A guide to invoicing when you’re self-employed
What's an invoice? How do you generate one? Here's everything you need to know.
What’s an invoice?
An invoice is a document issued by a business owner to clients that outlines charges of goods produced or services rendered. Essentially, an invoice acts as a legal document, establishing an agreement to pay between the buyer and seller. It details the charges, establishes an obligation to pay, and can be issued before or after a service is completed.
Why do I need invoices?
Invoices are crucial for maintaining solid financial and accounting records, and are especially important to small businesses. For the most obvious reason, they are important because you need to invoice clients to get paid. Invoices act as a legal agreement between a seller and buyer and establish a formal intent to pay by creating a sales record that cannot be erased or cancelled.
If you are a VAT-registered business, you are also legally obligated to invoice clients and keep record of your financial history.
What to include in an invoice?
The information to include in an invoice varies based on the nature of the business or services. However, here is some core information that should be included in an invoice:
- Invoice or reference numbers
- Your details
- Customer details
- Date of the invoice
- Details of services and the amount charged
- Date amount should be paid by
- Acceptable payment methods
If you have a VAT-registered business, you will also have to include the following details:
- Unit price
- Rate of VAT charged
- Total amount payable excluding VAT
How to create an invoice
Depending on how you go about it, there are several ways that you can create invoices. You could make one manually following templates available online and send them out via mail or email. However, this can be time consuming and you could make mistakes or even forget to send them out.
Nowadays it is simpler than ever to create and send invoices, especially given the number of different accounting software and services available, like ANNA Money and Xero. These generate invoices for you and also take away the hassle of chasing payments. These programmes are great because they can:
- Take away the need to manually create invoices and input information
- Reduce the risk of mistakes in invoicing
- Solve the problem of potential forgotten or overlooked invoices
- Chase late payments for you
Although these kinds of software are very useful, it is important to note that they can be costly. For a small business, justifying the financial cost of getting a premium accounting service can be difficult, so pricing is something to keep in mind.
How to get invoices paid on time
One of the most frustrating parts of being self-employed is having to wait on customers to respond to invoices and pay you. But though it can be awkward hounding customers for payment, the following tips can help ensure that your invoices are paid on time and you get the money you’re owed:
- Use an automated software to chase late payments
- Request a deposit before starting any work
- Clearly state non-negotiable payment due dates
- Set up penalties for late payments
Compare business bank accounts
More guides on Finder
Setting up a dog-walking business
This guide presents everything you need to know about starting a dog-walking business in the UK.
Coconut alternatives: A list of alternative business bank accounts
Discover the alternatives to this financial app for self-employed workers.
Compare current accounts
If you don’t feel like you’re getting much from your bank account, switching has never been easier! Banks and building societies offer up cash and vouchers when you switch, and will handle the boring bits for you.
Best business bank accounts for 2020
Want to avoid fees or integrate with your bookkeeping software? Here’s our pick of the top business current accounts.
Opening a business bank account in the UK
Whether you’re a UK resident or live abroad, our guide takes a look at how you can go about opening a business account here.
Business bank accounts for startups
Started up your own business and want to know more about opening a bank account? We take a look at what’s involved.
Business bank accounts for limited companies
Is your UK business a limited company? We take a look at why you might need a business bank account and how you can go about opening one.
A guide to business expenses when you’re self-employed
Your business expenses can be deducted from your total turnover when working out how much tax you pay. Do you know which expenses are allowable?
Renting commercial property
What you need to know to rent the best commercial property for you and secure a lease on the best possible terms. Plus, learn how the process works and what experts you need.
The complete guide to leasing an industrial property
If you’re looking for an industrial unit for your business, read our in-depth guide to what you need to consider and the terms of the lease you may need to negotiate.
Ask an Expert