Invoicing: How to create a business 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!

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.

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.

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 to identify any issues on your business invoices. You can now determine if changes are necessary, implement them and monitor the success of the modified invoices.

Heather Smith, an MYOB Certified Consultant and Specialist Trainer, provides business management software solutions which generate accurate and timely financial information that the business owner can use and understand.

9 comments | Add your own 1 2 | Next» View all»

Hi Heather - really good point about putting bank deposit details on invoices. So many people forget that.
Also, unless I missed it, should be mentioned that everyone is required by the tax office to have their ABN (Australian business number) on all invoices. And it should be readable.
In my MYOB software, every time an ABN is missing it asks me if I need to change a tax code and take out extra tax. So, always best to have the ABN for every customer and on every invoice. Karen Curran from Springwood
Karen,
Yes you are correct. If you read the ATO link it states the need for a supplier ABN, and a customer ABN, if the purchase is over $1000.
I also encourage my clients to check the ABN validity of all new suppliers - http://www.abr.business.gov.au to ensure that they are actually registered for GST and entitled to claim it off you. You don't want to end up paying it twice! Heather Smith from Brisbane
Thanks for this Heather - I have recently started my business and my first invoice went out just as 'Invoice' and someone told me I should have "Tax Invoice". But you have clarified that as I don't charge GST it's technically just an invoice. That's a relief - I didn't want my first client to think I was useless!! Marie Chandler, Office Support Online from Brisbane, Queensland, Australia
Karen - Thanks for your article. It brought back memories of my first business and the trouble we had getting in our invoicing right. Simple things like providing bank account information, a reference number for the customer to enter when they deposit funds (the eternal drama of working out who has paid) and a due date increased our billing cycle. As system developers, we decided there had to be a much easier solution to this problem and PeopleHub was born. Matt McGownfrom PeopleHub Direct Debit Solutions from Brisbane - www.peoplehub.com
Matt ~ It looks like an interesting business ~ Heather Heather Smith from BRISBANE
Heather, I have to take exception to point 1 - as a solo operator, every interaction with my customer/ client has to be a selling one (Read NOT hard Sell). I could not tell you how many times a customer on being handed my invoice asks about another item I sell or do, listed on the invoice. On an A4 page there is ample space, I also pre print my own carbonless invoices so that I can update or change the invoice format at any time, eg when I had to add the ABN, BSB & acc't no etc and also my list of products. As a solo operator I cannot afford to have glossy advertising brochures for everything I do (Insect screens, screen doors etc). The ONE document I can guarantee every customer large or small READS FULLY is my invoice. Just my thought. Thanks for your informative notes. Tony from Tamworth NSW

9 comments | Add your own 1 2 | Next» View all»

Add Your comments

Preview comment

Name

Website *

Town / city and country

Email (never sold, displayed or given away)

* This will link your name to your site. So please avoid self promotion elsewhere! We delete spam, disrespectful or off-topic comments.