How to get paid on time: the rules of Invoicing Club

You create invoices because you want to be paid for goods and services you've sold.

There are other important reasons for raising invoices but nothing else comes close to the objective of getting paid.

Here, Michael Austin from Blue Dot Consulting gives a breakdown of key things to keep in mind when invoicing clients.

The context

This is where your invoice typically sits in the sales process:

1. Agree what you're going to sell to your customer.

2. Agree terms – price, payment terms, delivery times.

3. Deliver the goods/services.

4. Send your invoice(s).

5. Get paid.

Your invoice must be consistent with steps one, two and three otherwise you open the door to delayed payment.

How to create an invoice

I always advocate that a business uses bookkeeping software and that invoices are created in that software because:

• The bookkeeping is done when the invoice is created.

• You can see at a glance which customers owe you money.

Alternatives include creating your invoices in Word or Excel, or in a CRM/e-commerce system if you have one.

Whatever you use to create your invoices, make sure they are consistent, clear and unambiguous.

Don't go overboard on the design because most invoices are produced, sent and processed electronically and these days no one really cares what they actually look like!

The details you must include on your invoices

Oddly, the first on my list is not legally required, but include your bank account details!

The details that HMRC says you must provide by law are:

• Your company's details (name, address, contact information, etc).

• Your customer's details.

• A unique invoice number for identification.

• A list and description of the goods and services provided, including quantity.

• The individual price of the goods and services.

• The date of supply for the goods and services.

• The issue date of the invoice.

• The total amount owed.

• The VAT amount if it applies – see below.

And returning to my theme of making sure you get paid, don't omit any information that your customer requires. The most common of which is the purchase order number. Make sure there's a space for this.

The "legals"

There are two main areas of law to follow – record-keeping, and VAT.

Sales invoices are part of your business records, so you need to create them.

A simple rule to follow is that businesses and limited companies should keep their records for six years from the end of the last financial year.

If you're VAT registered, then your invoices must follow some additional rules.

Invoice anxiety

It's not uncommon for a service or project being delivered to take on a life of its own and cost more than anticipated.

The real world often turns out a bit different from what was agreed.

And this can create anxiety over raising and sending your invoices. We've all been there, it's not uncommon.

Be transparent and sensible – but send your invoice. The chances are it will be acceptable but, if you need to have a discussion with your customer, at least your invoice is the starting point.

One of the benefits of using bookkeeping software is you can automate some or all of the invoice process. This can take a lot of the anxiety out of the equation.

Set up and stick to consistent invoicing procedures

Invoice promptly, don't delay. At the very least, have one invoicing run each month and set aside time to do it properly.

Have a clear, consistent invoice layout. If you create your invoices in Word or Excel, convert them to PDF before you send them so they can't be easily changed at the other end.

Many businesses use software to read and process incoming invoices, so use a format that makes it easy for the software to extract the details correctly.

Ideally, send your invoices by email as a PDF attachment and avoid sending them as a link.

Final thoughts

Don't overlook the legal aspects of invoicing, but the primary objective is to get paid on time – that's the first rule of Invoicing Club!

Each of your invoices should be clear, complete, accurate, free of surprises and easy to pay.

Set up a process to invoice regularly and keep to it. Accounting software makes invoicing so much easier and can reduce invoice anxiety.

Read more

• Invoicing for SMEs

• Free invoice template

• Invoice finance explained: how it works and when to consider it

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