For all contractors – indeed, for all limited companies, sole traders, and partnerships – the art of preparing an invoice and sending it out is one you have to master quickly.
How quickly you get paid has a direct correlation with what’s on your invoice, the terms of payment you’ve agreed with your client, and how quickly you print it off and send it over to them (or email it to them).
In this article, the BusinessCostSaver looks at everything you need to know about putting together the perfect invoice, together with three different examples for you to model your own on.
How to write an invoice UK
When you issue an invoice, there are certain pieces of information that need to go on it.
Some of that is for legal reasons. The main reason however is that you want to be paid in time and in full for the work you’ve done as fast as possible.
Britain, unfortunately, is swept up in an endemic of late payment. The average invoice now takes 71 days to be paid. And a lot of the time the reasons clients give are based around alleged deficiencies on invoices.
So, what needs to go onto your invoice?
Your company details
First, your company details – your company name and company address.
Putting a telephone number and an email address on there is also recommended. If there are problems with your invoice, it may be that it’s dealt with by a separate department within your customer’s organisation. Don’t make the mistake of assuming that, just because the person who buys from you has your contact details, that accounts will too.
By putting down your contact details, they can phone or email you to tell you if there is something wrong.
If you’re VAT-registered, you’ll need to state your VAT number on the invoice too.
Invoice number
An invoice number is important as it ties a particular payment your company has received to a specific bit of work that you’ve done.
Some clients may place continual orders with you. If a payment has gone past due and you’ve not marked each invoice with a number, it may be difficult for your client’s accounts team to figure out which invoice you’re phoning about asking for payment on.
Purchase order number
Many modern accounting systems will send you a purchase order number that you then have to include on your invoice to be paid on it.
If you have been given a purchase order number, always place it on your invoice as your client’s accounting system may not permit payment if the purchase order number is not there.
Dates
There should be two dates on your invoice:
• issuance date – when you raised the invoice
• due date – the number of days after the issuance day on which you expect to be paid. In Britain, the standard gap between the issuance date and the due date is 30 days.
BusinessCostSaver tip – you don’t have to choose 30 days. You can choose 7, 14, or any number you like. The best one is zero where you ask your client to make payment before you provide your product or service to them.
BusinessCostSaver tip – public sector bodies in the UK are now obliged under law to make payment no later than 30 days after a product or service has been provided or performed to their satisfaction.
Details of your customer/client
Make sure that you include your client’s company name, postal address, email address, and telephone number on your invoice.
Better still, if the person who buys from you is not the person that pays you, ask your for the contact details of the right person in accounts. When you issue your invoice, make sure that the person’s details who can authorise payment to you are on the invoice.
Fees and charges
Your invoice must, of course, include the amount that you expect to be paid.
Try to itemise your invoice as much as possible by supplying:
• a description of the products or services you provided
• the amount due as a result of providing those products or services.
If you are VAT-registered, you’ll need two additional pieces of information:
• the VAT being charged on the invoice
• a figure showing the sum of the amount you’re charging for what you’ve provided and the VAT figure.
How you are paid
In an ideal world, you’ll give your customers as many ways to pay as you possibly can.
Cheques are still around but they’re declining in use. Whether or not you want to accept them is your choice. Bear in mind that even though, at the time of writing, there is a proposal to make cheques clear within one day as opposed to the current average of 3 or 4, there are still delays involved in this method of payment. If your cheque is sent by second class mail, it could take up to 3 days to reach you depending on which part of the UK you’re based in. On top of that, cheques can also bounce which just add more time to the procedure.
If you do accept cheques, write on your invoice – “Please make cheques payable to (your company name). Please write the invoice number on the back of the cheque.”
If you do not accept cheques, write on your invoice that “(your company name) does not currently accept payment by cheque as remittance for work done”.
The most common method of payment is now by direct bank transfer. All major UK banks and financial institutions are signed up to the Faster Payment scheme meaning that payment can be instantaneous. It’s not always straight away you get the money though as all online banking options offer to place a delay on when the transfer is made.
If you wish to accept bank transfers, use the following – “Please make payment by bank transfer to the following account:
(Your company’s name)
(Your bank’s name)
Sort Code – (your sort code)
Account Number – (your account number)”.
More and more, businesses and consumers are happy to pay by credit or debit card. If you wish to accept these forms of payment, write the following on your invoice – “We accept payment by all major debit and credit cards. To settle your account using this method, please phone (your number).”
BusinessCostSaver tip – at time of writing, you are still allowed to add a surcharge to customers’ payments made by credit or debit card. From January 2018, this practice will be outlawed.
Always end your request for payment with “Your business is appreciated – thank you very much”.
Invoice template UK
Customers rarely specify whether they wish invoices to be delivered by email or post so, in most cases, the choice is yours. To save money, you may wish to email the client at first. If payment is not made by due date, you may choose to send the invoice again by email but send out a hard copy in the post.
If you are a contractor and your client requires a timesheet to make payment, make sure it’s signed and included with the invoice. Always make a copy of any timesheet prior to sending it.
If your client has not paid you by the due date, they are in breach of the contract they have made with you. First of all, check to see that there are no problems or issues with the products or services you have provided them with.
If there are not, try to take payment there and then with a credit or debit card. You will be pleasantly surprised how, in the case of most small business customers and consumers, that there is a lack of resistance against this option.
If your customers say that they cannot pay you in full, this is the first sign to you that they may be suffering from cashflow problems. If this is the case, ask them how much they could afford to pay you comfortably now and attempt to take payment by card. If they refuse to pay you by card, ask them to agree to transfer that amount directly and on the same day into your bank account two working days from now. Finally, at this point, ask them when they expect they can make up the rest of the payment to you.
If your customer does not make the bank transfer two days later (or whenever you agreed), it’s time to call them up and go through the same process again.
As you get more experienced in business, you’ll understand when someone is telling you the truth or when someone is lying. As soon as you sense that they are lying to you, serve formal notice to them that, if payment is not made in full by a date you specify, that you will be escalating the action by charging them interest and passing their account to a debt collection firm.
Please only do so when you feel that the customer is lying to you or, if not lying, not being straight with you. When that is the case, they have lost the right to expect patience and understanding from you because the best business relationships are formed on honesty, openness, transparency, and an empathy for the position of the other person.
Be careful though to make the right call. You may well get your money from the customer, even if much later than expected, by doing a bit of arm-twisting. They will, however, always remember you as the person that didn’t stick with them when times were tough.
Self-employed invoice template / sole trader invoice template UK
Invoices if you’re self-employed or a sole trader not registered for VAT should look like this:
| Invoice Number | ITV001 |
INVOICE |
|
| Date | 6 November 2019 | ||
| Due date | 6 December 2019 | Your Purchase Order No | 30 days from invoice |
| From: | Your Company Name, 2 Side, Newcastle upon Tyne, NE1 3JE |
To: | ITVIU Megacorp, 2 Strand, London, WC2N 4JF |
| Telephone | 0330 101 1010 | Telephone | 0330 010 0101 |
| 123@abc.xyz | abc@xyz.123 | ||
| Description of Service | Quantity | Price per unit | Overall price |
| Website design | 1 | £1,500 | £1,500 |
| Website hosting (3 years in advance) | 3 | £100 | £300 |
| Domain name registration | 1 | £5 | £5 |
| Total | £2,166 | ||
| Payment terms | 30 days from invoice | ||
|
Please make payment to the following account |
|||
| Sort Code 20-20-01 | Account Number 12341243 | ||
Limited company invoice template
If you’re a non-VAT-registered limited company, your invoice should look like this:
| Invoice Number | ITV001 |
INVOICE |
|
| Date | 6 November 2019 | ||
| Due date | 6 December 2019 | Your Purchase Order No | 30 days from invoice |
| From: | Your Company Name, 2 Side, Newcastle upon Tyne, NE1 3JE |
To: | ITVIU Megacorp, 2 Strand, London, WC2N 4JF |
| Telephone | 0330 101 1010 | Telephone | 0330 010 0101 |
| 123@abc.xyz | abc@xyz.123 | ||
| Description of Service | Quantity | Price per unit | Overall price |
| Website design | 1 | £1,500 | £1,500 |
| Website hosting (3 years in advance) | 3 | £100 | £300 |
| Domain name registration | 1 | £5 | £5 |
| Total | £2,166 | ||
| Payment terms | 30 days from invoice | ||
|
Please make payment to the following account |
Company Registration Number | ||
| Sort Code 20-20-01 | Account Number 12341243 | 12341243 | |
VAT invoice template
If you’re VAT registered, you need to issue VAT invoices to clients.
What do you need to put on a VAT invoice that’s different from a non-VAT registered sole trader invoice or a limited company invoice? Let’s look at the example of a limited company which is VAT registered.
| Invoice Number | ITV001 |
INVOICE |
|
| Date | 6 November 2019 | ||
| Due date | 6 December 2017 | Your Purchase Order No | 30 days from invoice |
| From: | Your Company Name, 2 Side, Newcastle upon Tyne, NE1 3JE |
To: | ITVIU Megacorp, 2 Strand, London, WC2N 4JF |
| Telephone | 0330 101 1010 | Telephone | 0330 010 0101 |
| 123@abc.xyz | abc@xyz.123 | ||
| Description of Service | Quantity | Price per unit | Overall price |
| Website design | 1 | £1,500 | £1,500 |
| Website hosting (3 years in advance) | 3 | £100 | £300 |
| Domain name registration | 1 | £5 | £5 |
| Sub Total | £1,805 | ||
| VAT at 20% | £361 | ||
| Total | £2,166 | ||
| Payment terms | 30 days from invoice | ||
|
Please make payment to the following account |
VAT Registration Number | Company Registration Number | |
| Sort Code 20-20-01 | Account Number 12341243 | 123 1234 12 | 12341243 |
Invoicing – the basics
There’s an old saying in business that if you look after the pounds coming in, the pounds coming in will look after you. Getting invoicing and customer payment management right from the start should be a priority from your first day of trading.