An invoice is a commercial document issued by the seller to indicate the details of a purchase made by the buyer. It should include all the necessary information to meet the legal requirements.
An accurately prepared invoice prompts payment. Incorrect or incomplete invoices are one of the primary reasons for a delay in payment. Additionally, such invoices could also create legal issues at a later stage. Therefore, it is always wise to have a complete idea about what to include in your business invoice in order to comply with the rules.
Let’s take a detailed look at the essentials that a business’s invoice must include.
It is vital to include your business’s details in the invoice. The following details should be present in your business’s invoice:
Name of business
A business’s invoice is a reflection of your brand’s uniqueness. The colours, fonts and the language used to convey your brand’s message builds your brand’s identity and sets your brand apart from your competition. Therefore, it is important to think carefully before choosing these.
Your business’s invoice should include your customer’s details. Your customer’s name and address should be present in the invoice to specify who you are charging the amount to. Additionally, these details will help you identify who you are receiving the payment from if the payment is due at a later date.
Every invoice has a unique invoice number. Keep an eye out to avoid duplication. Your invoice should mention the date and time of the purchase, also known as tax point, clearly. This detail is all the more applicable if your business is registered for VAT (Value Added Tax).
In addition to this, your business’s invoice should clearly mention the terms of purchase as well.
Details of Purchase
Your business’s invoice should provide clear details of the items you are invoicing for. A list of each item names, their descriptions and their quantities should be mentioned in the invoice. The price of each item should be present along with the total cost. Discounts, if applicable, should also be mentioned separately with the reduced price (the price customer has to pay) at the end.
In case it is a service that the invoice is being prepared for, the number of hours billed, cost per unit and the total charge should be included.
Methods of Payment
Business transactions may be carried out in various methods of payment. To avoid any confusion, your business’s invoice should clearly mention which method of payment you will accept. For payments through a bank, the invoice should include the bank’s name, account name and number and other relevant details as well.
If your business’s taxable turnover is greater than the threshold limit of £83,000 a year, you would need to register for VAT. In that case, your business’s invoice is required to include certain additional information as well. These are mentioned below:
- VAT identification number
Percentage of VAT charged for each item
Total amount of VAT charged
In the case of zero-rated items or VAT-excluded ones, your invoice should clearly mention this to avoid any misinterpretation.
While listing prices of the items, your invoice should contain VAT-excluded prices of each, the total price of the items excluding VAT and finally, the total amount to be paid by the customer including the VAT amount charged.
Invoices for Sole Traders
If you are a sole trader, apart from including the details mentioned above, your invoice should also include your name as well as the business name you are using (if applicable). Apart from that, a contact address should also be mentioned where any business-related documents can be forwarded.
Invoices for Limited Companies
If you own a limited company, you have the option to put the names of its directors in the invoice. Names of all directors should be included. Additionally, you would be required to include the full name of the company as on the certificate of incorporation.
An invoice is an essential document for any business. A complete and accurate invoice will not only speed up the payment process but would also be an effective record-keeping tool for each of your business transactions. Ensure that the details are in accordance with the rules to facilitate seamless business proceedings.