SMALL BUSINESS RESOURCES
What is an invoice?
5 min read
An invoice is a document that specifies what a client must pay the seller for their goods or services.
If you’re a tradie who has repaired a building or a cafe owner that has catered for an event, it’s likely that you’ll need to send one.
What’s the difference between a receipt and an invoice? An invoice is a request for payment, as opposed to a receipt which is the proof of payment.
In the early stages of starting out your business, you’ll probably only have a few of these to track and invoicing will seem straightforward. Fast forward to when your business starts growing with new customers and projects, and invoicing can start to become manic.
Ensuring that you have a strong understanding of all things invoicing is critical to making sure your business maintains a healthy cash flow to survive and grow.
Why is it important to invoice properly?
An invoice is the bread and butter of every small business, and directly results in you getting paid. An invoice is a way to communicate to your customers or clients the service or products your business has provided and what you’re owed in return.
It will let the client know how much they have to pay, when the payment is due, and the ways in which they can pay.
Invoicing is also extremely important for staying compliant with ATO. When you run your own business, you’re required to keep copies of your invoices to report how much you earned and, if you’re GST registered, how much tax you’ve collected.
An organised invoicing process will help you keep track of sales and payments and can be used to follow up on overdue or missing payments.
What exactly is an invoice template?
What’s an invoice template? It’s simply a layout that makes it easy to replace client specific details with the default, stock information.
Providing the necessary fields in the invoice makes it easy to fill in your company and customer details, and information about the product or service you’re selling.
Having a professional invoice template will save you time on manual processing, so you can focus on growing your business instead.
The simplest way to create a professional invoice template for your business is through invoicing software, such as Reckon One.
How to create an invoice template
Many people ask how to write an invoice template. Let’s find out.
What to include on your template may vary from business to business. A tradie may want to list the hourly rate with a paragraph detailing the work and project deliverables, while a doctor may want to list procedure codes for insurance reasons.
The good news is that once you’ve set up an invoice template, you’ll be able to continue to use this each time you want to create an invoice as some of the details will stay the same. For the content that varies, you can create placeholders in your invoice template.
The payment terms and methods of payment you offer may change occasionally. If they do change for a particular customer or job, you’ll need to remember to alter them.
So what information is required on an invoice? An invoice template should include the below information:
- Logo: Your custom business logo.
- Tax title: Your invoice requires a title. If you’re registered for GST, the title of the invoice should be ‘Tax Invoice’. If you’re not registered, you can name the document ‘Invoice’.
- Date invoice issued: The date the invoice is issued.
- Customer name: The customer’s name.
- Invoice number: A unique invoice number which distinguishes each invoice from all others.
- Customer reference: If your customer has provided you with a purchase order number you’ll need to include this on the invoice. If you haven’t been given this information, you can list the name of your contact person at the business.
- Invoice due date: How many days (from the invoice date) the buyer must pay the seller and payment due date.
Your business details
- Business name and information of seller: Your business name, address and contact details. Freelancers and sole traders can use a personal name. Include the details of the person to contact if the customer has queries about the invoice.
- Tax or business number: Your Australian Business Number (ABN). If you don’t add one, your customer may withhold 47% of the invoice value.
- Customer contact details: The customer’s name and address to send the invoice to. If it’s an organisation, check their legal name as it could be different from the trading name you’re familiar with.
- Customer shipping address: The name and address to send the goods to. May be optional if it’s the same as the invoicing address.
List of goods or services supplied
- Item description: A brief description of each of the products or services you supplied.
- Quantity: The number of items you supplied or the number of hours you’re charging for.
- Item price: The price per unit or per hour, or the fixed price you agreed upfront.
- Tax: The amount of tax that applies.
- T. code: Transaction code if applicable.
- Amount: The price for that item or service, obtained by multiplying the unit price by the quantity.
- Subtotal: The total amount before GST of all the goods and service listed. Make sure you apply any discounts you’ve offered and include any shipping charges.
- Discount: Any discount that may apply.
- Total (excluding tax): Total amount before tax with discount applied.
- Tax: Total tax.
- Paid: Balance paid.
- Balance due: Total balance due.
Payment details on the invoice
- Discount or late fees: The amount of any on-time discounts or late fees.
- How the buyer can pay the invoice: The methods of payment you offer, e.g., internet banking, credit card, BPAY, PayPal, cash, cheque. Include your bank account number or a link so customers can pay online.
Make invoicing better with these tips
- The government’s eInvoicing initiative will see invoices exchanged electronically, through a safe and secure network. Creating a more efficient, accurate and secure way to deal with your suppliers and buyers, eInvoicing not only reduces the risk of inception and fraud but also eliminates the need to use paper invoices sent by mail or PDF.
- Ensuring you have a professional design is very important. Every invoice provides an opportunity to market your business and can affect the perception of your brand, client satisfaction, and even how quickly you receive payment.
- When you create an invoice template, you want the design to be simple to read and to stay consistent with your brand. For ease, we’ve put together five tips to follow to create a professional and clean invoice.
- Create an email address specifically for dealing with invoicing and accounting. For example, set up email@example.com and send all your invoices from that email. This will create a stronger impact on the buyer when they’re asked to pay.
- Make sure you send your invoices to the right people, such as the bookkeeper or the business’s CFO. Set crystal-clear terms on the invoice so that you get paid on time, and include late fees associated with late payments on the invoice.
- The easiest way to manage and keep track of your invoices is by using accounting software. An online invoice allows your customers to pay you fast with a simple click of a button, and there’s no risk of it ‘getting lost in the mail’. Here at Reckon, we’re proud to include online invoicing among the capabilities through the invoicing module in Reckon One.
- There will be times when your customers may forget to pay an invoice. Online invoicing software allows you to easily see what’s been paid and what hasn’t, and you can go in and hit the re-send button to anyone who may need a reminder.
Running a streamlined invoicing process will ensure that you send invoices and receive payments in a timely, organised manner. This process is vital to help your business maintain a healthy cash flow and keep growing. Learn more about the benefits of online invoicing and how Reckon One accounting software can work for you.
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