4 Steps To Create An Invoice For Business
EMMA BOWDLER
I’m a cheerleader for women and an accountant bursting with personality.
The fool-proof way to invoice and speed up cash flow
Creating invoices is not the sexiest part of running a small business, I’ll agree with you there, but it’s one of the most crucial. These slips of paper determine whether you get paid by customers or suppliers.
Going for full effect here; they can make or break a business.
With their importance drastically emphasised I’ll reveal that too often I see simple mistakes made by clients when it comes to invoicing, which slows down cashflow.
Here are my fool-proofs tips to creating the perfect invoice.
Know which type of invoice you’re creating
There are two types of invoices and the difference between them comes down to whether you’re registered to pay GST.
The business.gov website summarises the two forms brilliantly, but for the sake of simplicity here’s the go.
• Registered for goods and services tax (GST) – you must provide tax invoices that shows GST was included.
• Not registered for GST – use regular invoices (and don’t include the words ‘tax invoice’)
Create a client services agreement or engagement letter
Many think client services agreements or engagement letters are a waste of time, but I think they’re essential when starting any business arrangement.
In essence it serves as a business contract between your enterprise and clients. It helps set expectations, creates deliverables and increases transparency. They also minimise professional risk and can reduce professional liability insurance (or E&O insurance) premiums.
You can find many examples of client engagement letters online but always have a lawyer look one over before use. We recommend our friends at Enterprise Legal for this service.
Why?
Every case is different and you don’t want to get stuck in an unfavourable loophole should a dispute arise.
Outline the T&Cs
Not setting clear invoice payment terms and conditions is one of the leading causes of missed or delayed payments.
Multiple studies published by Xero reveals approximately 33 per cent of invoices are paid two weeks late, and a total of 60 per cent of invoices are paid late overall.
To get paid quicker create T&Cs.
These are essentially your non-negotiables that will outline how you want to get paid (direct debit payments as opposed to cash, credit or cheque) and when payment should be completed by.
You can also outline a refund policy here as it will put customers at ease.
This should also be created with the aid of a lawyer to ensure they’re actually enforceable.
Seven crucial inclusions to make an invoice valid
Finally, business.gov says that for an invoice to be valid it needs to contain the following seven bits of information.
1. The words ‘Tax invoice’ – preferably at the top
2. Your identity as the seller, such as your business
name or trading name (contact details are optional, but recommended)
3. Your Australian business number (ABN)
4. The date you issued the invoice
5. A brief list of the items sold, including quantity and price
6. The goods and services tax (GST) amount payable (if any). You should display the GST amount for each item separately, or, if the GST amount is exactly one-eleventh of the total price, you can use a statement such as ‘Total price includes GST’
7. The extent to which each item sold includes GST. You’ll meet this requirement if you either:
- Show the GST amount for each item
- Clearly state that the total price includes GST
Communication is key here. Outline your expectations from the start and stand firm. If your customer doesn’t come to the party, they aren’t the customer for you.
EMMA BOWDLER
I’m a cheerleader for women and an accountant bursting with personality.
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