If you’re new to running a small company, you may not be familiar with all of the business documents that make up your day-to-day.
A business that sells products or services needs to provide its customers with an itemized record of the transaction. Invoices, as these records are known, are given to the customer after the products/services have been delivered. They state what was provided by the company, tell the customer what they owe, and state payment terms.
That’s what an invoice is, but how do you make one?
In this post, we’re going to discuss these important business documents in-depth and tell you what you need to include on your invoices so that they’re professional and clear. Read on and you’ll be set up to collect payments now and moving forward.
Invoices, Important Business Documents
A lot of people get invoices and bills mixed up, but there’s one main difference: a bill is due immediately and an invoice is collected at a later date. Similarly, invoices differ from receipts in that receipts record proof of payment. So, what’s the purpose of the invoice?
They help companies monitor cash flow by tracking what customers owe. Accounts payable can look at their invoices, bills, and receipts, and figure out how much money has come in and what is due to come in from outstanding invoices.
When the company sends the invoice, it helps them receive full payment by the stated date, but they also help track outstanding balances, the date of sale, and how much the service or product was sold for. All of this is important in creating a paper trail, should your business one day be audited by the IRS.
What to Include On Your Invoices
While there’s no set way to draw up an invoice, there are some things that you should always include. You can get an invoice template free on many websites, but make sure that you have the following on it:
Invoices should always be uniquely numbered for your and your customer’s financial records. Numbering them sequentially is advised because it keeps you organized and makes them easier to find, should you need to access a specific one.
The date of the sale of goods/services is crucial information because it’s an official statement of billing and payment due. Usually, the customer has anywhere from 1-3 months to pay an invoice, but the time of credit is up to you. Put the length of the payment terms and the due date beneath the date of sale, so all of the necessary information is there.
Put your business contact information, as well as the customer’s contact information under “bill to” and “sold to” headings.
Add a breakdown of what you’ve sold to the customer and how much each thing costs. Each service/product should have its own line in a table, with the quantity, the unit cost, the total cost per product/service, and a sum of the total cost, pre-tax.
At the bottom of the invoice, since you’ve covered payment details above, simply include the subtotal, sales tax, shipping, and total.
Managing Your Finances Can Be Made Easy
Invoices are some of the most important business documents that you’ll use. Now that you understand more about them and what you need to include, you can create a template and use it for years to come. Keeping good records is crucial to the success of any small business, so make good invoices and you’ll make your life easier.
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