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!
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.
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 with how to create an invoice. You can now determine if changes are necessary, implement them and monitor the success of the modified invoices.