How to Write an Invoice

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Table of Contents

What is an invoice?
How to create your first invoice after going self-employed
7. Add terms and methods of payment
What to include on your invoice
How to add VAT to an invoice
How to invoice clients overseas
How to send your invoice
Add the finishing touches
Need to chase a late invoice? Here’s how

Creating and sending invoices is an essential part of running your own business, even if you’re just freelancing on the side. It might seem like boring admin, but it’s vital to include some critical components. Invoicing errors can lead to late payments – something no solopreneur or small business owner wants.

If you’re newly self-employed or have been running a business for a while, it’s always good to check you’re including the right information, and presenting your invoice in a way that makes it easy for the recipient to process. This could help you to get paid promptly and will also ensure your business records are accurate.

What is an invoice?

An invoice is a document sent from a business to a client to request payment. It contains all the details the client needs to make the payment, such as an outline of the work completed, the payment terms, the total amount due and more (we’ll go into these below).

If both your business and your client are VAT-registered, you’re required by law to provide an invoice for tax purposes. However, it’s good practice for anyone providing goods or services, including freelancers, sole traders and side-hustlers, to provide invoices.

Why are invoices important for small businesses and freelancers?

Invoices are a useful way of keeping track of the money flowing into your business, making life easier when the time comes to file your self-assessment tax return. As well as covering your back from a financial and regulatory perspective, you can also use invoices to reinforce your brand. Adding your company logo to your invoice shows that you’re professional and could help make your business more memorable.

Sometimes invoices are confused with receipts. While they both relate to payments, there is a crucial difference: an invoice requests payment, whereas a receipt proves that the payment has been made.

Types of invoices

Depending on how you run your business, the two main types of invoice you’re likely to send to clients are a standard invoice (you can use as either a sole trader or limited company) or a VAT invoice (when both company and client are registered for VAT).

VAT invoices will require additional information to comply with VAT rules, such as your client’s VAT registration number and the VAT being charged. Generally, these should be submitted within 30 days of the date you supplied the goods or service.

» MORE: How to Choose a Company Structure and Register a Business

How to create your first invoice after going self-employed

For those new to invoicing, a template could help you make sure you include all the necessary information. Miss anything out, and you run the risk that you won’t get paid promptly.

You can find invoice templates online for free and in computer programmes such as Microsoft Word and Excel. These can be edited and customised to suit you and your brand. But don’t get distracted by perfecting the colour scheme – first, focus on the critical components below.

1. Start with your business details

Include your business name (or your full name, for sole traders and freelancers trading as themselves), your registered business address, phone number, and email address.

Tip: Don’t put your contact details in tiny lettering or fancy font; make them easy to read. If the person paying the invoice has any queries, you want them to be able to reach out quickly. An email address that’s hard to read could potentially lead to a late payment.

2. Add your client’s details

Include the full name or company name of the client you are invoicing, along with their business or personal address and contact details (such as phone number or email). Avoid using nicknames, even if the person you’ve completed the work for is a friend or relative.

Adding the address of the company you’re invoicing allows them to use the invoice as a business record if they need to claim back expenses or VAT.

Tip: Double-check their company details to ensure the invoice reaches the right person or department, especially if you are dealing with a larger company.

3. Create a unique invoice number

Every invoice must have a unique identification number – for your records and for whoever is paying it. Missing this off could delay payment and make you appear unprofessional, so don’t skip this step, even if you’re invoicing a relatively small amount.

There’s nothing wrong with starting with 001, but you may find it helpful to add some letters to help you match up payments to specific projects, and some business owners include the date in their invoices.

For new business owners and newly self-employed professionals worried about appearing inexperienced, this makes it less obvious to your client that you’re new to invoicing. For example, if you completed a web design project in March, your invoice number could be WD-2503001. Whichever software or template you use, saving the document with the word ‘invoice’ in the file name could help you get paid quicker.

Tip: It’s worth spending some time thinking about a numbering system that will help you make sense of lots of invoices in the future. If you plan to take on multiple clients, consider incorporating letters into your invoicing system to make it easier to track payments from different customers.

4. Include the supply date and invoice date

The Supply Date is when the goods or services were provided. The Invoice Date is when you issued the invoice, so put today’s date if you’ll be sending it today. Both dates are legally required and are essential for record-keeping and payment scheduling.

Tip: For sole traders working on digital projects, the supply date could be the date you completed the work, or the date you handed it over to the client.

5. Provide a clear description of goods or services

List each product or service you are charging for with a clear description. If you are invoicing for more than one item, use a table and put each element in a separate row, so that the breakdown of costs is clear. Include quantities, rates, and any other relevant details. If you’re a freelance designer, for example, your quantity may be the time you’ve spent on a project. If you sell candles, it may be in units.

» MORE: How to Start a Candle Business

Tip: Avoid using vague or unnecessary wording that could make it harder to understand exactly what you are charging for. Keep descriptions short and specific, making it easier for the person signing off payments to approve your invoice quickly.

6. Give the amounts charged and the total

The cost for each item or service should appear in a column next to the description, with the total amount due at the bottom.

If you are VAT registered, you must also show the VAT amount separately, including your VAT registration number, the net cost, VAT rate, and the total including VAT.

Tip: Check the maths. Business owners using accounting software to create their invoice should have no issue with totals. However, if you’re manually creating your invoice using a template, it’s always worth running the numbers through the calculator on your phone or using Excel to add them up.

7. Add terms and methods of payment

It’s vital to state clearly when you require payment, for example, “Payment due within 30 days” or “Payment due no later than 31 May”. Include the payment methods you can accept (such as bank transfer or PayPal).

If you’re requesting payment via BACS, you’ll need to include your bank details (sort code and account number) for the transfer.

Finally, if you’ve received a purchase order (PO) from your client, you should include the PO number on the invoice.

Unfortunately, late payments are a problem for thousands of small businesses, so don’t let an omission on your part give bigger businesses an excuse.
Tip: Some businesses offer a discount to customers who pay within a shorter time frame, as a way of encouraging prompt payment. For example. “10% off if payment is made within 7 days”. Use this strategy cautiously, and don’t offer discounts unless there’s plenty of room in your profit margin.

What to include on your invoice

Naturally, your invoice needs to specify payment details and the amount owed, but there is other information you need to include.

Here’s a quick list that you can check off as you go:

invoice date
invoice number
business name (and your own name too if you’re a sole trader)
registered business address (or correspondence address if you don’t have one)
name and address of the client
a clear description of the products or service you provided
the date the products or service were supplied
breakdown of costs
total amount due
payment terms
your payment details
purchase order (PO) number, if applicable
VAT details (if both businesses are VAT registered)

Including these key pieces of information allows both businesses to keep a detailed, trackable record of payments.

» MORE: What to do about late payments

How to add VAT to an invoice

A VAT invoice is required if your business is VAT registered. If that’s the case, it’s your job to collect VAT from your customers on qualifying purchases, and pass this on to HMRC when you file your taxes. (VAT you’ve paid to other businesses will be deducted from what you owe).

In addition to the standard details found on regular invoices, a VAT invoice requires some additional information:

The overall VAT charged
Your company’s VAT registration number
The date the goods or services were supplied (called the tax point) if this differs from the invoice date
The VAT rate applied to each individual item, or an explanation if a zero rate or VAT exemption applies (check the different rates on the government’s website)
The net price (before VAT) per item sold
The number of units or quantity of each item sold
The total value of goods or services before VAT is added

How to invoice clients overseas

If you’ve started selling your products or services internationally, here are a few extra tips to ensure you’re invoicing correctly.

1. Check currency conversion rates and fees

If you’re selling products to customers overseas, some e-commerce platforms do the currency conversion for you. This makes for a better shopping experience for customers, making them more likely to complete a purchase.

However, multi-currency ecommerce platforms may charge conversion fees, which can either be passed onto the customer or swallowed by the business. For example, sellers on Etsy typically absorb currency conversion fees, so these are not itemised on customer invoices.

2. Choose multi-currency invoicing software

If you plan to continue trading internationally, it’s worth factoring this into your choice of accounting software. Platforms like FreeAgent and QuickBooks can be used to account for currency exchange rates automatically, and some, like Xero, allow business owners to invoice customers in their own currency.

3. Look out for local taxes

It’s normally the responsibility of the customer to cover any local sales taxes or import duties. This includes tariffs imposed by the United States administration, which will affect more small businesses since the $800 de minimis threshold was scrapped. While you shouldn’t need to reflect these on your invoice, your customers may appreciate you flagging any charges they should expect to pay at the point they make their purchase.

How to send your invoice

It’s important to note that it’s now a requirement for VAT-registered businesses to keep records digitally and file their VAT returns using HMRC-compatible accounting software. This is part of the government’s Making Tax Digital (MTD) scheme.

If you’re unsure how and when the roll-out of Making Tax Digital (MTD) applies to you, we’ve set out the steps to make the transition as stress-free as possible. Adopting accounting software ahead of MTD deadlines can uncover other unexpected advantages. Find out more in our four-step guide. Should you use invoicing software?
Many small business owners and solopreneurs take advantage of digital accounting software to keep on top of their books. Even if you’re currently freelancing part-time, some accounting software packages come with digital invoicing features which could save you time when it comes to generating and sending invoices.

Add the finishing touches

Once you’re happy that your invoice ticks all the boxes from a financial and regulatory perspective, you can then look at using it to reinforce your brand. Adding your company logo to your invoice adds professionalism and could help make your business more memorable.

If you don’t yet have a company logo, try creating one using free design software such as Canva.

Need to chase a late invoice? Here’s how

In an ideal world, every invoice would be paid promptly according to the payment terms you’ve set out. Unfortunately, not every customer your business deals with will pay on time. Late payments are an issue for thousands of British companies every year, causing cashflow problems, not to mention stress for business owners.

The good news is, your accounting software should automatically flag payments that are overdue, and some platforms provide a template to help you to create a reminder email. You can schedule reminders to be sent as soon as a payment becomes overdue, and set up recurring reminders if needed.

As a business owner, you are allowed to charge a statutory rate of interest on the money you’re owed. Unless you have a contract with a customer that states otherwise, the interest you can charge is 8% plus the Bank of England’s base rate.
Applying this rate and adding it onto the outstanding amount in a new invoice can spur any late-payers into action. In some cases, you may be able to claim back the cost of recovering a debt. Read our guide on what to do if you’re not paid on time.

Image Source: Getty Images

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What is an invoice?