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.

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For many self-employed individuals, having stable finances and reliable cash flow are integral to being able to maintain their small business or side-hustle. For this reason, invoicing is probably one of the most important things to master.

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

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Name Product Interest Monthly fee Overdraft
Tide
0%
No monthly fee
No overdraft available
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Amaiz
0%
Free Starter plan, or £9.99 a month for Advanced account
No overdraft available
CardOneMoney
No interest
No monthly account fee for the first three months*
No overdraft
*£12.50 monthly fee thereafter inclusive of transactional fees
ANNA
0%
Starts from £0
No overdraft available
Starling Business Account
0%
No monthly fee
Overdraft available
TSB business banking
0%
Up to 25 months* free day to day banking
Planned overdraft available subject to acceptance
*25 months free when keeping your account within agreed limits. £5 fee applies after this period, but will be waived if you maintain an average monthly balance of £10,000.
Cashplus Business
0%
No monthly account management fees, annual account fee is £69
Up to £2,000 of credit, using it costs £1.50 a day
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