An invoice is not a binding legal document. However, invoices are a crucial part of your accounts receivable process, which helps you collect money for the products and services you sell and provide.
The invoice template you choose must be professional and easy to understand. Its clarity directly affects when – and on what terms – you receive payment. We’ll highlight 10 best practices for creating professional invoices and share critical elements of invoices your customers will notice and respond to promptly.
According to the AP Automation Tracker 2022 report, 49 percent of U.S. business invoices go on to become overdue. Late payments create cash flow problems and disrupt the accounts payable process, so minimizing them is crucial.
A clear, professional invoice can grab your customers’ attention and make prompt payment more likely. Here are 10 critical elements to include in your invoices for the best results.
While clearly labeling your invoice seems obvious, it’s a critical invoicing element. Ensure you label the document as an invoice in its header so your customer knows precisely what it is. Use a bold, large font to grab your customer’s attention.
Labeling the document makes it crystal clear that it’s an invoice and that the dollar amount listed is what the customer owes. Businesses typically send out multiple documents along with the invoice; when the invoice doesn’t clearly state what it is, it might get tossed aside or thrown away and go unpaid.
Small business invoices must include your business’s legal name, street address, email address, phone number and (if applicable) fax number. Ensure all information is listed at the top and bottom of the invoice.
Double-check that all your information is accurate in case the customer must 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 make you look unprofessional and make receiving payment more challenging.
Editor’s note: Looking for the right accounting and invoice-generating software for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.
Ensure the customer’s name and title are clear and spelled correctly on your invoice. Include the customer’s contact information on the invoice with their email and physical addresses. If you don’t include their information, they may discard the document.
In addition to your company’s information, you must include the date the invoice was issued and the payment due date. Make this information crystal clear. Additionally, let them know the new total they will owe if they pay after the due date if you must add on interest or late fees.
Clear and accurate dates will help if there’s any confusion about when an item was sold or services were rendered. Businesses must sometimes look back and confirm service dates and product shipment dates.
When charging a late fee or interest on an unpaid invoice, ensure the original contract clearly outlines that these charges may be assessed. It should also state the timeline and note if there’s a grace period.
Numbering invoices is another way to help you get paid on time. An invoice number serves as a transaction’s unique identifier. The invoice number is the second-most-important element after the amount due.
You can assign each invoice a number in various ways, including chronologically. Numbered invoices make searching for and retrieving documents much more straightforward. You’ll be able to check customer queries quickly and identify which transactions weren’t paid.
Your invoice must include a section that breaks down the bill for the customer. This breakdown can be as specific or generic as you prefer as long as it’s easy for the customer to understand.
Include the following in your breakdown:
Consider adding a section to elaborate on item descriptions or provide additional information to explain what’s listed on the invoice. For example, you can include additional materials purchased to complete a job or additional hours an employee worked.
Including payment terms on the invoice is critical. Payment terms depend on your industry, preference and customer relationship. For example, you may require payment upon the receipt of an invoice or extend 30-day or 60-day payment terms. It’s also vital to clearly state what the penalties and fees will be if the terms are not met.
List available payment methods so your customer understands their payment options. For example, in addition to accepting credit card payments or checks, you may also accept credit card payments with PayPal, allow Venmo payments or accept Apple Pay. Simplifying the payment process and including various convenient payment methods can increase customer retention and satisfaction.
If there are handling fees, taxes for purchased goods or any other money the customer must pay, list each fee as a separate line item. This way, customers will fully understand the charges. Itemizing fees also helps when your business must apply various payments to different budgets to ensure your books balance.
While it may seem obvious, the most crucial part of an invoice is the money the customer owes your business. Ensure you clearly state the total amount owed, including taxes. Display it prominently on the invoice in bold next to the label “Total” or “Total due” to ensure your customer knows what they must pay. Don’t make them hunt for the amount they owe.
While the above items are essential, including a message field is also a good idea. A message field is a great place to write a brief note to the customer and thank them for their business. Showing customers you value them can enhance customer loyalty, so taking every opportunity to thank them is essential. You can also use this field to reference the project, explain any unique elements and include incentives for early or prompt payment.
While your invoices should include critical elements, it’s also essential to pay attention to their design. To help you visualize a clear, professional, straightforward invoice, here’s an example generated from Wave Financial – an excellent free accounting software solution with stellar invoicing features:
When designing your business’s invoice, consider the following invoice design best practices:
Like everything you send, your invoice reflects your brand and helps tell your brand’s story. Keep the following elements in mind:
Keep readability in mind when designing your invoices. Consider the following tips:
If you offer an online payment option, include a link or QR code (or both) on your invoice. The extra convenience may prompt some customers to pay when they get the invoice instead of putting it off until someone can cut and mail a check.
The best accounting and invoice-generating software effortlessly creates optimized, professional invoices. These and additional resources take the guesswork out of invoicing. Consider the following solutions to help take your invoicing to the next level:
Jennifer Dublino contributed to this article.