What is an invoice?
When you’re just starting out in business, with only a few invoices to track, invoicing is pretty straightforward. But as your customer numbers grow and the volume of work grows, it can become hectic and messy. And it can start to eat into the evenings and weekends you used to enjoy.
If you feel this way, you’re not alone, and that’s why we’re here to help. We know that once you’re in business, you need to get paid. Fast. And very often, being paid on time is essential to a business’s cash flow and its ability to survive and grow.
So why do invoices matter?
Your invoices are one of the ways you communicate to your customers. They show the goods or services you’ve supplied and what you’re owed in return. An invoice shows how much your customer has to pay, when the payment is due, and the ways they can pay.
Your invoices are also tax documents. You’re required to keep copies to show how much you earned – and if you're GST registered, how much tax you’ve collected.
How invoicing works – from start to finish
There’s more to invoicing than you might think. It’s a process that begins when you take on a job and only finishes when the money comes in the door. There are quite a few steps along the way.
No-one wants to be stuck in the office doing accounts, so automating as many steps as you can you can really helps.
Details of what goes on an invoice
Some of the details in an invoice stay the same in each one you send and can be set up in a template that you use each time. For the content that varies, you can create placeholders in your template.
The payment terms and methods of payment you offer may change occasionally. If they do change for a particular customer or job, you’ll need to remember to alter them.
Here's more detail about what goes into an invoice.
- Logo: Your business logo if you have one.
- Invoice title: If you are registered for GST, the title of the invoice should be 'Tax Invoice'. If you are not registered, you can name the document 'Invoice'.
- Invoice number: A unique invoice number which distinguishes each invoice from all others.
- Invoice date: The date the invoice is issued.
- Purchase order number: The purchase order number if your customer has given you one. Otherwise the name of your contact person can be helpful to increase the chances of being paid promptly.
- Customer number: Your customer number if you use them to identify and keep track of customers.
- Tracking number: The tracking number for shipping if applicable.
Your business details
- Name and address block: Your business name, address and contact details. Freelancers and sole traders can use a personal name.
- Contact person: The name, phone number and email address of the person to contact if the customer has queries about the invoice.
- Tax or business number: Your Australian Business Number (ABN). If you don’t add one, your customer may withhold 47% of the invoice value.
- Name and address block: The customer’s name and address to send the invoice to. If it’s an organisation, check their legal name as it could be different from the trading name you’re familiar with.
- Shipping address: The name and address to send the goods to. May be optional if it’s the same as the invoicing address.
List of goods and services
- Description: A brief description of each of the products or services you supplied.
- Quantity: The number of items you supplied or the number of hours you’re charging for.
- Unit price: The price per item or per hour, or the fixed price you agreed upfront.
- Price: The price for that item or service, obtained by multiplying the unit price by the quantity.
- Subtotal: The total cost before GST of all the goods and service listed. Make sure you apply any discounts you’ve offered and include any shipping charges.
- GST: The amount of GST that applies.
- Total: What the customer owes including any discount, the total GST (when applicable) and any shipping charge.
- Deposit required: The amount of any deposit required.
- Due date: How many days (from the invoice date) the customer has to pay and the date when payment is due.
- Discount or late fees: The amount of any on-time discounts or late fees.
- How to pay: The methods of payment you offer, eg, internet banking, credit card, PayPal, cash, cheque. Include your bank account number or a link so customers can pay online.
- Customer name and address block: The customer’s name and address to send the invoice to.
- Invoice and payment details: Details you’ll need to identify who the payment came from and what it’s for including the: invoice number, due date, amount due and amount paid.
Payment terms example
Write your payment terms in plain English on your invoice and make it clear how you prefer to get paid. Here’s an example:
"Create an email address specifically for dealing with invoicing and accounting. For example, set up firstname.lastname@example.org and send all your invoices from that email. It has a psychological impact when it comes to asking to be paid."
Paco Nicole, The Hell Yeah Group, Xero partner