Generating an online invoice is an option that is available to everybody conducting business in this age of high-speed communications. It doesn’t matter if you are an offline business, a sole entrepreneur or even a blogger or affiliate marketer–we all need to get paid, and invoicing is one of the most popular ways to accomplish this.
When it comes to requesting or making payment, invoices work best, as they act as record of transaction for both sides. By implementing an effective invoice creation tool and solution in your day to day operation, this option makes doing business easier, because one does not have to create invoices manually or from scratch.
There are many templates available on the web and most of them are free. Let’s now take a look at what an invoice is, why your business should be using them, and how to get started with your first invoice template today.
What is an Invoice?
An invoice is a document that records the sales or transactions of any business. Whether you are a freelancer or a company, creating an invoice for every service that has been provided is important. The invoice establishes an obligation that the customer or buyer of the product or service will pay to the service provider. The invoice contains all the necessary details that establish an agreement between the two parties. It is a bridge between professionals.
Basic parts of an Invoice
Invoices can have a unique template or look for every freelancer or business, however, there are basic parts that should be present in order for the document to be considered an invoice.
- The label “Invoice” should be part of the invoice.
- The seller or service provider’s name, address, and contact details should be included.
- The buyers name and address should be included.
- The date that the invoice was issued and the payment due date should be present within the document.
- There should be a specific invoice reference number for every invoice issued.
- There should be a description of services provided or rendered, including the breakdowns of each transaction.
- The total amount charged and tax information, if available, should be present.
- Available payment methods should be indicated, such as cash, credit card, and other payment methods available for your company, your business and in your area.
Given that the basic parts of an invoice should be present, the style or format for them is flexible to the needs of a business.
Online Invoice Generators
There is much to be said for the online invoice generators available on the internet now. While most of them are free, providing a user with a basic template with which to fill in information, there are some that epitomize the cutting edge of the online invoice generation, such as FreshBooks Cloud Accounting. By using this intuitive invoice generator not only can you create basic invoices, you can also customize them into twelve different languages, include estimates and proposals, accept credit cards directly through the invoice, and even get updated instantly as to when the invoice is viewed and also when it is paid. The invoice service can be accessed by an app on your mobile phone which gives you more versatility as an entrepreneur or a freelancer.
Making use of a good invoice template will save you time making your invoices in the old fashioned way of actually writing them out physically and also in figuring out a complicated template online. Simplicity is key so that you can focus your time and energy on your business instead of worrying about creating a professional invoice in order to get paid for your services.
A good invoice template should help you accept payment in different ways. It should also help you organize your invoices and save you time. This means that you will not have to fill in the template every time you use it. It should be customizable so that it reflects a professional look as well as a unique visual signature that you may want for your business or service. Sending invoices online and even through an app on your mobile phone is great, but you may also want to consider the template you are using can be downloaded and printed easily so that you have physical records of your transactions.
The Invoice Process
Whether you are using an invoice template that you will print out or are sending the invoice to your customer through the internet, keep in mind that the invoice is prepared after the service is provided or the product has been delivered. First, the customer is clearly identified. And then, the product or service is clearly defined. This includes the name of the product or service, the quantity of the product as well as the length of time that the service was provided, and also the rate of the service (per hour) or item (per unit). Each item is identified and given a line on the invoice. All the lines are then totaled for the final amount.
Discounts can be applied to your services or products. If so, they should be identified. Discounts can also be connected to the manner of payment, depending on which methods you prefer, such as cash or credit card. Another element to factor into the invoice are the terms of payment. This means identifying when you want the customer to pay or when the entire balance of payment is due. This can also translate to discounts for early payment. When the client or customer has paid in full, the invoice number or code is included in the sales receipt. This transfers an account whose payment you are waiting to receive into an account that you have already received.
Key Information of an Invoice
Invoices usually contain a company brand or logo on the heading of the document as a signature of their products and services. More importantly, they should contain the company or freelancer’s name as well as their contact information. This is actually a requirement and not just a matter of style. An invoice should also contain the name, address, and contact information of the client. An invoice number is a code that helps you to be organized about this process. It helps you keep track of your client’s payment status. It is also important for an invoice to have a date since this tells you when the invoice has been sent. These parts of the invoice help you file your invoices in an orderly manner.
There should be included in the invoice clear and concise descriptions of the services rendered or products provided. This way there will be no confusion on the side of your client as to what they are paying for. Matching with the description of each item or service, there should be the cost of each item or service along with the rate of each. All these costs will be added to the total amount that the client should pay for.
The terms of payment are a key element for any invoice. This part spells out how the client should pay for the items obtained or the services received. If you have a refund policy, this is the part that states that eventuality. For late payments, the penalties should be clearly stated as well. Choose what payment methods work for you and state whether the client should pay through cash, credit card, check, or bank transfer. If it is the latter, then the invoice should contain the bank account information so that the client will know how to pay you.
A standard invoice has twelve parts compared to other more specialized invoice formats. It should declare that it is an “Invoice”. Each invoice should have a unique number code to distinguish it from others. Both your company name and address and that of your customer or client are clearly stated in the document. It has a summarized description of the goods or services. Also, the dates of supply are present along with the date in which the invoice was created. The amount of individual goods or services are clearly broken down within the invoice and the total amount to be paid is present also. If there is a purchase order number, then that should be included along with the terms of payment and the instructions for paying the invoice.
VAT Registered Invoice
A business who is registered for Value Added Tax should have a VAT registered invoice. This is not so different from other invoices, however, a VAT invoice needs to contain additional information than just what is contained by the standard invoice. Along with the unique invoice number, business name and address, customer’s name and address, and the date that the invoice was issued, there should also be a VAT number in the invoice. The VAT registered invoice should have the total amount for the items or services excluding Value Added Tax. Then, the total amount of VAT should be indicated. The price per item excluding VAT as well as the quantity of each item should be indicated in the document. Finally, it should contain the total amount to be paid which includes the Value Added Tax.
Invoice payment terms
Every business or freelancer can customize their terms of payment on their invoice. You can choose to stipulate PIA or payment in advance for new clients or those who have an inconsistent payment history. This means that you are requiring the client or customer to pay in full before delivering the goods or service. Net is a common term of payment which indicates the time before the payment is due. N30 or Net 30 means that the payment is due within thirty days. End of the Month can be added to the payment terms. This means that the time will start at the end of the month that the invoice is issued. Net EOM 30 stands for the payment is due thirty days from the end of this month that the invoice has been issued. A discount can be given to your clients if they pay within the time period you specify. Let us say you want to extend a 5% discount if the customer pays within 15 days of the invoice being issued otherwise the full amount is due within 30 days. The standard shorthand for that would be 5/15 Net 30. Offering discounts is a good motivator for your clients to pay sooner rather than later. Stage payments are usually practiced for big projects in order to minimize the risk that the cash flow will be negatively affected by a missed or late payment. Some companies or service providers may ask for the payment to come in 2 stages of 50% up front and 50% upon completion. Others may prefer different stages to be applied. 75%, up front and 25% upon completion of the project or delivery of the goods may be more convenient for you. Whichever is the case, stage payments are usually applied to big transactions.
Invoice payment methods
Cash and check payments may be more common in the local setting, but for bigger business transactions, especially those that cover long distances, a bank transfer may be more convenient for both parties. Bank transfers or Banker Automated Clearing Services (BACS) are electronic payments from one bank account to another. They usually take three days to clear and be available for withdrawal on the other end. Important information to add to an invoice with a bank transfer payment method would be the name of the bank, the sort code, and the account number. International business transactions, especially between European countries, New Zealand, and Australia require IBAN information to be present in the invoice. An International Bank Account Number allows you to receive payments in foreign currency. Most banks use a BIC or Bank Identifier Code but for transactions with companies from the USA or CANADA a SWIFT code is also needed. A Society for Worldwide InterBank Financial Telecommunications code helps identify your specific bank among all the other banks in the world. The invoice should include a BIC, IBAN, or SWIFT code if the payment terms call for it.
Generating online invoices allows companies, entrepreneurs, and freelancers to operate more smoothly. The ability to generate invoices that can be downloaded and printed or even sent directly through email to clients or customers even around the world sets a new standard for conducting business.
By familiarizing yourself with the basic information that is needed to generate online invoices, you are equipping yourself with tools that will help you collect payments for your goods or services.