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The ultimate guide to creating invoices for your business

Posted by Shivali Anand

December 23, 2021    |     7-minute read (1256 words)

Businesses have to create and send invoices to keep revenue flowing, but the process sometimes gets pushed to the bottom of the to-do list by busy entrepreneurs who need to attend to other tasks. But a good invoicing system saves time in the long run by helping you track business activities, file taxes and settle disputes. 

Examine these best practices for ensuring you send accurate and timely invoices, and that payments are received promptly.

What should your invoice contain?

For a full invoice, whether it’s generated on a PC or an app, you must include the elements below.
  1. A solid headline

Label and identify the invoice so that when your customer opens it, they know what it's about. Also, make sure your invoice's header includes your logo.

  1. A billing number

To distinguish a particular invoice from others, include an invoice number and a unique identifier, such as a project name or number. Numbering invoices makes it easier for you and clients to search for and track related payments.

  1. Name and contact information for your company

Include your company's legal name, email, physical address and phone number in your invoice. With a predesigned template in your invoicing software, that information should be prepopulated. Your consumers will be able to contact you if they have any questions now that this information is easily available.

  1. Dates of issue and invoice

When checking and confirming services or product delivery dates, including the date(s) of service and date of invoicing makes it easier for customers with questions to follow up.

  1. Description of the purchased goods or services

Make a separate line item that details the goods or services given so consumers know exactly what they're paying for. This may include:

  • The name of the product or service that was sold.
  • The billing period, invoicing date and good or service delivery date.
  • Handling fees, sales taxes and any additional money owed by the customer.
  • The number of goods or services offered.
  • Additional materials or hours spent on a project but not included in the original estimate.
  1. A unique message

Thank your consumers for their business with a simple remark at the bottom of the invoice. If you performed something special for the customer, you might additionally note it in the message area.

  1. Amount due in total

On your invoice, include all taxes and state the total amount payable. To emphasize this figure, make it bold and slightly larger than the surrounding text. Also, have various payment options and related bank account information so that your consumer understands payment options.

  1. Terms of payment and the due date

On your invoice, provide payment conditions and late payment and charge information if consumers fail to fulfill the requirements. If you include the due date on your invoice, customers will know how much time they have to pay and how much more they will owe if they pay after the due date.

  1. Name and billing address of your client

Make sure that the customer's name, title and contact information, such as their email, billing address, phone numbers and physical address, are correct before sending the invoice.

The importance of accurate invoices

It is vital to your business’s profitability and cash flow that your invoices are professional and thorough. Here are some other key reasons why invoices must be precise.

  • To obtain on-time payments – Companies usually do not pay until they get bills for the goods and services received. After a transaction is complete, swiftly preparing and submitting proper invoices will help you get paid or collect payments on time. Setting up recurring billing for returning clients will help speed things up even more.
  • To ensure legal protection – Invoices can serve as legally enforceable agreements between a company and its customers, shielding it from legal action. Invoices allow you to keep track of the items or services you've provided, as well as the money you owe and the firms involved.
  • To develop marketing strategies – Invoice records can help you identify peak hours for your products or services, as well as the most- and least-popular items or services you offer. Create corresponding marketing plans based on these patterns.
  • To track sales – Invoices allow you to record and track sales and manage cash flow. They can also help determine the average time it takes to receive payment from clients, as well as the status of payments and transaction dates.
  • To analyze your business – Invoices include a trove of information about how sales fluctuate over time. Mine that information to develop realistic business projections. They can also assist you in identifying top-performing salespeople and the revenue they generate.
  • To file taxes – Invoices serve as documentation for submitting taxes or conducting an internal audit. 

12 best invoicing practices

The better your invoicing practices, the fewer inquiries you’ll receive from clients regarding billing. We've compiled a dozen recommended practices to precipitate on-time submission and payment of invoices. 

  1. Take care of your contract

    – Contracts are legally enforceable instruments, and that should influence what you include on your invoices. Ensure you delineate necessary facts and clauses. It should specify what legal steps you can take against a customer who doesn’t pay.

  2. Provide details

    – Explain each component of the overall price of delivered items or services, such as packing and delivery charges, sales or service taxes and the hourly rate. If you provide exact details, customers will better grasp how you arrived at the total amount.

  3. Send invoices as soon as possible

    – If you expect invoices to get paid promptly to help maintain cash flow, submit the invoice when you finish a project or deliver a product.

  4. Consider using read receipts

    – Use your bookkeeping/invoicing software to enable read receipts so you know when customers open your invoice. This information lets you know when to send a payment reminder

  5. Send professional reminders

    – While it’s aggravating when clients take a long time to pay, maintain a professional demeanor in your follow-ups. Send a pleasant reminder by text or email, or call to confirm they've received the invoice. Always communicate directly with the person in charge of the company's finances and who has the right to issue payments.
  1. Emphasize payment terms

    – Define payment conditions in your invoices so clients know the payment due date and any late fees you may impose (as determined by the state, if applicable) if they do not pay on time.

  2. Reward early payment

    – If your clients pay early or before the due date, you may want to consider giving them a discount on that invoice or a future one. You may also wish to provide a bonus for referrals.

  3. Provide thank-you notes

    – Thank clients for making timely payments, express gratitude for their business, and ensure availability for future queries or issues. This courtesy leaves a pleasant and lasting impression on customers. 

  4. Include accurate, complete information

    – Ensure invoices have the correct information and are sent to the right individuals. Always include the invoice date, an invoice number for tracking inventory and business progress, the total amount owed, the due date and the correct billing address. Provide additional information that your customer may need to process the payment request, such as purchase orders or authorized timesheets.

  5. Maintain a positive working relationship with clients

    – By staying in touch with clients, you’ll know better whom to contact if there is a delay. When reaching out to a customer for a payment, keep the following three practices in mind:

    • Notify the customer when you first send an invoice.
    • Confirm receipt of the invoice a few days after it is sent.
    • Check on the status of your payment before it's due.
  6. Use a cloud-based invoicing system

    – Invoicing software lets you send invoices and reminders in a timely manner. Most will also back up and save invoices on the cloud, making them easily accessible. They also enable you to keep descriptions of various items or services and instantly add them to invoices.

  7. Provide multiple payment options – Speed up the payment process by offering more than one payment option, and include those options on the invoice. 

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