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How to create an Invoice

There are many different ways that a small business owner can create an invoice—and that’s precisely the challenge.Especially if you’re just getting started as an entrepreneur, you may be wondering whether to create these documents manually or to use software right away. Creating invoices manually has its benefits: you can fully customize your templates, aesthetics, and process.

But if you do create your invoices from scratch using spreadsheet or word processing software, you may encounter administrative errors. Also, if you’re creating invoices manually, you’ll run into challenges tracking them and getting paid.

That’s why it’s important to start using invoicing software or an accounting software with integrated invoicing from the beginning. While it may make sense to build your own invoices for one, two, or even five customers, imagine how your efforts will scale across multiple customers.

Eventually, the process of creating invoices may become unsustainable. You’ll run into a situation where you’ll need to hire someone to manage this process. Or, you can pay a monthly fee to use software, at a tiny fraction of the cost of bringing on an employee.

Using software you can manage and scale your invoicing process, with minimal effort.

The Components of an Invoice

When creating invoices for a small business or for yourself as an independent contractor, you should include the following components:

  • Header: The word INVOICE should be in large letters centered across the top of the document. This practice will help you signal to your busy customers—who need to filter through many documents on a daily basis—that they need to make a payment.
  • Payer’s Name and Address: The company or person that is issuing the payment, along with the mailing address, should be listed. This information will help your customers understand that the document was, in fact, intended for them.
  • Payee’s Name and Address: The name of the person or company being paid should be listed, along with the mailing address; the payee’s email address will also suffice. This information will make it easier for your customers to send you a check.
  • Itemized Listing of Goods or Services: Depending on the type of work that is being billed, a description of the work that was done should be listed. For example, if the invoice is for a certain product, the product name, quantity, per-unit price, and total price should be listed on the invoice, typically in columns that run vertically on the page. Itemized details are especially important for both yours and your customers’ accounting documentation.

If the invoice is for services (for example, the completion of a design or writing project), then the name of the project, a brief description of the type of work (i.e. graphic design, writing) and the hourly or flat rate should be listed. If it is an hourly rate, the number of hours worked should be included. If payment is per piece, each piece completed should be listed separately.

Underneath the listing of products or services being billed, there should be an invoice total that’s clearly marked to avoid any undue confusion.

  • Date: It’s important to include the date the invoice was issued, as well as the date(s) of the work completed or when the products were ordered or delivered—you can discuss this preference with your client and/or business to make processing easier for both of you.
  • Invoice Number: An invoice number is not generally required, but it may help in keeping invoices organized. Larger organizations often have complicated billing systems that may require a certain invoice number or code. Remember to discuss this with your client before submitting your invoice. No matter which system you use, be sure that the invoice number goes up incrementally each time it is sent.
  • Terms: You’ll want to be sure to note the payment terms. Whether the payer or the payee, it’s important that everyone has an expectation of when the payment is to be made. Most invoices have a 30-day term, meaning they must be paid within 30 days of receipt to avoid any late fees or penalties. This is usually written as “Net 30” on the invoice. Every organization should establish their own payment terms depending on the type of business they do and the type of vendors with whom they work.
With QuickBooks you can create invoices on the go, when and where you need them

Creating the Invoice

Thanks to software, you can create invoices using automated templates. Using tools like an invoice template, sellers can quickly input information to keep invoices simple (but don’t expect any automatic tracking of who has paid what). Here are three easy ways to create an invoice:

1. Use this free invoice generator tool to create and export an invoice.

2. Download an Invoice Template for use in Microsoft Word, customise design, populate components and save as PDF and send.

3. Use QuickBooks to generate invoices and accept payments.

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Tips to consider when creating an Invoice

No two invoices are alike, but there are some general tips you should keep in mind when creating your own to ensure both parties are clear on what the expectations are on how and when payments should be received.

1. Ensure Product Descriptions are easy to follow and understand

If you are a services company, make sure to include a title of your project, as well as a description of the activity that you perform.

If you’re selling a range of products, include your SKU or product ID in the itemized list on your invoice.

2. Create a Purchase Order

A purchase order is the contract between buyer and seller agreeing to purchase whatever goods or services are being bought. For example, if a local coffee shop agrees to buy five cases of espresso from their favorite distributor, they might sign a purchase order when they buy the product, and the distributor will issue an invoice upon receipt of the coffee. In general, an invoice is issued by the seller, and a PO is issued by the buyer.

Choose invoicing terms that maximize your cash position and likelihood of getting paid. You may choose to collect 50% upfront or require immediate payment upon completion.

Then, you can decide how long your customer needs to settle an invoice. One of the most common payment terms, Net 30 days (or “N/30″), means that a buyer must settle his or her account within 30 days of the date listed on the invoice.

It’s important to remember that 30 days is not equivalent to one month. If your invoice is dated March 9, clients are responsible for submitting payment on or before the 8th of April. Businesses may also set invoice terms to Net 60 or even Net 90, depending on their preferences and needs. You can learn more in our guide to choosing invoice payment terms.

Create custom invoices to best match your brand

More Resources

As the creators of the world’s most popular accounting software, QuickBooks has conducted extensive research into what makes an invoice most effective. Take a look at the following resources that our team has created, below:

  • What Is an Invoice? – This article walks through the basics of what makes an invoice effective, in addition to the details that small business owners need to include to get paid.
  • The Complete Guide to Invoices – This guide walks through each step of the invoicing process, covering the basics.
  • How to Collect Invoices Faster – Getting paid can be a challenge for the small business owner. This guide provides tangible tips to help you get paid faster, with fewer hiccups.
  • Use this free online invoice generator tool to create and export an invoice.
  • Use QuickBooks to generate invoices and accept payments.

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