When is the last time you updated your invoice template? If you haven’t looked at the details of your invoices in a while, it’s a great time to check that you’re meeting all of your legal requirements and helping your invoice stand out from the crowd.
Emily Coltman FCA, Chief Accountant to FreeAgent – who provide the UK’s market-leading online accounting software specifically designed for small businesses, contractors and freelancers – gives her top tips for what to include on your invoice template.
The must-have legal stuff
If your business is a limited company or LLP, your invoices are legally required to include its Companies House registered number and address – and if you put the name of one director/member on your invoice, you must also include the names of all the other directors/members.
If you’re registered for VAT you must also include your VAT number on your invoices, and comply with HMRC’s rules about VAT invoices. These rules state that a VAT invoice must show:
- a unique invoice number which follows on from the number of the previous invoice (and remember – if you spoil or cancel a serially numbered invoice, you must keep it to show to a VAT officer at your next VAT inspection)
- the seller’s (i.e. your) name (or trading name) and address
- the seller’s VAT registration number
- the invoice date
- the time of supply (also known as the tax point)
- the customer’s name (or trading name) and address
- a description sufficient to identify the goods or services supplied to the customer
- the rate of any cash discount
- the total amount of VAT charged, expressed in sterling
For each different type of item listed on the invoice, you must show:
- the unit price or rate, excluding VAT
- the quantity of goods or the extent of the services
- the rate of VAT that applies to what’s being sold
- the total amount payable, excluding VAT
And if you issue a VAT invoice that includes zero-rated or exempt goods or services, you must:
- show clearly that there is no VAT payable on those goods or services
- show the total of those values separately
However, if you make retail sales and you make a sale of goods or services for £250 or less (including VAT), you can issue a simplified VAT invoice. And if you’re a sole trader and you’re not registered for VAT, the good news is that you don’t have to comply with all of the rules above – but it’s still a good habit to follow to them as best you can. That way your invoices will look clear and professional and you’ll avoid any unnecessary queries from HMRC or your customers.
The non-compulsory (but equally important) stuff
OK, now that we’ve covered the legal requirements, what else can you do to make your invoices look amazing and work more effectively for your business? Here’s a few ideas to consider:
- Include professional branding
Invoices are a very visible part of your business, so it’s important to ensure they reflect your brand. Make sure you add your logo and use the same colours and fonts as you do elsewhere in your business, and check that the wording of item descriptions and payment terms on the invoice matches your brand messaging (for example, if your brand is “fun and quirky”, make sure your payment terms are not written in lawyers’ English or accounting jargon).
- Describe everything clearly
You don’t want to get a call from your customer querying the invoice you’ve sent them – you want them to pay you quickly! So to avoid this, make sure the description of what you are selling them is as clear as you can, using language that they’ll understand rather than any technical terms.If your customer can see exactly what they’re being invoiced for, they’re less likely to query it and, hopefully, won’t delay paying you.
- Use up-to-date prices
Make sure you use your most recent prices when including the final total payable figure on your invoice – and don’t forget any discounts or special offers that you might have promised to all your customers or to just this particular customer. If you don’t, you may could find yourself in the very embarrassing position of either having to ask your customers for more money, or give them some back!
- Make it easier for customers to pay
Remember your customers are busy people and the more hassle it is for them to pay you, the more likely they are to put off doing so. Therefore make it as easy as possible for them to give you the money they owe.Include your bank account details on your invoices if you’re taking payment from online banking or by BACS – and if you send your invoices by email, try using a service such as PayPal or GoCardless to collect payment from customers, include a link when you email the invoice, so that customers can pay with one click.
- Add a personal touch
Don’t just settle for a bog-standard invoice template: if you have design skills (or know someone that does), try to add a splash of personality into your invoice. Most customers prefer dealing with someone they can relate to, rather than a faceless corporate brand, so don’t be afraid to be creative with your invoice (or the subsequent email reminders you send if clients don’t pay on time).Personality can go a long way when it comes to building rapport with your customers and even if it doesn’t lead to you getting paid quicker, it could be the difference-maker when it comes to them remembering your business in the future.Remember your invoice isn’t just a demand for payment – it’s an important document that supports relationship you’ve built up with your customers. Taking the time to get your invoice right can make it as easy and pain-free as possible for your customers to pay you.
Emily Coltman FCA is Chief Accountant to FreeAgent, who provide the UK’s market-leading online accounting software specifically designed to meet the needs of small businesses, contractors and freelancers. Try it for free at www.freeagent.com.