Is it mandatory to use invoicing software?

As your business grows, so do your invoicing needs. You may reach a point where your current approach to creating invoices no longer meets the needs of your expanding business. At this point, it may be necessary to invest in invoicing software. 

Whilst it’s not mandatory to use invoicing software if you run a business, any invoices you send must fulfil certain legal requirements. Invoicing software will ensure that these requirements are met, whilst also helping your business to accurately account for all transactions and VAT. 

This article explores how invoicing software can help your business to remain legally compliant and simplify accounting.

Create legally compliant invoices with invoicing software

An invoice is a formal request for payment. Invoicing software provides businesses with online invoice templates that can be used to create invoices.  

Invoices must contain specific information to be valid. Any finalised invoice needs to show both the buyer and seller’s names (or business names) and addresses. They must include the date the invoice was issued and the date of supply, as well as a  description of the products or services sold and a breakdown of the cost and the total amount due. Invoices must also be labelled with the title ‘Invoice’ and have a unique invoice number. 

If you use invoicing software to create your invoices, it’ll provide you with an online invoice template. All of the necessary fields will be included and you’ll simply need to fill in the form. 

Can I create invoices without invoicing software?

Yes, you can create invoices without using invoicing software. In the UK, it doesn't matter how an invoice is created, as long as it fulfils the legal requirements.

Some businesses may choose to create invoice templates with Word or Excel, rather than using an online invoice template. However, by using software that’s not specifically tailored to invoicing, you’ll miss out on helpful features that ensure your invoices remain compliant with regulations.  

The advantages of using invoicing software

It’s not mandatory to use invoicing software when you send an invoice, but it can be helpful. 

Avoid mistakes with invoicing software

If you decide to create your invoices manually using a Word or Excel invoice template, you always run a higher risk of making a mistake. It’s only natural that errors occur, and even after double-checking facts and figures, there may still be something you overlook. Rectifying these mistakes can cost you time and money. 

By using specialised invoicing software, you minimise the risk of doing something wrong. For example, if you try to finalise an invoice with an invoice number that’s already been used, you’ll be alerted and need to revise that field on the invoice template. 

Moreover, the software will automatically calculate your prices and apply the appropriate VAT. This may be especially beneficial if you handle deposits and calculate partial payments from customers.  

Legally cancel invoices with invoicing software

Once an invoice has been finalised, it cannot be deleted. It’s an official request for payment, meaning that if you need to edit it, you have to cancel the invoice with a credit note. 

Once again, by using invoicing software, you can avoid mistakes by selecting the invoice you want to credit. The information will be immediately copied to the credit note, guaranteeing that the payments match and your accounts are in order. 

Automate your regular invoicing needs with invoicing software

As your business thrives, it may also be necessary to automate certain repetitive tasks. Setting up recurring invoices is one way you can streamline your workflow. 

If you have invoices that are sent out on a weekly or monthly basis to certain clients, you can set your invoices to send automatically according to your set schedule, meaning your invoices will always arrive on time. 

To remain legally compliant, your dates and invoice numbers will be adjusted appropriately, and you can invoice your customers without having to create a new document from scratch every time. 

Remain compliant with HMRC with invoicing software

If your VAT taxable turnover is over £85,000, then you’re required to register for VAT through HMRC and issue VAT invoices to your customers. Even if you don’t reach the £85,000 VAT registration threshold, you can still opt-in to VAT registration.

A VAT-registered business must submit a VAT Return at the end of each accounting period. This report declares how much VAT the business should pay or reclaim for the specified period. If your business uses invoicing software, you can use it to create up-to-date VAT reports in a matter of seconds.

Submit your VAT Returns with invoicing software

Invoicing software keeps track of your business transactions. Every time you generate an invoice or create an expense, your software can adjust your financial reports. Some invoicing software will allow you to submit your VAT Reports by connecting to HMRC directly. 

The report will be automatically generated from the data you’ve recorded in your account. Using invoicing software to organise your tax returns will help to ensure you’ve correctly recorded and paid any necessary tax.  

Can I submit a VAT Return without invoicing software?

It’s not mandatory to submit your VAT Returns via invoicing software. However, it can be beneficial to simplify the process if you’ve recorded all of your invoices and expenses using the software. The reports will be generated automatically and save you time.

Making Tax Digital (MTD)

If your business is VAT registered, you’ve likely heard of 'Making Tax Digital', or 'MTD'. This is a government initiative to make all tax-related processes digital and more efficient. 

MTD is slowly being introduced in stages but is currently mandatory for VAT registered businesses with a taxable turnover of more than £85,000. From April 2022, it will be mandatory for all VAT registered businesses, regardless of turnover.

This means that you’ll need to store your business records digitally either through compatible invoicing and accounting software or through other software, like spreadsheets. 

When it’s time for your business to be compliant with MTD, you should consider the benefits that invoicing software provides compared to spreadsheets. Invoicing software eliminates the majority of manual work needed to be compliant with the rules.

Invoicing software: not mandatory, but recommended

There are lots of options for businesses that need to send invoices to their customers. It’s not mandatory to use invoicing software, but the invoices themselves must meet certain requirements in order to be legal. Therefore, investing in invoicing software can be a good idea, as it guarantees that you’ll create invoices that are compliant. 

If your business is registered for VAT, invoicing software can help you submit VAT Returns directly to HMRC and remain compliant with Making Tax Digital regulations.

Moreover, invoicing software, like SumUp Invoices, offers a variety of features that are tailored to your invoicing needs. You can invoice in different languages, issue quotations, and can cancel an invoice with a credit note in seconds. Invoicing software simplifies the day to day running of your business and can help you organise your business’s accounts.