Invoicing is a headache for many people in business, but if you can’t keep track of customer payments, you risk looking unprofessional and losing substantial amounts of would-be profit. The key to invoicing properly is to be prompt – the sooner you request payment, the sooner it will be made, and theRead More
Invoicing is a headache for many people in business, but if you can’t keep track of customer payments, you risk looking unprofessional and losing substantial amounts of would-be profit.
The key to invoicing properly is to be prompt – the sooner you request payment, the sooner it will be made, and the sooner you chase unpaid invoices, the more likely you are to recover any outstanding amounts owed.
Some people are required by law to issue an invoice for any payments received – this is the case if you and your customer are both VAT-registered, for instance.
What is an invoice?
It may sound like a stupid question, but an invoice is far more than just a request for payment – and simply emailing the client saying “you owe me £x” will not suffice.
An invoice should include all of the following elements:
- The word ‘Invoice’, clearly displayed.
- A unique invoice ID number.
- Your company name.
- Your company address.
- Your contact details.
- The customer’s company name.
- The customer’s company address.
- A description of the goods or services provided.
- The date on which they were supplied.
- The date on which the invoice was issued.
- The amounts being charged.
- The VAT payable.
- The total amount payable.
- Your company registration number (if you are a registered limited company).
- The address of your company’s registered office (again, only if applicable).
It’s a long list, and if you are a sole trader, the list is actually longer, not shorter – you must also include your individual name, along with any trading name you are using, and an address where legal documents may be served.
An invoice is an important document, so you should make sure you include all of the necessary information, not only for the sake of compliance, but also because it makes it easier for your customers to pay you, if all of the relevant information is set out clearly in one place.
You have the right to be paid.
You can offer incentives for upfront payment, or for prompt payment upon receipt of the invoice.
Unless you agree otherwise, the default deadline is usually 30 days after the issue date of the invoice.
You can charge statutory interest on late payments – but this is optional, and is often waived as a gesture of goodwill.
Minimising Late Payments
There is only so much you can do to minimise late payments – some clients will inevitably pay late, and some will try not to pay at all, so be prepared to take action on substantial unpaid sums.
But you can reduce your risk of reaching that stage by following the right procedures each and every time you issue an invoice.
Issue invoices promptly and chase them diligently – and politely, even when payments are overdue – and you maximise your chances of being paid in full, plus any penalties or interest.
Taken together, these are the measures that will help to keep your cash flow looking healthy over the long term.