Money / Financial management

Business invoicing: How to create an invoice

After years of working in Management Accounts, the same invoicing errors keep cropping up. So I'd encourage you to print out a copy of your business invoice and discover whether you’re guilty of delaying your own cash flow!

20 March 2008 by

Read on for tips on how to create an invoice.

Presentation of your business invoice

There is no approved standard for the format of business invoices. That said, an invoice contains a lot of important information which should be presented in a clear and legible manner.

Within three seconds, you should be able to circle the following on your business invoice:

1. The invoice number
2. The due date
3. The total amount due.

If you failed this task you will certainly need to look at the invoice’s format.

What information should be present on the business invoice

1. Business name

Some business have the misconception that an invoice is a promotional tool, with logos, brand names and fancy interlocking letters, all of which cloud the purpose of the invoice. While branding is important, KISS! Keep it Simple Stupid! The invoice is not an advertising document, it needs to convey the name of your business, and/or who payment should be made to in a straightforward way.

"An invoice contains a lot of important information which should be presented in a clear and legible manner."

2. Business address

Ensure the address where any correspondence should be mailed to is clear and legible. Pay close attention if your logo incorporates the address – check that it is readable when printed in black and white.

3. Telephone number

There should be a phone number on the business invoice that your customer can call for assistance with any queries.

Want more articles like this? Check out the financial management section.

4. Purchase Order number

The Purchase Order number should be clearly stated. It is your record that the customer has initiated and authorised the expenditure in question. You can therefore assist the matching process by highlighting the purchase order number.

If you don’t use a formal purchase order system, I suggest you use the surname, in CAPITALS, of the person at the company who authorised the payment.

5. Invoice number

The invoice number is used as a control feature on many accounting packages; if you accidentally invoice a vendor using the same invoice number, even if the date and amount are different, payment could be refused. So do not repeat invoice numbers, even over an extended period of time. If the number has been repeated, the invoice may be held up, and thus payment may be delayed.

6. Size of paper

There should be enough blank space on an invoice to allow for additional information to be added to the invoice. The Accounts Payable department may choose to add a date stamp, authorising signature and account allocation.

In Australia, our offices are set up to match A4 sheet size and if you choose something outside of this norm, locating and filing the invoice will be more cumbersome for the companies you are doing business with. Small invoices do get lost and a lost invoice can easily delay payment.

7. Type of paper

If you are mailing a business invoice, I would encourage the use of distinctive coloured or textured paper, so it is easy to find your businesses invoice amongst a pile of bills to be paid. Emailed invoices are a legal and environmentally acceptable way to send invoices.

8. Payment details

Make it easy for companies to pay you, offer them a variety of alternatives and all the payment details they’ll need. If they were to make a payment via cheque or postal order, they will need the account name, number and address details. If they are to pay directly into your bank account, they will require your account name, BSB number, and account number.

9. For taxation purposes

When it comes to invoices, this is probably the number one mistake I see. Solo Flyers issue Tax Invoices claiming GST; even though they are not registered for GST. If you are not registered, you are only issuing an Invoice, not a Tax Invoice, and you cannot claim GST.

I suggest you refer to the easy to read ATO publication entitled How to set out tax invoices and invoices (NAT 11675-08.2004)  to ensure you are compliant.

I hope this article helps you with how to create an invoice. You can now determine if changes are necessary, implement them and monitor the success of the modified invoices.

Heather Smith

is a Chartered Certified Accountant & Xero Accounting Advisor specialising in moving businesses to the cloud, improving productivity and profits. She’s written six books including Xero for Dummies & Learn Small Business Start-Up in 7 Days.

Comments

  • Jim

    I’m looking at starting a invoicing co. for small business owners. Does anyone have any suggestions as to what I should charge my customer to send a INVOICE for them?
    I’m thinking of charging by invoice, but not sure what price to charge?

    • Heather Smith

      are you effectively working as their bookkeeper – I am not sure what you mean otherwise?

  • Jim

    No, I am just looking to do their invoicing for them.
    Guys such as plumbers and electricians who don’t have the time to do their billing on a regular basis. I would offer to create an invoice for them and send it to their customer.
    Hope this makes sense?

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