WHAT IS AN INVOICE?

An invoice, or bill, is a commercial document issued by the seller, received by the buyer and which contains details such as prices and quantities of goods, payment methods, and maximum period within which the buyer should make the payment. The seller is the vendor or service provider, while the buyer is the customer or client. This document is important for both parties because the seller needs to keep a copy as a record of their sales, and the client needs to keep a copy as a record of their purchase. Sending an invoice indicates that ‘someone owes you money’ and a receiving an invoice indicates that ‘you owe them money’.

WHAT SHOULD AN INVOICE LOOK LIKE?

The look and language of your invoices should be in keeping with the rest of your branding and the message you’d like to deliver. It should match your business card design, letter head, tagline, even your site colors. Even though the invoice structure is industry dependent, there are some general elements and rules that should be followed. To remember this more easily, you can divide the invoice into 6 different sections:

SECTION 1: YOUR DETAILS

Contains details about your company (or your full name if you’re freelance), company logo, contact details, payment info etc. If your company holds a specific legal status, for example if in the U.S. it’s a corporation, or in the U.K. it’s limited then you should include the information specific to your jurisdiction; that usually means an official address and registration number, but rules vary so check with your local tax office. In Europe, if you’re V.A.T. registered, you must include your V.A.T. number as well.

SECTION 2: RULES OF THE GAME

Here you may specify the invoice options such as issue date — date of the invoice, net terms, due date, currency and P.O. Number. In business, the term net 30 is used to indicate payment within 30 days, or it’s fairly common to see 10/15, net 30 which is another way to say 10% discount if paid in 15 days, and net due within 30 days. However, people who are less aware of business terminology may not know what this means, so depending on who your buyer is, it may be better to use plain English instead: “Please note that payment is due on or before 07/09/2013”. Also, bear in mind that the date formats differ internationally — payment due 07/09/2013 may mean payment in July, or September depending on the client’s location — so to avoid any ambiguities consider a more formal expression such as July 9th, 2013. Another term that may also cause confusion is “Upon Receipt”. Freshbooks produced an interesting study which says that many people seem to interpret this as “whenever you feel like it”. It’s as if they receive an invoice with the words ‘payable upon receipt’ and immediately dump it into the ‘whenever’ pile. Instead, using specific terms such as ’21 days’ seems to focus the client’s mind around a specific timeframe and will actually get you paid faster than asking for immediate payment. — Zach Mathew

SECTION 3: YOUR CLIENT

This part contains the name and address of the customer you are invoicing. If you’re addressing a multi-office company you need to specify the right person or department. This may not be the person you’ve been communicating during the project, so in order to get paid faster, make sure to ask who will be dealing with paying you.

SECTION 4: TITLE AND NUMBER OF THE DOCUMENT

Usually, the word Invoice indicates title, but depending of the type, it can also be Bill, Tax Invoice, Pro-Forma, Quick Invoice etc. If in doubt, stick with Invoice. The number of the invoice is a unique reference ID and is used in case of correspondence. The rule is to never use the same number for multiple documents.
In some jurisdictions it is mandatory that your invoice numbers ascend chronologically. But, they don’t have to be consecutive. If you don’t want your client knowing how much work is crossing your desk consider increasing the invoice number by a random number every time you write a new invoice: your first invoice would be ‘00007’, the next would be ‘00012’, then ‘00014’ and so on. You can also work codes into your invoice number to jog your memory come tax time. For example 2013-06-WDD-002 can be translated as “Second Invoice for Webdesigner Depot in June 2013”. This depends on you; be creative and find a numbering scheme that suits you best.

SECTION 6: MUMBO JUMBO

This is a box for your custom message or note that describes your invoice terms more thoroughly. For example if you accept more than one payment method, here you may specify which one you prefer. Is it a check, bank transfer or PayPal? Furthermore it is a perfect spot to show appreciation. Remember, being polite matters and can really get you paid faster. Some studies claim that a simple “thanks” can increase the percentage of invoices that are paid quickly by more than 5%. Analogously, that could be translated to lots of cash per year. Although a late fee is not my preferred way to ask for on-time payment, keep in mind that here you can specify this too. For example: “Interest accrued at 5% per month thereafter”. An invoice is a list of products or services given to a client that includes the cost of those services. In other words, an invoice is a bill. You send an invoice to someone because they owe your business money. Invoices come in all shapes and sizes. They can be handwritten on a scrap of paper, put together in a word processor, or created using specialist software such as Cashboard. Most invoices follow a particular template. If you want your invoices to look professional and reflect well on your business, it's best to follow this template. We'll come to the template in a moment. First, let's look at the purpose of an invoice. Let's start with a simple definition. What do invoices mean to you, as a business owner or freelancer? Invoices are the tool you use to ask for money that you' re owed. When I started out as a freelancer, I didn' t know what an invoice was. Invoices were a mystery to me. I thought they were a strange and magical document businesspeople used to make money. I saw invoices in the same way that children see credit cards or check books. Invoices were something that people with responsibility knew how to use. I quickly learned what invoices were when a client asked me to "send an invoice" for work I' d completed. I taught myself how to create an invoice, and sent it in. If I hadn' t have done so, I would never have been paid for that work. These days, I send out invoices several times a month. We live in a culture where there are certain cultural expectations and norms around how we talk about money. In most social and business situations, it' s seen as improper to talk about money directly. Instead, I send them an email saying "I've attached an invoice for my recent work". That' s a polite way of asking for payment. Invoices are a culturally acceptable way of asking for money. From a customer or client point of view, invoices help them see what they' re getting for their money. Additionally, invoices provide a document that customers can use for their financial records. In my experience, most clients only pay me after I' ve sent them an invoice. That doesn' t mean you can' t be paid before sending an invoice, but it is the way that most business transactions work. Even if you are paid before you send an invoice, your customer will expect you to send one in. Invoices vary depending on who is sending them. Invoices from service providers such as freelancers typically include the following information.
The word "Invoice". This is placed at the top of the page as the title of the document. An invoice number. Every invoice you send should have a different number. The easiest approach is to start with invoice number one for the first invoice you send out, and work up from there. Details of the product or service provided. That way, your client can see what they' re paying for. The date the invoice was sent and the date the product or service was delivered. For example, as a writer I include the date my article was accepted for publication, or the date it was published, depending on what my client prefers. The name and contact information of the seller or service provider. The name and contact information of the buyer. A breakdown of costs. What were the different project components you delivered to complete a project, and how much did each component cost? Optionally, you can list your hourly rate, and the time you spent on each project component. The total amount due. This figure is usually prominently displayed on the invoice, as it is the most important part of the invoice. Payment details. Such as your bank account or PayPal details. A due date for payment, and details of late payment fees. Late payment fees encourage your clients to pay what they owe promptly.