An invoice, while not technically a binding legal document, is one of the most important documents your company will ever create. It directly affects when you get paid and on what terms those payments are made. Below are eight essential elements you must include to create an invoice that is both professional and effective.
1. Company Information
If you are the payer, you want to be sure that your company’s legal name, business address, business phone number and fax number (if applicable) are listed accurately and included near the top and bottom of the invoice. If you are the payee, you want to be sure to include the same information at the top and bottom of the invoice as well. You want to be sure to differentiate which company is the payer and which is the payee by labeling each. As the one making the payment, you should label the payee as “Sold To”; this indicates who is responsible for making the payment.
This may seem blindingly obvious, but be sure to label your document as an invoice in the header. This way, you minimize any confusion about what the document is, especially if it’s part of a pile of otherwise indistinguishable papers.
3. Date, Invoice Number and Unique Identifier
Along with each company’s respective payer and payee information, you’ll want to include the date on which the invoice is issued and an invoice number or another unique identifier. You can structure your ID based on any system or stylistic preference, whether it’s a simple file number, unique billing code or date-based purchase order number. If you are the one sending the invoice to an organization and asking for payment, perhaps for freelance work, check with the organization to see if there are any unique company details they need included, such as an internal purchase order (PO) number or billing code. For many larger organizations, PO numbers and/or billing codes are the only way they can expediently deal with an invoice. Details like these can mean the difference between getting paid on time and getting paid next quarter.
4. List of Goods and Services
This section of the invoice can be as detailed or generic as you like. The most important parts of the listing include:
- Name of the good or service provided
- Date the good or service was provided
- Rate for the good or service provided
- Quantity of the good or service provided
You may want to consider adding sub-sections for each item that includes price modifications, item descriptions or other information as needed.
Terms of payment are incredibly important on an invoice. Standard payment terms will vary based on your industry, your company’s preference and, perhaps most importantly, your relationship with the client. It’s also important to make mention of the penalties if these terms are not met. This could include a late fee or an additional percentage of the total bill.
6. Itemized Fees
If there are any taxes, handling fees or other charges that need to be levied, each of these should be listed as a separate line item. This is important for some organizations that need to apply these different fees to different budgets for their internal books to balance.
7. Total Amount Due
While it may seem trivial, it’s worth mentioning: Make sure that the total amount due is prominently displayed on the invoice.
While the previous seven items are really important to include on an invoice, there are a few other elements you can include if you choose, such as:
- Message Field: This can be used to say “thank you” to a client or make reference to something unique to the project.
- Tax Identification Number: Some businesses may file their invoices using their clients’ TIN. Since it is a government-issued number that is unique to each business, it’s worth including, especially if you handle a high volume of invoices.
While there are no legal guidelines for an invoice, including the elements listed above will help ensure your invoice is handled correctly and paid promptly.