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.

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 company name, address and contact information
  • Customer details, including their company name and address
  • Date of the invoice
  • Details of services provided
  • The total 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. If you do choose this option, it’s crucial to set aside some time each day or week to catch up with your invoicing and make sure you keep solid records.

A much easier option is to use accounting software and services 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.

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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 (this will only be suitable in certain circumstances)
  • Clearly state non-negotiable payment due dates – common invoice timeframes for payment are 14, 30, 60 or 90 days
  • Set up penalties for late payments

Keep in mind that under the Late Payment of Commercial Debts Act 1998, small businesses are permitted to charge up to 8% interest plus the Bank of England base rate on late payments. But you must make this clear to your customers in advance of starting the work to avoid any disputes.

Finder survey: Are you currently self-employed?

ResponseYorkshire and the HumberWest MidlandsWalesSouth WestSouth EastScotlandNorthern IrelandNorth WestNorth EastGreater LondonEast of EnglandEast Midlands
No89.41%85.22%89.39%86.96%84.77%84.21%79.17%86.78%85.71%68.52%86.21%87.5%
Yes10.59%14.78%10.61%13.04%15.23%15.79%20.83%13.22%14.29%31.48%13.79%12.5%
Source: Finder survey by Censuswide of 1032 Brits, December 2023
We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

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