Introduction to invoices: An easy guide to creating them

In this article, we’ll give you a comprehensive overview of invoices, including their definition and instructions on how to create them.

We’ll cover:  

• What an invoice is

• Why are invoices important?

• What information goes on an invoice?

• The different types of invoices

• Who can issue invoices?

• Tips for creating invoices

• Sample invoice

• How to find an invoice template

What is an invoice?

As an entrepreneur just starting out, it’s important to understand the right way to raise invoices for your customers. 

To put it simply, an invoice is the document required for you to get paid. In other words, when you finish a job and it’s time for your customer to pay, the invoice lays out the goods or services provided and the amount of money they need to send you.

It’s a commercial document that must meet a series of requirements to be considered compliant under UK law. And it’s a pillar of the sales process: a ‘must’ if you’re in the business of selling goods or services of any kind.

Why are invoices important?

Invoices help businesses get paid and are mandatory for business-to-business transactions between VAT-registered businesses.

Accurate invoices are important for:

• Helping you get paid promptly

• Record keeping

• Regulating cash flow

• Filing accurate tax returns

• Legal protection from fraudulent lawsuits

• Gathering information on buying patterns and identifying trends, peak buying times, highest-selling products, etc.

What information goes on an invoice?

In order for your invoice to be valid in the UK, it must meet a certain set of requirements. Each and every invoice you create should include:

• The name and contact details of your business

• The name and contact details of your customer

• A unique invoice number that fits in your invoice number sequence

• The issue date of the invoice

• A description of each product or service you’re providing

• The cost of each product or service

• Your VAT details, if applicable

• The date the goods or service were provided

• The total amount due

Some other non-crucial details you may want to add to your invoices are the payment due date, bank details for payment, terms and conditions, discounts, and images of the products. 

Types of invoices

It’s important to understand that there are different types of invoices. The most common types are:

• Standard invoice: This is your everyday invoice, which is the legal document that accompanies a sale.

• VAT invoice: A VAT invoice is also a standard invoice, but one that includes VAT details for business-to-business transactions when both businesses are registered for VAT.

• Proforma invoice: A proforma invoice is essentially a draft invoice that is often used before the full details of the sale have been finalised (e.g. quantity).

• Electronic invoice: Also known as an e-invoice, this is an invoice created and sent online that meets a series of security clearances and is usually sent via a government-approved platform.

• Amending invoice: Also known as a credit note. We’re all human, and sometimes mistakes are made. An amending invoice corrects a mistake made on a previous invoice.

In addition, HMRC distinguishes between three different types of accepted VAT invoices: full invoices, simplified invoices and modified invoices. Full invoices are the most common VAT invoices and can be used for any sale that includes VAT. A simplified invoice is for any retail supplies with a value under £250, while a modified invoice can be used for retail supplies over £250.

Who can issue an invoice?

If you’re a business that provides goods and/or services to consumers or other businesses, you’ll likely have to issue an invoice when payments are made to you. If your business is registered for VAT, then you must issue VAT invoices for business-to-business transactions.

Even private individuals can generate invoices for products or services sold. However, if your self-employed income exceeds £1000 in a tax year, you'll need to register as a sole trader.

Tips for creating invoices

As a freelancer or small business owner, sending out invoices is an essential part of the job. It's not always the most enjoyable task, but it's crucial for getting paid on time and keeping your finances organised. To make this process smoother, here are a few tips to keep in mind. 

• Make sure to clearly outline what services or products you provided and when. This will help avoid any confusion or disputes down the line.

• Make it easy for your clients to pay you by providing different payment options such as bank transfer, credit card, or PayPal. 

• Don't be afraid to follow up with payment reminders if a payment is late. Remember, invoicing is a necessary part of running your business, and implementing these strategies can make the task less daunting.

• Good organisation is often synonymous with success, so the more organised your invoices are, the more easily you’ll be able to stay on top of your payments.

• Each new invoice should always be reviewed before it’s sent out to your customer, reducing the chance of errors.

Example invoice

Invoicing may seem like a daunting and time-consuming task. But with the right tools, the process can be simple and efficient. 

Below is a sample invoice created through SumUp Invoices including all of the mandatory invoice fields and a customised design to fit the business.

How to find an invoice template

If you’re reading this, it’s likely that you need to create invoices to send to customers. Whether it’s your first sale or your thousandth, each invoice you create needs to meet the same set of requirements.

Determining which template to use can depend on the type of business and your brand’s aesthetic. To help with this, we’ve created several free invoice templates that can be customised and downloaded in various formats. 

While sitting down with a paper and pen might seem like the most obvious and quickest way to write an invoice, we suggest a more modern approach that can save you time, tedious calculations, and ensure your invoice meets the most recent regulations. The classics that most turn to are Word and Excel, but in fact, these are missing some crucial features.

Invoicing software, such as SumUp Invoices, makes it easy to create compliant invoices in a few simple clicks. All of the necessary fields are included on your premade invoice template, meaning you’ll never neglect crucial information. You can also create quotes, delivery notes and more, as well as keep track of both your sales and expenses in one simple tool.