18th September, 2018
Understanding invoicing in the time that it takes to pack your sports bag.
By the time that you’ve found your tennis racquet and a matching pair of socks, we’ll take you through what invoicing is, why it’s important and what you should include in an invoice.
Don’t break a sweat – it’ll only take about three minutes to read.
When it comes to controlling your business’ finances, invoices will become your best friend.
An invoice is a document that outlines a business transaction. It’s used to bill a customer for goods or services that you’ve provided them.
In other words, an invoice tells your customer how much they need to pay you – and makes sure they pay it.
Invoices are also records of business transactions, which you can use to keep track of your business’ revenue.
To make sure they’re legally valid, you must include the following things on business invoices:
Tax invoices for sales of $1000 or more also need to show the buyer’s identity. A tax invoice is not needed for supplies of $50 or less (including GST). But it is best practice to keep records for these purchases, such as invoices, vouchers or receipts.
DOWNLOAD: MYOB’s FREE invoice template
Invoices play an important role in keeping good business records. This is because they contain important information about every transaction you’ve conducted.
Your invoices tell you the story of your cash flow that can help you understand when money is coming into your business and where it’s coming from. This will help you see different financial challenges and opportunities in your business.
For example, a chocolate store will probably see a lift in sales around Easter time, as well as a drop in sales after Easter. This can help the business make decisions around how much to spend on advertising around Easter, as well as how many staff members to roster on during that same period.
Online invoicing software makes it easy to keep good records of your invoices. This software simplifies the process of creating, distributing and analysing invoices. Plus, unlike paper-based invoices, it’s harder to lose them.
Learn more about how you can take control of your cash flow through online invoicing here.
As well as including the mandatory elements, there are four things you should do to make sure your invoices look professional:
It’s tempting to keep your invoices as brief as possible. But be specific when outlining what you’re charging customers for. This is especially relevant for service-based businesses.
If you’re a photographer and are charging a customer for “photographic services”, be specific about exactly what those services were. Are you charging them for a photo shoot or are you charging them for the time it took to edit 10 different photos?
Time is money, so keep track of it.
Time tracking will help you learn how long it takes to do a certain task, which will help you work out your costs.
Time-tracking more accurately will also make your invoices more transparent, so your customers will know what to expect when they need you to work on something similar in the future.
When it comes to invoice design, simple and legible designs tend to work best.
Think about including your branding on your invoices. You should put your logo and contact information on your invoice. You could even design your invoices using your business’ colour palette. This will help customers remember your business when they require similar services in the future.
Using digital invoicing tools will help keep your invoices consistent. It will also make invoicing quicker and easier, and help you keep more accurate records.
READ NEXT: Your guide to business tax obligations