments your customer has made.

Avoid accepting cheques
Promote payment methods such as cash, cards, electronic transfers, or direct debit.

Do not let the problem escalate
If you haven’t received payment for goods or services, cease supplying the customer immediately. If the customer relies on your product or service for their own business, this provides the leverage needed to secure payment.

Use a debt collection agency
Debt collection agencies often operate on a ‘no recovery, no fee’ basis. However, for larger debts, the percentage commission can be substantial.

Contact us today

Effectively managing your invoicing and promptly addressing late payments is crucial for the financial health of your business. By implementing the strategies discussed in this post, you can streamline your invoicing process, reduce the risk of late payments, and maintain a healthy cash flow.

To discover how we can assist you in optimising your invoicing process, please don’t hesitate to contact us today.