Ahh, financials. Every freelancer’s least favourite part of running their own business. You’ve pitched, landed the job, delivered your work, and now it’s time to get your money.
A surprisingly common question from new business owners is, well, how exactly do you do that? Luckily, help is at hand!
Who are you dealing with?
The primary point of contact you have with your client’s office most likely won’t be involved with their company finances in any way, and will simply forward your sales invoice through to their accounts department when you send it. It’s often easier for everyone (and can avoid payment delays) if you deal with the accounts department directly.
When it comes time to settle up, ask for the contact details of whoever is responsible for actually paying your invoice. This way, you know they’ve actually received it, and if you have to chase them up you can get in touch with them directly.
How do you actually raise a sales invoice?
There are a number of ways to skin this particular cat. For first-timers, check out our free invoice templates, which is a simple fill-in-the-blanks process that’ll have you raising invoices in just a few minutes.
The next step towards invoicing professionalism is some kind of invoicing software, which allows you to add your clients, tailor and beautify your invoices, and track your income. Luckily for you, Crunch has you covered with Crunch Free, our free bookkeeping software. You simply enter your business details, save your customer details and our invoice generator will help you get your invoices done and emailed quickly and easily, not to mention also track your expenses.
The top tier, Rolls-Royce of invoicing would be some complete accounting software that’ll take care of your invoicing as well as calculate tax, run payroll, track expenses and even file your taxes. At this point, hopefully, you’ll forgive us for mentioning Crunch’s simple online accounting software, which does just that.
What information are you legally required to include on an invoice?
HMRC require you to include certain details in every invoice you generate. You must include:
- a unique identification number
- your company name, address, and contact information
- the company name and address of the customer you’re invoicing a clear description of what you’re charging for
- a supply date (i.e. the date the goods/services were provided) the date of the invoice
- a breakdown of the amount you’re charging your client
- the amount of VAT applicable
- the total amount owed.
If you’re a sole trader, you’ll also need to include:
- your name and any business name being used
- an address where any legal documents can be delivered to you (if you are using a business name).
For limited companies, you need to include the full company name as it appears on your certificate of incorporation. If you need and/or decide to feature the names of any of your directors on your invoice, you need to make sure you include all of the directors.
How should you record the services you’re charging for?
When it comes to recording the services you’re charging the client for, there’s no ‘one size fits all’ answer, and will depend entirely on what you’re charging for. It may be as simple as one line item-listing the product or service you sold. For example:
- x1 company logo design @ £250
It’s always advisable to put as much detail as possible on your invoices. If you need to pull them out of your archive for any reason, you’ll be able to easily identify what they were for. For example, if I wrote three pieces for a magazine, I could invoice like this:
- x3 magazine articles @ £150
Or, more sensibly, I could list separate line items:
- Article “Why Ham Sandwiches are the best”
- Article “What Postman Pat can tell us about the US Financial crisis”
- Article “Five reasons the Internet makes you hungry”
The other form an invoice can take is that of a timesheet. For example, if you’re working for a client on an ongoing basis and billing by the hour. In this case, each line item should include the date, the hours worked, and the rate.
Should I put VAT on my invoice?
A common question, and one that never fails to stump new business owners. For a detailed response, have a look at our VAT article. An invoice should only include VAT if the company issuing it is VAT registered. If you’re not sure if you’re VAT registered, you aren’t. As your turnover increases, it’s something you’ll need to consider and an accountant can help you understand if you should consider registering.
When should you send your invoice?
Well, this one’s easy. As soon as your work is finished, and sooner if possible. If it’s a big job, consider asking for part-payment upfront, or staggering your invoices at set milestones. Don’t delay in issuing your invoices, either. If you’re sticking to the standard 28 days payment terms, waiting two weeks to issue the invoice is increasing the time before you get paid by 50%, which is bad news for your cashflow.
Invoice straight away, don’t mess around!
Congratulations, you’ve successfully invoiced your client. Next comes chasing payments, which is an entirely different kettle of fish. For some help there, download our credit control guide.
If you’re looking for a simple, easy, and free way to keep on top of your business finances why not take a look at Crunch Free, our bookkeeping software for limited companies and sole traders?