Invoices are particularly important documents for all businesses. They are necessary for suppliers to get payments from their customers. Therefore, they are critical for positive cash flow, which is necessary in order for businesses to meet their regular financial obligations
While invoices may seem like a relatively straightforward thing, it does require some must-have fields to be included in order for it to become a legally-binding document. Besides having the word ‘invoice’ prominently displayed on the invoice, many people are still unsure of exactly what is required on an invoice.
That’s why today we’ll look at the 5 most important, must-have fields you should include on every invoice you send out. We will focus here on the standard invoice, rather than on proforma invoice or commercial invoice, which will have their own necessary fields.
Suppler & Customer Details
The first of the many must-have fields you should have on your invoice is the data on the invoice issuer (the supplier or seller) and the customer.
For the invoice issuer, the following information should be listed:
- the issuer’s full name
- registered billing address
- any necessary Tax ID Numbers
- optionally, phone number and email address
While listing your phone number and email address are only optional, they are particularly important since they are the primary way for customers to get in contact with you. This is especially true for emails, although many customers are still willing to call in case there is a mistake on the invoice.
If you don’t have this listed, the customer will have to do extra work to get in touch with you or even send the invoice back through the snail mail, which can severely delay having your invoices paid.
For the customer’s data, the same details should be included: full name, billing address and Tax ID Number.
Invoice Issue Number & Date
For every single invoice that you create, you should include the invoice date and unique invoice number.
This is something that often gets overlooked, especially when business owners don’t have a good system in place to store their invoices. They end up downloading invoice templates and manually entering invoice numbers.
While this may work for a while, after many invoices sent, it is easy to forget which invoice number was the most recent, and therefore there’s a greater risk of sending invoices with a duplicate invoice number.
This situation is alleviated if invoice issuers start using invoicing software which, besides many other features, can help business owners by automatically assigning a unique invoice number to every invoice.
However, if you are still doing invoices manually, it is recommended when you start out not to begin from 1. For example, if you are sending invoices for the first time, you shouldn’t use ‘0001’ as the first invoice number, which will signal to your customer that he or she is your first.
There are no really strict regulations in many countries on how you should number your invoices as long as they’re unique. Therefore, to appear more professional, you should start your first invoice with another number; e.g., ‘0067.’
You must always include a detailed (but not unnecessary) description of the goods delivered or services rendered for the customer.
The exact details of the invoice description may differ depending on what is agreed between the invoice issuer and the customer.
At its most basic, you should include:
- the date of delivery for goods or services,
- the exact description of the goods or services, including the item or job name, duration, etc.
- the quantity of goods delivered
- the hours for services (if charging by the hour)
- the unit price for each item or the hourly rate
Optionally, you may need to include other information such as the purchase order number, word count, etc.
Applicable Taxes & Total Amount
This one is of course the vaguest section of this article, as the exact nature of the taxes will largely depend on the country or state you are doing business in.
For example, if you are operating in the US, you need to make sure that your invoice taxes comply with state law. However, if you are selling to customers outside your state, there may be different taxes you need to apply, and therefore it is your responsibility to make sure you are complying with those tax laws.
This is even more important when you are selling to international customers. For instance, if you are selling to Canadian and Australian customers, you’ll have to apply GST (goods and services tax) if the invoice amount is above a certain threshold.
In the UK and EU you’ll have to apply VAT, although it is much more straightforward in the UK, whereas the EU (with all its member states) will be much more of a wrinkle for you.
Nonetheless, the exact nature of the taxes you should apply is your responsibility to find out and apply.
Beyond that, you should include the subtotal (before taxes, fees and charges) and total (after everything has been applied).
One very important thing to have that many business owners neglect is the payment due date and other payment terms at the bottom of their invoices.
This is a note to the customer, reminding them of the terms you have discussed to make it easier for them to reference.
If you didn’t discuss any payment terms, then it is recommended you start incorporating that into your invoices.
Although the standard payment terms is Net 30, meaning the customer has 30 days to pay the invoice, it is now recommended to make it much shorter. Your payment terms should be Net 15, meaning your customer will have to submit payment roughly 2 weeks from the invoice date.
You should also include any important payment and banking details, such as the types of payment you’ll accept and (if applicable) your bank account number so that the customer can transfer the payment to your bank.
These 5 fields are all absolutely necessary if you want to have a smoother time of getting your invoices paid on time. This will help you to increase your cash flow, spend less time debating invoice details, and with that, focus more on your core business.
About the Author
Uwe is the founder and CEO of InvoiceBerry, an online invoicing software that helps small business owners and freelancers to send out their invoices on time. Uwe successfully ran multiple online businesses before starting InvoiceBerry out of the need to send professional looking invoices. He is passionate about technology, startups, small business and travelling.