Setting Up Invoicing for Your Small Business
One of the most confusing parts of setting up a new business can be accounting. If you’ve never dealt with invoices before, follow these small business tips for creating effective invoices.
What Is an Invoice?
An invoice is like a bill you get at a restaurant. It includes each item you ordered, the tax you are charged and any additional fees. An invoice is a bill you send to a customer that details exactly what you’ve done and should include quite a bit of detail. For you, an invoice creates an account receivable, a way to track the money you are owed.
What Should an Invoice Include?
Make sure your invoice has your business name and address featured prominently and include the name and address of the person or company you are billing even if you send your invoices electronically. You don’t want to have any confusion about who owes what, even if an invoice gets sent to the wrong business. To reduce confusion even further, make sure to include the name and email or phone number of a contact for you and your customer so you each know exactly whom to get in touch with if there is an issue with the invoice.
Obviously, you will list and detail every item for which you are charging. If you are doing a large job for a client, consider creating multiple invoices breaking up services by contractor, or items by location. In addition, make sure to uniquely number each invoice and date each one. Don’t give two clients “invoice 1” or it will cause confusion on your end. If you want to keep numerical order within each client’s records, consider adding a three-letter code to represent the client to the invoice number. The date you create the invoice is when the money appears in your system if you run on an accrual basis so it is imperative to remember. If you run on a cash basis and already have the funds in hand, create a sales receipt instead of an invoice to keep your records straight.
Finally, include your payment terms. A standard payment term is net 30, meaning customers have 30 calendar days to pay from the time the invoice was printed (another reason the date is so important). If you want to encourage quick payment, your invoice could offer 2/10 which is a 2% discount if you receive payment within 10 days of issuing the invoice.
Many accounting programs will take you through a complete setup but remember you can do your own. All you need is a word processing or spreadsheet program to create an easily updateable invoice form.
