How to create an invoice

If you’re a freelancer, contractor or business owner, or you have a side hustle, getting paid for your work means knowing how to create an invoice.

In this blog, we explain what invoices are, what they need to include, and how to create one.

What is an invoice?

When you’ve done work for a client and are ready to be paid, an invoice is the document you use to set out your charges. It lays out which products or services you’ve provided, and the amount the client owes you in return.

Invoices not only help you get paid, they allow you to keep accurate records of the goods or services you’ve sold and the payments you’ve received. This is crucial when it comes to filing tax returns and maintaining a good overall view of your business’s finances.

What should I include in an invoice?

Your business invoices must include:

• your business’s name, address and contact details

• your client’s details, including name and address

• details of the upcoming or completed work, which you can itemise with an amount for each item (if you’re VAT-registered, include VAT rates for each item)

• the date you supplied the goods or services

• the date of the invoice

• the total amount your client owes

It also helps to include:

• the deadline for payment (for example, within 14 days or one month)

• your bank account number and sort code

• your e-mail address

Including a unique invoice number or reference will help you keep track of which invoices have been paid and which ones are outstanding. It can also help your client stay on top of their payments.

For this, you can use whichever string of numbers and letters you prefer. For example, you might choose to go with a sequence such as INV00001, INV00002 and so on. Or you might include the date at the beginning, as in 01-01-2022-INV001. It’s up to you.

If your client has given you a purchase order (PO) number, make sure to include that on your invoice. A purchase order is an official document to confirm what the buyer is purchasing from the seller. Not all companies use PO numbers, so if you don’t have one to include on your invoice, don’t worry.

Read more:

• Invoicing and taking payments from customers (GOV.UK)

How do I create an invoice?

The key with invoices is to have a good template that you can use over and over again. That way, the only information you have to add is whatever’s pertinent to that particular client, such as the amount they owe, the client’s details and so on.

Once upon a time, many businesses wrote their invoices out by hand. Nowadays, however, there’s technology to help you.

You might choose to produce an invoice template using Microsoft Word or Excel, or Google Docs or Sheets, for example. (Spreadsheets are particularly useful here as they allow you to use simple formulas that let you calculate figures automatically.)

If you already use accounting software, it likely has built-in templates you can take advantage of. Alternatively, look out for invoicing tools that come with your business bank account.

VIDEO: Dog-walking and home-boarding company swaps out Excel spreadsheets for Sage software and cuts invoicing time in half

When should I send an invoice?

Depending on the work you do, you may invoice for 50% of your work upfront and the rest when you’re finished.

If the job involves extra work that falls outside the scope of what you and the client agreed at the beginning, you might raise a separate invoice. That way, you’re not waiting too long to invoice for the original work.

Some freelancers choose to invoice at the end of each month, especially if they’re doing regular work for the same client, which can also work well.

It’s worth noting that some clients have systems in place where they pay all their freelancers or contractors in one go at the end of the month. That’s why it’s important, when you're pitching for work and agreeing its scope, to ask your client about their payment procedures.

Try not to hide away from that money conversation. Having clarity from the beginning will make everything much easier down the line.

Make sure you know where to send the invoice as the accounts department e-mail address may not be the same as the person you’re working with. Sending your invoice to the right person from the beginning should limit the chance of delays arising when it comes to paying your invoice.

What is invoice insurance? Do I need it?

If you often complete huge chunks of work for particular clients, you may want to look into invoice insurance. This covers you if your client goes bankrupt before paying your invoice.

Unfortunately, the number of companies going bust is rising. It’s estimated that at any given time, small businesses in the UK are waiting on billions in late payments – so the risks are clear.

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Relevant resources

• Late payments: Tips to help small businesses get paid on time

• Lunch and Learn: How to invoice and get paid faster

• Top tips: How to sell and get paid quickly [E-BOOK]