Invoicing can be a daunting task for sole traders, especially if you’re new to the game. But don’t worry, we’re here to help.
This guide will walk you through the process step-by-step so that you can get started on issuing invoices like a pro.
What Is an Invoice?
An invoice is simply a document that itemizes the products or services you provided to your customer, along with the corresponding prices. This serves as a record of the transaction and helps your customer (or client) keep track of what they’ve purchased from you.
Now that we know what an invoice is let’s move on to find out what makes a good invoice.
Key Elements of a Small Business’s Invoice
There are certain key elements that should be included in every invoice you send out. These include:
- Your business name and contact information – This should include your business name, address, phone number, and email address.
- The customer’s name and contact information – Be sure to include the customer’s name, address, phone number, and email address.
- A unique invoice number – Assign each invoice a unique number for reference purposes. This will come in handy if you ever need to track down a particular document.
- The date of the invoice – Include the date that the invoice was issued.
- A description of the products or services sold – Be as specific as possible so that there is no confusion about what was purchased.
- The quantity of each item sold – If you’re selling multiple items, be sure to list the quantity of each.
- The unit price of each item – Include the cost of each individual item.
- The total amount due – This is the grand total of all items purchased, plus any taxes or fees.
- The payment terms – Include information about when the invoice is due and how you would like to be paid (e.g., by check, cash, or credit card).
- Your signature – A physical signature is not required, but you may want to include a digital signature (e.g., using software like Adobe Acrobat) for added security.
Creating an Invoice in 5 Steps
Here are the steps you will need to take when creating an invoice.
Step 1: Choose an Invoice Template
The first step is to choose an invoice template. There are a variety of templates available online, or you can create your own using a word processing or spreadsheet program.
Step 2: Enter Your Contact Information
The next step is to enter your contact information. This should include your business name as the header, address, Australian Business Number (ABN), phone number, and email address. If you’re creating your own invoice, you may align this chunk of information to the left.
And don’t forget your logo. (You can place it in the header along with your business name).
Step 3: Enter the Customer’s Contact Information
The next step is to enter the customer’s contact information under your own contact info. Be sure to include the customer’s name, address, phone number, and email address.
Step 4: Enter the Invoice Details
The next step is to enter the invoice details on the right-hand side of your document. This includes the invoice number and date.
For the description of the products or services sold, the quantity of each item sold, the unit price of each item, and the total amount due, make a neat and tidy table.
At the bottom, add any additional notes, your payment terms, and finish with a thank you note to your customers.
Step 5: Print or Email the Invoice
Once you’ve entered all of the necessary information, the final step is to print or email the invoice to your customer.
A Better Way to Invoice
Manual invoicing – like outlined above – can be time-consuming and error-prone. If you want to save time and automate your invoicing process, consider using online invoicing tools like FreshBooks and MoonInvoice.
These tools provide you with a one-stop solution for invoicing and make it super-easy for sole traders like yourself to handle your own finances without the help of a bookkeeper or accountant.
Most online invoicing apps allow you to:
- Track payments and see who has paid and who hasn’t
- Send automated reminders to customers who haven’t paid
- Accept online payments so that you can get paid faster
- Integrate your invoicing app with accounting software so that your finances are always up-to-date
Most Common Invoicing Errors That You Need to Lookout For
Before we end this article, we want to quickly touch on some of the most common invoicing mistakes that small business owners make so that you can avoid them in your own business.
- Not including an ABN or a GST – You must include your Australian Business Number (ABN) and GST (if you’re registered for it) on all invoices that you send to customers. If you don’t, you may be subject to penalties from the Australian Taxation Office (ATO).
- Including too much information – An invoice should be a simple document that includes only the essential information. Avoid adding unnecessary details or using too much “fluff” language in your invoices.
- Making your invoice look unprofessional – Be sure to make your invoices look professional. Use high-quality paper, avoid typos and grammatical errors, and use a simple yet stylish layout.
- Not including payment terms – Always include your payment terms on invoices so that there is no confusion about when you expect to be paid.
- Not following up on late payments – If a customer doesn’t pay an invoice on time, follow up with them as soon as possible. Many business owners are afraid of offending their customers, but the truth is that most customers understand that businesses need to be paid in a timely manner.
- Failing to keep accurate records – Be sure to keep accurate records of all invoices that you send and any payments that you receive. This will come in handy if there is ever a dispute about an invoice or payment.