How to create a business invoice
Sending invoices is a vital part of running a business. Designed to record the goods or items your business has supplied and bought, or the work or service it has provided, an invoice is a document that is sent to a client or customer that details the amount that is owed and when payment is expected.
Additionally, invoices can also help business owners to keep track of their financial standing. But how do you create a business invoice and what should be included? Keep reading to find out.
How to create an invoice
According to official Gov.uk guidelines, all business invoices must include a certain amount of basic information. Below, we outline each step you need to follow in order for your invoice to be correctly constructed.
What should an invoice include?
Every business invoice you send should include the following information:
Your company name and address
Although this may sound obvious, making sure your business invoices clearly include the name and address of your company is essential. Business contact details, including any relevant telephone numbers and email addresses should also be incorporated. It’s important to note that depending on whether you are a sole trader or a limited company, the level of detail required in this respect varies.
If you’re a sole trader, the invoice must include your name and the name of your business, as well as any address where any legal documents can be safely delivered. On the other hand, if you have a limited company, you only have to include the full company name and registered address as they appear on its certificate of incorporation. However, if you also choose to include the details of one or more of the company directors on your invoices, the names of all directors must be included.
A unique invoice number
Invoice numbers help both you and the customer in question reference and file a specific invoice. With this in mind, the number must be unique to each invoice, and all numbers/references used must be recorded and stored, allowing for future reference.
What invoice number should I start with?
Using a sequential numbering system is the best way to implement this. The most common sequential invoice numbering systems typically begin by using references starting with nine zeros followed by a one (i.e. 0000000001). This would be followed by 0000000002, etc. It’s also important to note that both numbers and letters can be used to create distinctive combinations, meaning it’s easy to produce an almost unlimited number of unique references.
The word ‘invoice’
Again, while it may sound obvious, the word ‘invoice’ should always be included and made very clear at the start of your invoice documents. This is to ensure a customer can clearly identify the document and easily differentiate it from a receipt, credit note or quote.
The product or services you’re charging for
The main bulk of an invoice should be taken up by a description of the product and/or services your business is charging for. These reports don’t need to be overly long, however, they do need to be adequately detailed to ensure your client is 100% clear about what exactly you are asking payment for. This is an important aspect of your invoice because, after all, if your client is not clear about what you are charging for, they are more likely to query the invoice, leading to a potentially delayed payment.
Naturally, a number of dates that provide the customer/client with some timeframes are crucially important when constructing an invoice. As a rule, all invoices should include two main dates. These are:
- The supply date - this is the date your goods/services were delivered/provided to your client/customer.
- The billing date - this is the date the invoice was created and sent out.
Additionally, you may also want to include a date by which you expect to have received payment, as specified in your payment terms. However, this is optional.
The amount due/paid
This is simply the amount to be paid for your goods and services. While each individual cost may be broken down and listed as part of the description of goods and/or services, the total sum of goods/services should be clearly listed at the bottom of the invoice.
This information should be included on all invoices and is there to simply outline the terms and conditions your customer agreed to when it comes to payment. Specifically, this information should be included to highlight the length of time your customer/client has to pay what they owe. For example, ‘Payment is expected within 30 days.’
Payment details should be included to instruct your client/customer how they can go about paying you what they owe. This should list the different payment methods your business accepts (BACS payments, bankers cheques, cash etc) and should also include your business’ bank account references. For example, your sort code and account number.
Do I need to keep a copy of my invoices?
Yes, as a business owner you have to keep copies of all invoices. This is to ensure you can accurately update and provide supporting evidence for all transactions in your business account.
How long does a business need to keep invoices?
In the UK, all invoices must be retained for at least six years from the end of the financial year they relate to. Additionally, they should be kept longer if the invoice relates to equipment or machinery the business had bought and expects to last more than six years, or, the invoice shows a transaction that covers more than one of the company’s accounting periods.
HMRC could financially penalise your business if you are audited and you have been found to violate these rules. Additionally, if invoices are lost, stolen or accidentally destroyed, this must be reported to HMRC immediately. Replacement documents should then be recreated and replaced as accurately as possible.
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