Small business owners rely on cash flow and a lack of this is one of the top reasons for small business failure.
Cash flow is often hindered by late payments being received and one of the causes of this can be poorly structured invoices.
Many small business owners do not realise that they can levy a late payment charge if an invoice goes 30 days overdue. Interest can also be charged on late payments but so few business owners include this information on their invoices or instigate it for overdue accounts.
Follow the tips below to ensure you have the details you need on your invoice so that it stands a higher chance of being paid on time.
Details that should be included on an invoice?
All invoices should include:
- The name and address of the customer.
- Your business name and trading address.
- Your contact details.
- A unique invoice reference number.
- A customer reference or order number if applicable.
- The date of supply.
- A description of the goods or services provided (include hours worked and hourly rate if applicable)
- The gross amount due to be paid.
- The payment terms for this invoice and a due date for payment.
- Your bank account details for payment to be made.
- Your right to charge interest on late payments and to make a late payment charge – for more information visit Gov.UK on current interest rates and charges for late commercial payments.
- A retention of title clause that states you retain ownership of any goods supplied until full payment has been received.
Further details required
For sole traders and partnerships
If the name of the business is not the surname of the trader, you must include the business name as well as its full trading address. For example if Anna Smith trades as Cute Kids Clothing, her invoices should show either just Cute Kids Clothing or Anna Smith trading as Cute Kids Clothing.
For Limited companies
A limited company must give the following details on its invoices:
- The full registered company name and company registration number.
- Any trading name that the company may be using that is relevant to the transaction.
- The address of the company.
For VAT registered businesses
If your business is VAT registered you must include the following information on your invoices:
- Your business’ VAT number.
- A unit price, if multiple units are supplied.
- The VAT rate applicable to the goods or services supplied.
- The net amount charged for the goods or services, excluding VAT.
- The amount of VAT charged at each rate.
- The rate of any cash discount offered.
- For businesses that export goods or services, there are additional requirements and you should seek professional advice to ensure you comply with the regulations.
When should an invoice be issued?
You should always send your invoice as soon as possible after providing your products or services.
Set up a system to send reminders as soon as the due date arrives. It is your responsibility to chase unpaid debts.
Rather than manually typing invoices, consider using an online accounts system that will create the invoice for you and generate automatic reminders. There may be a small monthly for using this but it can save you considerable time and stress in the long run.
Once your invoice has been created, it is critical to proofread it a couple of time to make sure all information is correct. This can be the difference between you being paid or not, particularly if you have entered an incorrect digit in your banking details![print-me]