Invoices have been around for centuries: the oldest ones date back to Mesopotamia.
Obviously, they have changed drastically in form since then, but their purpose has remained the same: to serve as a way for the entity that provided a service or a product to charge the customer.
So, if you need to invoice your customers, read on to find out what an effective invoice needs to contain.
This article will explain what elements you should include in your business invoice and what each of them means. Some aspects are obligatory, while you can choose to omit others at your own discretion.
Jump to section:
Invoice Number and Date
Description of Products or Services
Quantity and Price
Taxes and Discounts
Payment Due Date
Bank Details and Unique Message
Terms and Conditions
The business logo is an integral part of your invoice that makes the invoice stand out from the others. Logos help the customer identify your company.
However, some businesses don’t place that much importance on the logo. Featuring it on the invoice isn’t strictly obligatory and there are no rules as to where it should be positioned.
Nevertheless, this approach might make things harder for companies that don’t use it in the long run.
After all, research shows that you are 3x more likely to get paid if you use a logo on your invoice. That’s enough incentive to make your company logo an integral part of the invoice.
Also, don’t forget to give the placement of the logo some thought. A study has shown that customers are 89% more likely to make a mental note of the logos placed on the left-hand side than of those positioned on the right.
Why not take advantage of this fact and place your logo to the left to help more customers remember your brand? If you stay top of mind, they’ll be more likely to want to work with you.
Unlike the logo, the number of the invoice and the date when it was issued are both obligatory parts of a company invoice.
Every invoice you send has to have a unique number. Otherwise, you, an eventual auditor, or the customers might have a problem tracking the purchase details.
Unlike other countries, the US doesn’t have specific rules for numbering invoices, so the system behind the numbers is up to you.
Some companies choose sequential numbers, some incorporate customer codes, and others include the purchase date. Whatever system you choose, make sure it helps you differentiate between invoices and find the documents you need with ease.
The date used on the invoice is usually either the purchase date or the date of the creation of the invoice. It’s essential to include this data in your invoice since the payment terms typically apply from the purchase date or date of invoice issuance.
Each invoice you issue should contain information on the company that issued it.
This data should include:
- The company’s full name
- The company’s address
- The company’s email address
- The company’s phone number
It’s essential to include such information in case your customers have questions or concerns about the invoice.
That way, they can contact you, you can track their purchase down and give them the information they need promptly, encouraging them to pay their dues as soon as possible.
Otherwise, you’re risking very late payments, which can have some grueling consequences.
Over 30% of small businesses are currently experiencing or expecting to experience the negative impacts of late payments. That comes as no surprise if you know that 13% of all payments are late.
On top of that, 10% of all late payments are so late they have to be written off as bad debt, meaning that the companies lose that money for good.
Therefore, it’s in your best interest to include the information that will help your customers reach you if they need some help with your invoice.
Another obligatory part of every issued invoice is the data relating to the customer.
In addition to the customer’s name or the name of their company, include their address, email address, contact phone, and any other contact data you have for the person or company that made the purchase.
The information has to be correct if you want to get paid on time, much like any other info you include in the invoice.
This data should be visible in the “Billed To” section of the invoice to ensure that it’s clear who is responsible for paying the invoice.
In case you’re invoicing a company, it’s a good idea to also name the person who should pay the invoice.
Otherwise, the company may receive your invoice with hundreds of others and put it on the back burner because it isn’t as straightforward as it should be.
A short description of the services or products you’re charging the customer for is also a must-have part of your invoice.
In some instances, your customers are companies that shop or do business with numerous other companies, so just seeing your logo and an item code may not be enough for them to determine the exact service or product you provided.
Of course, if they can’t understand what the invoice is for, chances are you may not receive the payment for the service provided.
To put an end to this, make sure to include as many details as possible in your invoice.
Describe and pinpoint the exact product or service you’ve provided and refresh the client’s memory. For instance, the details included can refer to the size, color, and type of the product for easier differentiation.
And if you have sold multiple products or services, you’ll need to clearly state that as well, which brings us to the next topic.
When listing the services or products you’ve provided, don’t forget to include the quantity and unit price for each one.
This section will detail how many products you’ve sold at which price or how many hours or amount of services you’ve provided to the customer.
For instance, if your offer consists of something like an online class, you can record how many hours of the service you’ve provided.
On the other hand, if you provide a monthly subscription to a course, class, or a similar service, you can list the number of subscriptions purchased by the user.
The description section will look something like this:
|Email writing course||2||$ 125||$ 250|
If you feel like you need to explain your service in greater detail, feel free to add a description of the service.
For example, Grammarly’s description could be something along the lines of “monthly subscription to Grammarly, a cloud-based writing assistant.”
That way, even if the logo and the name didn’t ring a bell, the product description would make the nature of the offer much more transparent.
All the added taxes and possible discounts you’ve offered to the customer are also an indispensable part of your invoice.
While the US doesn’t have a national sales tax like the EU’s VAT, you should consider not just your state’s tax law but the federal laws as well to make sure you’re not missing a critical obligation. Keep in mind that you have to calculate the tax correctly.
If you charge the customer a higher tax rate, they will have to pay the amount on the invoice but won’t get a tax deduction in the same amount because it’s not the actual state/federal tax.
On the other hand, you can face severe penalties if you charge the client less than necessary.
|Monthly fitness subscription||1||$ 125||20%||10%||$ 135|
On top of tax, you should list any discounts you’re offering to the customer. If your goal is to get paid sooner, you can provide a small discount for those who pay you within ten days of the invoice creation date.
An automated payments software can be of immense help here, as it allows you to easily include discounts in your offerings. This video will guide you through the process of setting up discount codes in Regpack.
The subtotal will change when you add the taxes and discount values to your invoices, so it’s better to add these two values near the subtotal price. That way, the clients will understand how you’ve calculated the total.
If you want to get paid on time, you must state when the payment is due on your invoice.
Otherwise, don’t be surprised if people take their time paying you. After all, why wouldn’t they if you didn’t state when you expect their payment by?
Studies show that including the due date makes you 8x more likely to be paid on time.
Since the total amount of unpaid small business invoices in the US is circa $825 billion, you should do everything in your power to avoid being in that number and increase the chances of the customer paying you on time.
The due date is often calculated using the invoice date, as it gives the customer a certain number of days to pay, usually 30.
Experts recommend always stating the day, month, and year of expected payment instead of using a code like Net 15 or Net 30 to avoid any possible confusion.
If you want to increase chances of getting paid, always include your bank details and add a unique thank-you message.
Mention all the bank details you think are necessary for the client to make a payment whichever way they choose.
Nowadays, clients have many ways of paying you: they can go to their bank, or the post office, wire transfer the money, or even pay using a QR code, to name a few.
If you can, include the click-to-pay button in your digital invoice so your customers can click the button and open the payment form online. Online payment solutions like Regpack can automate this process for you.
Invoices usually look and feel formal, so consider adding a short thank-you note for your customer.
It doesn’t take that much time and energy to write something that doesn’t sound generic. Even if it did, remember that thanking your customers helps you gain more loyal clients.
Terms and conditions help the customers understand not only what is expected of them and you but also what will happen if they don’t pay on time.
The T&C section explains what you have already provided and how much the customer needs to pay.
This section should also detail whether any discounts apply for early payments and any fines for late ones. In case you request a deposit, this is the right place to mention it.
Freshbooks studied invoices and shared the findings on which terms and keywords resulted in faster payments.
According to their results, if you include phrases that indicate the deadline for the payment, like “7 days” or “14 days” in your terms of service, your chances of getting paid within a week are over 50%.
Similarly, including keywords “thank you” or “interest” gives you around a 45% chance of getting paid in that same amount of time. So, think of including some of these terms into your terms and conditions to boost your chances of getting paid faster.
How Regpack Helps With Business Invoicing
The Get Paid Faster report pointed to some serious invoicing problems that US businesses face.
Firstly, 11% of customers never even receive an invoice because the business forgot to send it, or they sent it to the wrong address or some other reason. In those cases, the customer didn’t receive the invoice and couldn’t pay because of the company itself.
An astonishing 61% of invoices get paid late because there is an error in the invoice. Of course, when invoices are created manually from scratch, the risk of an error rises.
In fact, the report lists manual processing as one of the three main pain points of invoicing. Moreover, there’s always a chance that your customers will lose a paper invoice or delete an email that contains one.
Regpack can help you solve all three of these problems.
The software helps you invoice your clients online, allowing you to automate the process.
You can create invoice templates and modify them according to the customer’s needs and details. Check out this video to see how Regpack simplifies that process.
Since your invoices will all be saved online, you’ll quickly find the one you need. Tracking unpaid invoices will also be a lot easier, and so will charging the late fees.
The software will automatically detect invoices delivered more than 30 days ago, making it easier for you to remind customers about late payments and, if you think that’s necessary, charge them extra for being late.
On top of all that, Regpack helps you charge the customers in a way that suits them the most.
Some prefer to pay the entire sum at once, while others prefer smaller installments. The good news is that Regpack can cater to both.
Because of this, businesses that chose Regpack for invoicing have seen a 35% increase in timely payments.
In short, a software solution for payments like Regpack is usually the most practical for a variety of reasons.
The perfect invoice contains all the obligatory sections and additional ones that make the whole process easier for you and the customer.
Such sections include a good, personalized “thank you” message, an attractive logo that helps customers remember your brand, and detailed terms and conditions.
The most important thing about invoicing is to stay consistent, ensure that your invoices are error-free and that you’re sending them on time. Using invoicing software can help you with all three points and increase the percentage of invoices paid on time.