You’ve probably received them periodically throughout your life, paying little to no attention to the document itself. But if you’re a business owner, a freelancer, or a sole proprietor, you’ll need to be able to create an invoice if you want to get paid.
The good news is that writing an invoice is easy, and many of the best accounting software applications have made it even easier with invoice templates and customization included in their products.
There are five easy steps to creating an invoice, but it’s important that each step is completed properly. Skipping a step, such as filling in the due date, can result in delayed payment, and putting in incorrect remittance information can result in a payment being mailed to the wrong address or being deposited to the wrong bank account.
At a glance: How to write and send your first invoice
- Step 1: Personalize the invoice to reflect your business.
- Step 2: Fill in all the necessary customer information.
- Step 3: Assign terms and fill in the due date.
- Step 4: Explain what the invoice is for.
- Step 5: Include remittance information or a link to pay online.
Invoicing basics: What you need to know
Congratulations on having your own business! It’s a big step, and your days will likely be filled with both challenges and rewards.
The good news is that there is a tremendous amount of resources available for you as a business owner. You’ve likely already decided on a name and a legal structure for your business. So, what’s the next thing you should do?
If you want to get paid, (and who doesn’t?), you’ll need to learn how to write an invoice. If you’re already familiar with the invoice creation process, that’s great. But if you know nothing about creating an invoice, or just want a refresher, please continue reading.
For those who don’t know exactly what an invoice is, it’s simply a way to collect monies owed your business. Every time you sell an item, whether it’s a baseball cap or a pair of earrings, and you don’t collect a payment for those items at the time of the sale, you will want to create an invoice.
The same goes for providing a service, whether that’s fixing a broken pipe or preparing a professional report for a client. Whatever your business is, whether you’re selling products or services, if you are willing to accept payment for those items or services at a later date, you will need to create an invoice.
How to properly write and send an invoice
Your accounting software is the most likely place you will be creating an invoice from. If you don’t currently use accounting software, I highly recommend that you do.
However, in a pinch, there are also numerous invoice templates you can download off the internet or from an application like Microsoft Word that will help you get started invoicing your customers. Either way, the same information will be needed in order to create a proper invoice.
Here’s what you’ll need, in five easy steps.
Step 1: Personalize the invoice
If you’re using accounting software, or are in the market for one for your business, you’ll likely be preparing your invoices using it. Most of the accounting software applications on the market today provide excellent invoicing capability with an option to customize the invoice as you see fit.
In most cases, the business information you enter into your software such as business name, address, telephone number, and email address will automatically populate any invoice that you create.
But many accounting software applications take it a step further, providing you with the option to customize the invoice by adding your business logo, tag line, or color scheme. While not a necessity, customizing your invoice to better reflect your business will make it more recognizable to your customers, and may help you get paid a little bit faster.
Step 2: Fill in the customer details
One of the most important things you want to do is manage your customers or clients properly. If you’re a small gift shop, managing your customers properly means having a way to communicate with them about sales and other promotions or campaigns.
The same goes for service businesses, with the bottom line being if you extend credit to your customers, you must ensure that you have the appropriate information on file for those customers, including an accurate mailing address, email address, and point of contact.
Having an incomplete mailing address or an incorrect email address can hold up payment processing for weeks. You’ll also want to assign a custom number to each invoice that you create, but this is usually completed automatically by your accounting software.
Step 3: Assign terms and the invoice due date
Assigning terms to your customers simply means that you’re making a determination on how long they have to pay. In many cases, Net 30 is the default term, meaning that your customer or client has 30 days from the date of the invoice to pay you.
If they don’t pay before the 30 days is up, you can then apply late charges to the past due amount. For new customers, you may want to use Due Upon Receipt as your payment term, which means that the invoice is due as soon as it’s received. Net 10 terms are common as well, but it remains up to you as the business owner to determine what terms should be applied to what customers.
Step 4: Explain what the invoice is for
If you’re selling a product, you’ll add the description of the product, as well as the quantity and the price per item.
If you’re selling services, you’ll likely want to include a detailed description of services rendered, and what the client received in return. If, like the invoice above, you created a custom report, that information should be properly displayed in the invoice.
If you’re billing for hours worked, you will likely want to use an invoice style that reflects that information.
Step 5: Add remittance information or an online payment link
Once your invoice is completed, you can print it and mail it to your customer, or email the invoice directly. Most accounting software applications also offer the choice to include an online payment option, which allows your customers to pay to quickly and easily by credit card or ACH transfer directly from the invoice.
While you’ll have to pay service fees if you choose to accept online payments, the very real upside is that you’ll likely get paid much faster.
However, if you choose to be paid in a more traditional manner, be sure that your remittance information is accurate on your invoice so your customers know where to send their payments.
Need an invoicing template?
While there are plenty of invoicing templates that can be used to bill your customers, you’ll be better able to manage your entire business by using accounting software.
There are a lot of applications available. A few of our favorites, Accounting by Wave, Xero, and QuickBooks Online, offer terrific invoicing capability, as well as the option to customize your invoices.
Invoice better, get paid faster
Invoicing remains a key component for managing your business. Small business owners in particular will want to be sure that they invoice promptly and properly because the faster you send out an invoice, the faster you will be paid.
Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool owns shares of and recommends Intuit and Microsoft. The Motley Fool owns shares of Xero and recommends the following options: long January 2021 $85 calls on Microsoft. The Motley Fool has a disclosure policy.