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Business owners have a lot on their mind, so until the task becomes relevant, we’re sure you aren’t exactly spending free time wondering how to create an invoice. And, even then, for a small business owner using accounting or billing software, the purpose and importance of writing an invoice might not be clear. After all, isn’t creating an invoice just a formality?
The truth is, writing an invoice, structuring it properly, and including the correct information can have a dramatic impact on your business’s cash flow and the ease of your business operations. Whether you use an accounting or billing program, a formatted spreadsheet, or a Word document when creating an invoice, you want to make sure the correct components are included.
So what is the purpose of an invoice, and why is it such an important business accounting document? How do you create an invoice perfectly for your business to make sure you get paid as quickly as possible? Here’s what you need to know about this important document and its potential impact on your business. (If you’re short on time, below you’ll find our favorite free sources to create an invoice online. You’ll get more info on each of these sources further down.)
First things first: it is important you know that the formula on how to create an invoice isn’t just an archaic formality. An invoice is used to convey lots and lots of vital pieces of information to your customer or client. Examples of this information include:
Hopefully you can see how knowing how to create an invoice correctly could affect your bottom line.
If you provide products or services to other businesses, these businesses will very likely require that you create an invoice and send it over to them before they’ll pay you. Just like you might and most likely require it them.
Writing an invoice is the first step in the accounts receivable process. If you’re using an accounting or billing software to create your invoices, creating the invoice will automatically post the amount of the sale to the correct general ledger accounts. You can then track the total amount each customer owes to you to make sure you receive all your payments.
For your customer, your invoice is the first step in their accounts payable process. Your invoice is a bill to them, and they’ll use the information on your invoice to validate the bill and start the payment process. The clearer the invoice is, the less likely your payment process will get stalled. And what does this mean? You get paid faster.
What should you include when you’re writing an invoice? While there are certainly some differences from invoice to invoice, at a minimum, your invoices should include the following information:
If you’re not getting the gist yet, we’ll say it again: when it comes to knowing how to create an invoice, the structure of your invoice has a direct bearing on how quickly you get paid.
Certain customers—especially large companies, government entities, and project-based businesses like construction contractors—require specific information on invoices in order to process them. You want to make sure you know these.
Some of this information may include:
Make sure you understand your customers’ billing requirements before creating and submitting an invoice so that you don’t risk having your invoice rejected. Often, incorrect invoices are not addressed immediately by the client, and once they are you addressed, you might have to reset the clock on the payment terms—further hampering your cash flow. Do everything you can to make sure there is no room for questions. You don’t want a delayed payment to cause you to miss paying one of your own bills!
Beyond getting the basic information right when you create an invoice, there are other things you can do to help increase your chances of getting paid early or on time. Here are examples of certain things on your invoices that can help expedite receipt of your payment:
If you use billing or accounting software, you likely have a number of invoice templates to choose from right within the software. While you can create an invoice from scratch, there are so many wonderful templates out there that there really isn’t a good reason not to use one. A template will give you everything you need to know if you’re questioning how to create an invoice. In most cases, you can adjust these templates to include specific information, so they cover any needs you might have.
If you adjust an existing template, take the time to make sure all the information boxes align and that all details fit within the boxes. Include your logo as well. The end goal is to produce a professional-looking invoice that is easy for your customer or client to read and understand.
If you aren’t yet using a billing or accounting software package, you’ve got other options. You can buy blank invoice forms at your local office supply store, but these often require you to write invoices by hand and can give your business an unprofessional appearance. Creating an invoice online is your best bet.
Instead of handwriting invoices on forms, give one of these free invoice templates a try:
You probably came to us looking for a quick solution to send a customer or client a bill. Hopefully, though, you’ve learned that instead of going for the quickest solution here, you (and your wallet) will be better off if you take the time to create the perfect invoice.
Don’t feel bad—taking the time to learn how to create an invoice and write one to perfection is not something a new business owner gives much thought to, nor should you until you have customers or clients. But, as you’ve learned, doing so can help make sure that you get paid quickly. And this really matters the world over, since it has a direct impact on your business’s cash flow. That’s critical at all points in your business, but especially so during the beginning stages.
Including the right information in the format that your customers or clients require also helps establish your expertise in their field. Writing an invoice formatted for products when you provide services, or failing to include critical information often required by your target customers can give the impression you’re not familiar with their industry.
Plus, adding the proven tricks to speed up payment is a no-brainer. If you don’t have cash flow problems now, you’ll still want to do everything you can to prevent them in the future.
As business owners, we always want to put our best foot forward. Writing the perfect invoice is one easy way to establish your credibility and get off to a great start, while making your own life easier along the way.