As a business owner, sole trader or freelancer, knowing exactly how to create an invoice is an essential skill. By ensuring that your invoices are clear, professional-looking and legally compliant, you can cut down on time-consuming admin and get paid quicker.
In this article, we’ll cover:
How to make an invoice
What to include on an invoice
Invoicing with VAT
First, you’ll need to decide on an invoice layout. There are plenty of basic invoice templates freely available online, so there’s no need to start from scratch. Many of these are designed for Word or Excel, but you’ll also easily find templates for Apple Pages and other popular tools.
While it’s fine to keep things simple, research suggests that it’s worth taking a little extra time to personalise your invoice. For example, a 2017 study conducted by Due found that you’re 3 times more likely to get paid if you include a company logo. Additional little touches like utilising colour and picking an elegant font can make a positive first impression and help build your brand.
If document design isn’t your thing, you may prefer the convenience of invoicing software, which generally allows the user to create smart-looking invoices with just a few clicks. With an automated invoice system, you can also safely store key information like customer contact details and product descriptions in the cloud.
Feel like invoicing software may be the right solution for you? With SumUp Invoices, you can generate invoices in seconds, issue them straight from your smartphone, and provide your customers with instant online payment options. There are no upfront costs or monthly charges—just a 2.5% transaction fee once your invoice has been paid.
Perhaps the most important aspect of invoice creation is to ensure that you stay legally compliant. If you’re located in the UK, or invoicing a UK-based customer, your invoice must include the following:
A unique invoice number
Your company name, address and contact details
Your customer’s name and address, plus company name if applicable
A description of the goods or services you supplied
The date these goods or service were supplied
The invoice date
The cost of the goods or services
The VAT amount (if applicable)
The total owed
If you’re a sole trader using a business name, your invoice must include this business name, plus an address where legal documents can be sent to you.
If you own a limited company, you’ll need to include your company name exactly as it appears on your certificate of incorporation. And if you want to add the names of your company directors, the name of every director must be included.
In addition to these must-haves, we highly recommend including payment terms on the invoice. In the UK, customers are legally required to settle invoices within 30 days. As such, many invoice templates include a generic reminder of this rule. However, keep in mind that you’re entitled to define your own payment terms.
For example, you can set your own due date, incentivise early or upfront payment by offering a discount, or charge interest for late payment. In the 2017 study we cited earlier, it was found that you’re 1.5 times more likely to get paid by including payment terms on your invoice, and 8 times more likely to get paid on time by specifying a due date.
Whatever terms you ultimately decide on, make sure that these are expressed clearly and concisely on your invoices.
Finally, a couple of tips that might sound obvious, but which could have a positive impact on your company cash flow.
The first is to clearly mark your invoices as such. Just adding the word ‘invoice’ to your header will instantly distinguish the document from all the other paperwork vying for your recipient’s attention.
And secondly, a short expression of gratitude can help strengthen the relationship between you and your customer. A simple ‘Thanks for your purchase’ strikes a friendly tone, while also reminding the recipient that the invoice has been issued by a fellow human rather than a faceless corporation.
In the UK, only VAT-registered companies can issue VAT invoices. You must register your company if its VAT taxable annual turnover exceeds £85,000.
If you find yourself in this category, most transactions require a full VAT invoice. However, you can issue a simplified invoice for supplies under £250, or a modified invoice for retail supplies over £250.
In general, VAT invoices require all the information you’d include in a standard invoice, plus the following:
Your company’s VAT number
The time of supply (otherwise known as ‘tax point’) if this differs from the invoice date
The rate of VAT per item (VAT-exempt items must be clearly marked as such)
You’ll also need to break down the amount charged with and without VAT, but how you do this depends on the type of invoice you’re issuing. For a simple breakdown of everything you need to know about VAT invoices, check out this guide.
It’s important to note that you can only reclaim VAT after issuing an invoice that follows these instructions—a standard or proforma invoice won’t suffice.
When writing an invoice, your top priority should be to ensure that it meets all legal requirements.
Beyond this, there are numerous small touches you can add to build relationships with your customers and improve your chances of being paid promptly. These include clearly stating your payment terms, specifying a due date, customising your invoice to reflect your brand and personalising it with an expression of gratitude.