Invoicing: what it is, how it works and its requirements
Get the low down on invoicing!
Let’s get into it! We’re here to crack the nut that is invoicing. What they are, why they’re important, what’s required and how to use them.
What is an invoice?
In accounting terms, an invoice is a time-stamped, legitimate document that records a transaction between a seller (that’s you) and a buyer (your customer or client).
In some not-so-account words, an invoice tells your customer how much they owe you when they need to pay, and what products and services you will provide them. They are the backbone of how you conduct and record your business's sales.
Why are invoices important?
As a business owner, you’re responsible for a wide range of tasks to keep your business running. And oftentimes your top priority can be the simplest one of all. That’s where invoicing comes in. Invoicing is one of the most well-known and reliable tools a business can use and here's why:
1. They keep your customers happy
And who doesn’t want that? Invoices allow your customer to pay you for the products and services you have provided them, and that makes their life easier. If you send them a stub invoice then you have also given your customer a super easy way to pay you 😉
2. They’re professional
Believe it or not, sending invoices can help build trust between you and your customers because it shows that your business, even if small, is a well-oiled machine with professional systems and processes. And if those invoices are coming from a professional accounting software like stub, even better.
3. They keep your customers accountable
We know there’s nothing worse than chasing money you’re owed, and invoices can help you avoid this unpleasant scenario. Invoices have clear outlines of what your customer is obligated to pay when they need to pay and what they will receive in return. It's all there, in black and white, no room for arguments.
4. They keep you organised
By making the switch to stub, invoicing has never been easier and you’ll have records of all your sales, payments, past and pending, available at the touch of a button.
5. They protect you
Touchwood this never happens, but if you ever find yourself in the position where a customer doesn’t or won’t pay you, despite multiple attempts, your invoice can act as proof that an agreed service was carried out, and it can therefore be put to use when taking further action.
What makes up an invoice?
To make sure your invoices are legit, there are a few details you need to make sure displayed:
- “Invoice” label - It might seem obvious, but the word “Invoice” needs to be displayed
- A unique invoice number - Every invoice needs a unique identifier/ invoice number without any replicas
- From: {Your business detail} - name, address, contact details and logo
- To: {Your customer details} - customer's name, address (a physical address or an email address) and contact details.
- Invoice date & payment due date - The date the invoice was generated and the date payment needs to be made by
- A list of products and/or services - title and description of products and services being provided in a separate line, their prices, and the amount or quantity of product or service.
- Total amount due - The total value of goods and services being provided
Want to know how to create an invoice step-by-step? We have a guide just for that
How long should you give someone to pay an invoice?
As the business owner can, yup that's you, you have the ability to set the payment terms when it comes to invoicing. You can also choose to offer discounts for early and upfront payments. Typically options for payments are payment in advance, immediate payment, 7 days, 30 days, or 60 days.
Can I edit and resend an invoice?
As a rule, you can edit and resend an invoice that has missing information or includes an error. However, if this happens, you should never delete the invoice. It is vital for auditing reasons that you hold onto records, even if they are incomplete or incorrect.