When you run your own business, chasing your client for money is often the hardest part of the job. It is time-consuming, frustrating, and can have a serious impact to your cash flow.
Creating an invoice
Every business is different however the requirements of an invoice are almost always the same. I have detailed points below which will make sure you have covered the basics:
Your company name, address and contact details
If you are registered with companies house, detail your registration number
A unique invoice number
The company name and address of the customer you are sending the invoice to
The date the invoice will be issued
Include your company branding / logo
You will then need to provide details about the goods or service you have supplied:
A clear description of what you’re charging for
The date the goods/services were provided
The amount being charged and the total amount owed
The VAT amount, if your business is registered for VAT
Details of how your customer can pay you – bank account details for bank transfers/BACS, cheque, PayPal. Make paying easy and convenient.
Payment terms - setting out the deadline for when you require payment. Many companies choose 30 days however if you are a small business you may want to make this less. Keep your wording simple.
Offer incentives - one of the most effective ways to motivate your clients to pay an invoice is by offering incentives. Even a discount of just 2% off the invoice for paying early or on-time is enough to persuade a client.
Creating a pricing structure and terms of payment
When starting up your business it is advisable to have a clear policy for your pricing and payment terms. It should be clear how much you charge for certain goods or services, and at which point you expect to be paid by your customer.
Depending on what product or services your business offers, it may be reasonable to ask for a deposit. For example, if your business is a landscaping company, you may ask for material costs and a percentage of labour. This will vary by trade, but there are some good principles that every business owner can follow when drafting an invoice.
Automate the process
Using an invoicing software can help make your processes more efficient and avoid the cumbersome task of creating paper invoices. I use Xero Accounting Software which offers many benefits to the invoice process:
Add your logo to professional templates
Create your own custom invoices
Set up repeating invoices and allow Xero to email them automatically to customers
Bulk Invoicing
Create and send invoices straight from your phone
Take online payments with a credit or debit card or PayPal account
Assign expenses to a sales invoice to recoup money from customers
Replicate previous customer invoices
Automating the invoice process will help save you time and you are likely to receive payment quicker.