What Should an Invoice in an Exporting Business Look Like?
You’ve set up a small business and sold your first batch of goods to a customer. What next? You send them an invoice.
Writing an invoice is as dull as watching paint dry. However, invoices form an essential part of the global supply chain.
The good news is that creating an invoice is simple and after completing your first invoice, you can use a basic template to streamline your invoicing process.
This article at a glance
If you want to be paid on time, you send an invoice. Necessary details include invoice number, company name, contact details, invoice date and the due date for payment.
What is an invoice?
An invoice is a document issued by a business to a customer, requesting payment for a service or product. It’s sent to the customer before or after a transaction, establishing the customer’s obligation to pay. It’s also known as a sales invoice or a bill.
Additionally, if your business is registered for Value-Added Tax (VAT), you’re required to send out invoices in line with HM Revenue & Customs (HMRC) requirements. But more on that later.
Why is invoicing important?
Invoicing is crucial to a business. It ensures that you:
- Look after your cash flow — Healthy cash flow is important to a Small and Medium-sized Enterprise (SME). Inaccurate or incomplete invoices can cause a delay in payments, which usually results in cash flow problems.
- Get paid on time — An invoice details the goods provided, so your customer can pay you on time and avoid underpayment. You can also set a payment deadline and impose a late payment fee where applicable.
- Stay organised, especially when it comes to tax season — Correct invoicing makes it easier to keep track of incoming and outgoing payments. It’s particularly useful when tax season comes around.
- Safeguard your interests and produce evidence during audits — During a business audit, a well-organised record of invoices allows your auditor to verify the goods provided and the revenue received.
How do I start creating an invoice?
There are nifty online tools that provide pre-made templates for invoices. Check out this one for more information.
Without further ado, let’s get started.
1. Unique invoice number
Every invoice should come with a unique identification number. This will allow you to easily discuss sales invoices and payments with your accounts payable teams.
Establish a systematic order in which you create your invoice numbering system. For instance, your invoices can be sequential with numbers or letters.
Name each invoice in a way that works for you, such as the following:
- Numerical: #01, #02, #03
- Location-based: LDN1234, HK1234, CN1234
2. Company name
Including your company name is obviously important. Moreover, it validates your business and reflects your brand as a whole. Go the extra mile by creating a simple company logo with design tools such as Canva.
3. Contact information
As a business, you should remain readily available to your customers. Be sure to include your name, trading address, email address, and phone number for potential clarifications about the invoice.
For limited liability partnerships (LLPs) or limited companies, you will also have to put in your Companies House registered address and number.
4. Your customer’s information
Include your customer’s contact information under the ‘Bill to' section. This section should state your customer’s name, company name (if applicable), address, email address, and contact information, like a phone number.
5. Invoice date
Include the date of the invoice whenever you create one. This will be a huge time saver, especially when it comes to tax season. The invoice date will be the date you send out your invoice, so your customers are aware of the date the invoice was created and how long they have to fulfil the payment.
6. The provided goods
This is the important part — the description of goods sold. For clarity, neat line items are easy to read. Just make sure you include columns such as quantity, description, unit price, VAT sum (if applicable), and line total.
Quantity Description Unit Price VAT (%) Line Total 1 Customised Mask Chain £30 10% £33 7. Discounts
Depending on the relationship you have with your customer, you could also offer goodwill discounts. If you do, remember to include the discount in the invoice. This discount can be in the form of a percentage or an actual amount.
Quantity Description Unit Price Discount VAT (%) Line Total 1 Customised Mask Chain £30 15% (Customer loyalty) 10% £28.05
8. Payment terms
The payment terms are usually outlined in your terms and conditions, and accepted by your customer. Include the period to pay stated clearly at the bottom of the invoice. For instance, within 30 days. Some of the typical invoice payment terms include the following:
- Payment in advance (PIA)
- PIA is a great way to deal with new customers or customers with a history of late payments. It ensures that your customer pays in full before they receive your goods.
- Net (N)
- ‘Net 10' means that payment is due in 10 days, while ‘Net 30' means that payment is needed 30 days after the date of invoice. ‘Net' can also be shortened to ‘N', so you can simply put N10 or N30 on the invoice.
- End of Month (EOM)
- EOM means that payment must be fulfilled within the number of days stated after the month-end of invoice issuance. For instance, your invoice can state “Payment due 30 days month-end”. Or shorten it to “Net EOM 30”. If your invoice date was 7 May and your payment terms were ‘Net EOM 30', then the full payment should be made by 30 June.
- Month following invoice (MFI)
- MFI is great if you have cash flow problems. You request payment on the first 15th of the calendar month after the invoice has been issued. The payment term is shortened to “15 MFI”. In other words, if your invoice date was 7 May and the payment term was “15 MFI”, the payment will be due on 15 May. If your invoice was dated 17 May, the payment would only be required on 15 June.
Remember to include the different payment modes that you accept, along with your bank details. International transfers require you to provide your BIC code.
9. Value-Added Tax (VAT)
If your business is registered for VAT, you are required to issue a VAT invoice. For each line description of goods, you will have to state:
- The unit price (exempted goods can be found here)
- Total amount to be paid, excluding VAT
Additionally, your VAT invoice should include your VAT registration number, a unique invoice identification number, date of goods supply, and more.
10. Due date and amount due
State the total payment required at the bottom of the invoice and highlight this with bold font. Avoid any confusion by clearly stating the payment deadline. For example, “Payment due June 15, 2022”.
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