Whether you run a small start-up or a multi-million-pound corporation, understanding the importance of invoice best practice is essential.
The success of your business relies on an efficient system that issues invoices and collects payments smoothly and reliably. A system that secures predictable cash flow and minimises the number of late and non-payments.
If you’re just setting up an invoice process or want to improve an established one, using a free invoice template is a good start. You’ll find a selection below to suit your precise needs.
Introduce them to your business and you’ll be reassured that your invoicing system has firm foundations. Clear and accurate, when you send them out quickly to your customers, they’ll be encouraged to pay them sooner.
Get these basics right and you’ll be better positioned for steady and sustained growth while also enjoying less admin and more freedom to focus on your business.
Your Free Invoice Template
A successful invoice is one that’s received by the customer and paid swiftly. They don’t quibble with any of its details, they don’t pay it three weeks’ late and they don’t leave it in a pile of paperwork and forget about it altogether.
Ensuring every single invoice you issue is 100% accurate and sent as soon as the work is completed or the product is received plays a big part in this success.
Any mistakes could lead to unnecessary delays, jeopardising both cash flow and customer relationships.
Templates can help here. Used in conjunction with accounting software, you can tailor them for specific jobs and customers, and build in formulae to calculate total charges and taxes.
To comply with the law, you must ensure that every invoice contains certain pieces of information. The following list applies to all UK invoices, including those issued by sole traders and limited companies, whether VAT registered or not:
- A clear title indicating that it’s an invoice.
- A unique number to act as both the seller’s and buyer’s reference.
- The names and contact details of both the seller and the buyer. Email addresses are essential. It’s also wise to include a postal address in case any important documents need to be physically posted. All these details should be carefully checked for accuracy.
- The date of the invoice. This is crucial as it starts the countdown to when the invoice needs to be paid.
- The date the product was delivered or the service was supplied.
- Details of what items have been provided, including prices (per item or per hour) and quantities (of product or, for services, time).
- The total amount charged, including a breakdown of VAT and delivery charges if relevant, and any discounts already applied.
- The payment terms including how to pay, what methods are accepted and preferred, when payment is due, and details of late payment terms and early payment discounts.
- Your bank account details including account number and sort code.
- References to previous document numbers related to the sale, where relevant.
- Your business logo to raise brand awareness and establish professionalism.
- A space for a personal note if required.
As well as all these details, your invoice will need to be tailored depending on the legal status of your business. Make sure you use the right template to suit its structure. These fall into three main groups: sole trader, limited company and VAT registered.
Sole Trader Free Invoice Template
In addition to the above list, sole trader invoices must include:
- Your name and any business name being used.
- An address where any legal documents can be delivered to you if you’re using a business name.
Limited Company Free Invoice Template
In addition to the above list, limited company invoices must include:
- The name of the limited company.
- Its registered number, as found on your certificate of incorporation.
- If you decide to include the names of directors, they must all be listed.
VAT Free Invoice Template
If your limited company is also VAT-registered with HMRC, your invoices will be more detailed. In addition to the above list, they must also include:
- A unique identifying invoice number which must be sequential.
- The total amount charged, net and gross of VAT.
- The rate of VAT used, usually 20%.
How to Get Invoice Best Practice Right
The process of invoicing a customer from start to finish needn’t be complicated. But there are some invoice best practice tips to maximise your chances of being paid accurately and on time.
1. Decide What System to Use
Invoice templates will slot into any system, manual or automated, saving time and reducing admin chores.
But using specialist software will supercharge the efficacy of these templates, eliminating the need for manual tedious reconciliation that’s slow and prone to errors.
Accounting software packages will issue invoices automatically, send reminders, calculate tax, learn the prices of your products or services, and accurately keep track of the entire process. The associated apps also let you quickly send invoices from your mobile or tablet for billing on the move.
And some can be integrated with slick payment methods like Direct Debit for further streamlining and reliability. Choose FastPay as your Direct Debit bureau for example and you can link your recurring invoice payments to both Xero and Sage: a comprehensive overview of your financial status at your fingertips.
As your business grows, the limitations of a manual invoice system will become glaringly obvious. Opting for automation will make the whole process smoother, slicker and simpler.
2. Get Organised
With an efficient system in place, it’s time to get even more organised. Your software will help here but it still needs informed human input to work to its best ability.
First, establish whether your product or service lends itself to one-off or recurring invoices. Whether you use one or both of these models will impact on how much work is involved on a regular basis.
Outline a billing schedule for each client to help you plan and give customers a clear heads-up of when to expect an invoice from you.
You could choose to bill on the same day each month or week: a regular time slot to get the work done which also decreases the likelihood that one of your invoices gets overlooked and ends up unpaid. Be aware though that if you’re slow sending out invoices, your customers could follow your lead and be slow paying them.
Or you may prefer to consistently invoice as soon as the work is done. Prompt invoicing prevents a backlog from forming and spreads income out throughout the month, rather than waiting for a large chunk to arrive at the same time.
This approach can make invoicing less of a chore that has to be done on a certain date, no matter what. Your cash flow will thank you for it and you’ll be positioning your business as efficient and helpful.
Invoice issued, it’s good practice to contact your customer to check they’ve received it safely and it includes all the information they need. As well as being courteous, it can help to pre-empt late payment.
Another tactic to adopt to avoid payment disputes is to connect quotes with invoices, using the same reference number and tracking them on your software. If you have a signed quote in place, you can use this to back up the contents of your invoice should a misunderstanding arise.
3. Be Accurate
When invoices are accurate and easy to understand, they’re more likely to be paid promptly by happy customers.
So use clear, logical templates and complete them carefully, checking for errors such as misspellings, wrong amounts or missing VAT charges every time.
Make a mistake and there’ll be an easily avoidable delay to your invoice getting paid as a new one is requested, raised and re-issued.
Make them accurate and you’ll avoid customer confusion and frustration which could jeopardise reputation, compromise cash flow and create unnecessary admin work.
4. Be Clear
Invoice best practice includes doing all you can to mitigate the chances of late payment. But no matter how carefully you word and check your invoices, every single one runs the risk of being paid late.
The efficient credit control and steady cash flow that regular income brings depends on establishing – and enforcing – clear payment terms. Make these crystal clear on your invoices to avoid any surprises and maintain strong customer relations.
You have a legal right to be paid within 30 days. And there’s nothing to stop you from reducing that time if it suits your business needs better. In addition, you can specify late payment fees that kick in regardless of the excuse given.
Offering convenient payment methods such as a simple bank transfer for one-off payments or Direct Debit for recurring fees can speed up the process.
If your business model would benefit from swifter payments, you could request that invoices are settled within seven days. If this feels a little extreme, incentivising early settlement within a 30-day period with a small percentage discount could lead to similar book-balancing results.
Also have a strategy in place for how you’ll deal with the inevitable late payees. On the first day the invoice is overdue, send a polite, professional reminder including all the details of the amount due and your payment terms. This will start a vital paper trail if the bill remains unpaid.
With your free invoice templates and an overview of invoice best practice, you’re primed and ready to implement a streamlined system that will maximise your chances of getting paid on time.