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Managing your money

The Fluidly complete guide to invoicing

How important is it to have an efficient and functional invoicing system? Critical! We can’t stress it enough. To get paid in a timely manner (or at all!) you need to invoice. Invoices act as a record for sales transactions. Not only do they let your customers how, when and how much to pay you, but they also function as a tool for record keeping.

We’ve put together a guide to everything you need to know about invoicing, starting with the basics.

What is an invoice?

An invoice is a document sent by a provider of a product or service to the buyer. It specifies the amount and cost of products or services. It is a written verification of the agreement between a buyer and seller for the exchange of goods/services in exchange for cash.

Types of invoices

There are different types of invoices that may be applicable to your business, your client or the services you provide. Here are some of the most common:

    • Proposals: you might be asked by a client to create a proposal which details what you expect your service to cost after completion. The details on this type of invoice may be an estimation rather than a final charge.
    • Interim invoices: allow your customers to break the total amount due into multiple smaller payments. This can be useful for you as it will help your cashflow whilst the work is being completed
    • Recurring invoices: covers ongoing services. You send these to your client in regular intervals, usually for a membership or subscription.
    • Final invoices: is sent out to your customer after you have completed a project. The details on this type of invoice are a final charge rather than an estimation.

What are the benefits of having good invoice system?

  1. Faster payments: A well structured invoice communicates all important information required to process your payment on time. If you’re organised about invoicing your customers, it makes it easier for them to be organised.
  2. Improved cash flow: With a structured billing system you are more likely to get paid in a predictable way. If you know what cash you are likely to have in the business at any one time, you can make better decisions about your own outgoings.
  3. A safety net when things go wrong: In the case that a payment is overdue or missing, having a clear, invoicing system will make it easier to chase up payments and take further action.

What makes a good invoice?

Design

A good invoice should be laid out in a clear way that details all information that the buyer needs. It should reflect your brand in terms of design and colour, although it’s best to keep it simple.  A well designed and structured invoice positions your business positively to customers.

Structure

A good invoice should include all of the following

    • Your contact details: provide the buyer with all your business contact information including a point of contact, phone number and email address. If you are a limited company, include your registered office address and company registration number
    • Your customers contact details: include the name of the buyers company, phone number and email address. When possible, reference the person you have been in direct contact with whilst you were fulfilling the job brief.
    • Invoice or reference number: This acts as a catalogue system for your record keeping. Ensure each client gets a unique invoice number to avoid that there are no duplicate cases within your business logs. A lot of businesses implement a number sequence e.g 0001, whilst some assign unique IDs associated with the client name e.g Stable Constructors (StC001)
    • Date the goods or services were provided: This is extremely important if you include VAT within your invoices, where it is also known as a supply date.
    • Date the invoice was issued: Ensure that within the invoice you declare the date the invoice is created/sent out – not the date the goods and services were provided. This is important should the issue of late payments arise
    • Details of the products or services supplied: Provide the buyer with a clear description of what they are being invoiced for. This usually involves a line by line list of each product or service,  alongside the cost of each product or service.
    • A total amount for the products or services invoiced: You can also include any discounts that have been deducted from the total amount (e.g for early payments).
    • Payment terms for the invoice: covers all the financial information needed by the buyer to process your payment. This should include:
    • Acceptable forms of payments – bank transfer, online payment etc.
    • Currencies accepted by your organisation
    • Payment timelines: Let the customer know how long they have to pay, this may either be a date agreed upon by yourself and client or the 30 day period within your legal rights.
    • Detail any late penalties

Managing your invoicing is crucial, as is distinguishing who your good and bad payers are.

Having a transparent view of both debt and cashflow puts your finance team in the most insightful position possible – allowing you to spot the issues, take action and keep the company’s cash in a positive position.

Find out more about Intelligent Cashflow management with Fluidly

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