The Purpose of an Invoice
An invoice is one of the most important documents that your business creates. In addition to functioning as a receipt, it is also your accounting paper trail. It’s an instructional document that guides your customers through the process of paying your business.
Let’s start with a simple definition of what an invoice is:
As a transactional tool, an invoice is a bill for an account between a buyer and a seller indicating what was sold, and how much is owed. They’re used for account-based transactions between vendors and sellers who work with each other on a regular basis. You can use invoices to keep track of how much your customers owe you in total, as a basis to monitor your cash flow.
Invoices are like most bills in that they’re issued from a vendor to a customer for something they’ve already received, something in development, or something that’s ready to be created. But invoices, unlike a restaurant bill, aren’t necessarily due immediately upon receiving them. You may choose to set invoice payment terms of up to 3 months, to give your customers flexibility to manage their cash. Here are some tips to help you set up your invoice.
Invoices show your clients what they purchased, how much they owe, and when the funds are due.
That’s why software makes the invoicing process easier. Let’s say you send 10 invoices per month, and the process takes you 1 hour a piece. This is time that you could be using fulfilling services or generating new business. Using software, you can trim your invoicing time down from 10 hours to 1 hour.
You can standardize your templates, quickly query information about payments, and answer customer questions as they come up.
An invoice is an important transactional tool with extremely functional applications. That’s why it’s important for small business owners to create them in a way that is error-free.
Learning how to create an invoice online is relatively straightforward, but the information you include can affect how quickly people pay your bills.
Invoice Structure: Details to include in your Invoice
Unlike some government-issued tax documents in Malaysia, invoices aren’t standardised. The invoice you get from one contractor might look a bit different from the invoice you get from another.
But all invoices are built of the same building blocks, with the following components:
- Your business’s name, address, email address, and contact information
- An invoice number for record keeping, to establish a paper trail of information for yours and your customers’ accounting records
- The customer’s name and contact information
- The date of completed service
- A description of goods or services, to a level of specification that describes what you provided at the unit level
- How many units your customer ordered
- The rate or price per unit
- The total number of units
- A total amount owed
- Any fees or tax that your company needs to apply to the amount due
- The date payment is due
To make your invoices look professional, you may also want to add your logo and customise your design. Many templates allow you to upload your logo and customise details such as borders and colours.
Create Invoice Templates to Send Electronically
Alternatively, you may want to consider electronic invoicing. Cloud-based accounting software, such as QuickBooks Online, comes with electronic invoice templates. The templates ensure you remember all the important details, and they let you personalise the invoice by uploading your logo. Then, you simply send the invoices to your clients with the tap of a button. And because your clients can see the invoice on their computer or mobile device, using this option is a great way to keep your business mobile friendly. As an added bonus, you can save the information you enter. That way, you don’t have to start from scratch when you’re invoicing a regular client. See our free downloadable Invoice Template and invoice checklist as an example.
Use Cloud-Based Accounting Software to Send Invoices Quickly
When you use cloud-based accounting software, such as QuickBooks Online, the option to create and send professional invoices is already built in. This feature helps ensure you don’t accidentally enter incorrect information into your accounting records. It also saves you time by calculating sales tax, handling currency conversions, and creating purchase orders in just a few simple steps.
With QuickBooks, invoices can also be sent via Whats App. This makes sending a breeze, especially when you’re on the go and want to send invoices from your mobile phone.
Send Online Invoices to Speed Up Payment Times
The way you handle invoicing can have a direct impact on how quickly customers pay their bills. For best results, generate your invoices as soon as possible. If your customers see the bill while the transaction is still fresh in their minds, they may be more willing to pay quickly. In contrast, if you wait a few weeks, they may have forgotten about the product or services by the time they receive the invoice.
Note your due date clearly at the top of the invoice. You may even want to outline what happens if someone pays late. For instance, you may want to charge a fee for payments made after 30 days. On the flip side, you may want to offer discounts to encourage early payments.
Tracking Your Invoices to Ensure Accurate Records
Ideally, you should track your invoices. Otherwise, unpaid invoices may become forgotten. So when you set up your accounting software and bookkeeping process, make it a point to manually review the invoices you have outstanding while you reconcile your accounts. This way, if you find an unpaid invoice, you can easily send an email reminder to your client notifying them their payment is past due. This is one of the strengths of Using QuickBooks invoicing software, as the software can detect when your client has made payment of their invoice.
All kinds of tools can help you create invoices for free. But to truly stay on top of your finances and save time, look into electronic invoicing tools that sync with your accounting software and help you track the status of your invoices.