A clear, thorough invoice could be the difference between your business getting paid and your invoice being ignored.
An invoice is not a binding legal document, yet it is still one of the most important documents you will ever create. It's a bill for the services you provide or products you sell. You obviously realize that you need to invoice your customers to receive payment for the goods or services you provide, but what should your small business's invoices actually look like?
The invoice template you choose needs to be professional and clear – after all, it directly affects when you receive payment and on what terms the payment is made. A study by U.S. Bank found that U.S. small businesses are owed $825 billion in unpaid invoices. If you're ready to create professional invoice templates to ensure you get paid for the products and services you provide your customers, utilize these 10 critical elements to ensure the invoice is both professional and effective.
1. A standout header
This point seems obvious, but it's also very important. Make sure to label your document as an invoice in the header so your customer knows what it is when they receive it. Use a bold, large font. When you label the document, you make it crystal clear that this document is the invoice and the dollar amount listed is what the customer owes. It's common for businesses to send out multiple papers with the invoice, and when the invoice doesn't clearly state that it's an invoice, it might get tossed aside or thrown away and go unpaid.
2. Your company's information
Small business invoices need to include your business's legal name, street address, email, phone number and (if applicable) fax number. Make sure all the information is listed at both the top and bottom of the invoice. Double-check that all of your information is listed accurately, in case the customer needs to contact you to pay with a credit card by phone, email you with questions or mail a check to your business address. Incorrect information will not only make you look unprofessional, it will also make it difficult to receive payment.
3. Your customer's name and contact information
Make sure the customer's name and title are clear and spelled correctly. Include the customer's contact information such as their email and physical address on the invoice.
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4. Invoice sent date and due date
In addition to your company's information, you need to include the date the invoice is issued and the date the payment is due. Spell it out for your customers! Also let them know the new total they will owe if they pay after the due date. These dates can help if there is ever any confusion about when an item was sold or when a service was rendered. You never know when you might find yourself in a position where you have to look back and confirm dates of services or product shipment.
5. Invoice number
Include other identifiers on the invoice, such as an invoice number unique to the transaction. The invoice number is the second most important element after the amount of money that is due. You can assign each invoice a number in various ways. It's common for a business to list invoices in chronological order. When invoices are numbered, it makes things much easier if you have to search for a document in a paper file or on the computer. Numbering invoices is just another way to help you get paid on time.
6. Breakdown of products and services provided
You need a section on the invoice that breaks the bill down for the customer. It can be as specific or generic as you prefer, as long as it is easy for the customer to understand. Make sure to list the following:
- Name of the good and/or service provided
- Date the good and/or service was provided
- Rate charged for the good and/or service provided
- Quantity of the good and/or service provided
You might want to add a section to elaborate on the descriptions of the items or other information to explain what is listed on the invoice. This may include additional materials that were purchased to complete a job or additional hours that an employee worked.
7. Terms of the transaction
The terms of payment are extremely important on your invoice. Payment terms depend on your industry, preference and relationship with the customer. It's also vital to clearly state the penalties and fees if the terms are not met. List the available payment methods to make sure your customer knows how they can pay in the most convenient way for them; they may not know you accept payment via Pay Pal, for example. One of many ways to improve customer retention is by making things simple for them.
8. Itemized fees
If there are handling fees, taxes for purchased goods or any other money the customer needs to pay, you need to clearly list each as a separate line item so your customer knows what they are being charged for. This is also helpful when your business needs to apply fees to different budgets to ensure your books balance.
9. Total amount of money due
This point may seem silly to mention, but it's the most crucial. Make sure you clearly list the total amount the customer owes, with all taxes included. Display it prominently on the invoice in bold to ensure your customer is clear on what they need to pay. Don't make them hunt for the amount they owe.
10. Any notes for the customer
While the items above are the essentials, you may want to include other things. An important one is a message field. This is a great place to write a brief note to the customer and thank them for their business. Every business owner should know that a customer wants to feel valued, and customers who feel valued turn into loyal customers, so use the message field on the invoice to extend a sincere thank-you. You can also use this field to make reference to the project, especially if there was something unique about what you did for the client.
In this era of texting, you might also want to send a heads-up text message to let your clients know that an invoice is on the way.
Bonus: Design elements
Pay attention to the design of your small business invoice. Just like everything you send out, your invoice is a reflection of your brand. At the very least, it should include your logo. If you can, use your color scheme and signature fonts.
At this point you might be thinking, "This is a lot of information just to create an invoice," but luckily, there are many free downloadable templates out there in case you don't already use a system that offers an invoicing feature. This is the solution I use for my small business invoice needs. [Related: Best Invoicing Software for Small Businesses]
Creating and sending invoices is often a laborious process, but it's part of running a small business. An invoice is proof that you provided services or goods. Invoices also give your business some legal protection if you're challenged with a tax audit and allow you to verify your business's reported income.
Whether you're a new or long-standing business, there are some things your invoices must include. If you have some doubts about how to issue correct invoices, use this basic information to help ensure your invoice is paid promptly and in full.
What other elements do you think are vital to include on a professional invoice?