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What Every Tradesperson and Sole Trader Should Know about Invoicing

Published on: Oct 28, 2023 at 09:03
Reading time: 8 minutes

Hey there, fellow tradespeople! We get it, invoicing might not be the most exciting part of your job, but it's crucial to keep the wheels of your business turning. So, we're here to break it down for you in a fun and friendly way – think of it as a chat over a cuppa. Ready to learn all about invoices? Let's dive in!

What Should a Basic Invoice Look Like?

Imagine your invoice as a handy map to get you paid, and like any good map, it needs clear markings. A basic invoice should include:


Header: Your invoice begins with the header, where you'll want to feature:

  • Your Business Information: Your business name (or your name if you're a sole trader), address, and contact information.
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  • Client Details: Ensure you include your client's name, their address, and their contact information. This part helps you and your client to know who's who.
 

Description of Services or Products

This is where you describe the services or products you've provided. It's not the place for cryptic clues! Be specific and itemise if you need to.

 

Quantity and Price

If you've provided multiple services or items, you'll need to show the quantity and the price for each. This gives your client a clear view of what they're paying for.

 

Subtotal

Calculate what's owed for each line item by multiplying the quantity by the price. These subtotals help break down the overall cost.

 

Total Amount Due

This is where the magic happens. Sum up all the subtotals, and you'll get the grand total that your client needs to pay.

 

Payment Terms

Clearly specify your payment terms. Let your client know when the payment is due, and if you're feeling generous, you can mention any discounts for early birds and penalties for late payments.

 

Payment Instructions

Help your client pay you by providing clear payment instructions. Whether it's bank details for bank transfers, information for cheques, or other accepted payment methods, make it straightforward.

 

VAT Info (if applicable)

If you're VAT-registered, you'll need to include your VAT number and any applicable VAT amounts. This is a must to keep things legal.

 

Legal Bits

Last but not least, make sure your invoice complies with the law. Cross those 't's and dot those 'i's to avoid any legal complications.

 

Feeling overwhelmed? Don't fret! In this digital age, you have tools at your disposal that make invoicing a breeze. You can use professional invoice templates or accounting software to ensure your invoices are both accurate and professional. Need a reference point? Check out a sample invoice here for inspiration.

What Makes an Invoice Legal?

Legal invoices might not be the most exciting topic, but they're incredibly important. To ensure your invoices are legally solid, here's a checklist to follow:

 

Include Your Business Details

Make sure your business name, address, and contact information are prominently displayed on the invoice.

Clearly List Your Services or Products

Provide a detailed description of the services or products you've delivered. This ensures clarity for your client and tax authorities.

 

Show the Quantity and Price of Each Item

If you've provided multiple services or items, ensure that both the quantity and the price for each item are clearly indicated.

 

State the Total Amount Due

No ambiguity here. Let your client know the exact total they need to pay.

 

Specify Payment Terms

Clearly state your payment terms, including due dates and any penalties for late payments. This ensures your client knows what's expected.

 

Add Your VAT Number (if applicable)

If you're VAT-registered, including your VAT number is a requirement. Charge VAT according to the current rates.

 

Comply with Tax and Legal Requirements: Keep your invoices up-to-date and compliant with the latest tax and legal regulations in the UK. If you're not sure, it's wise to consult a professional, such as an accountant or tax advisor.

Do I Need to Add VAT to My Invoice?

Ah, VAT (Value Added Tax)! It's like the seasoning on your business's financial dish. But the question remains – do you need to add VAT to your invoice? The answer depends on your turnover and VAT registration status.If You're VAT-Registered

 

Include Your VAT Number

Make sure your VAT number is prominently displayed on the invoice.

 

Charge VAT

Charge VAT according to the current rates for the services or products you're providing.

 

Follow HMRC Guidelines

Ensure you're registered for VAT and follow the guidelines set by HMRC for VAT reporting and payment.

 

If You're Not VAT-Registered

No need to worry about VAT. You can exclude it from your invoices

 

For a deeper dive into VAT and how it works, we've prepared a detailed guide that you can explore here.

Feeling like an invoicing pro now? We hope so! Invoicing might not be the most thrilling part of your business, but it's essential to keep things running smoothly. Plus, there are tools and resources available to make your life easier.

Invoice Dos and Don'ts

 

Do:

  • Do Make It Clear: Your invoice should be crystal clear. Use a professional format and ensure that all information is easy to read.
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  • Do Use a Unique Invoice Number: Keep track of your invoices with a unique and sequential invoice number. Avoid repetition to maintain order.
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  • Do Itemize Services: Break down your services or products into individual line items. It helps your client understand what they're paying for.
  •  
  • Do Specify Payment Terms: Clearly state your payment terms, including the due date and any early payment discounts or late payment penalties.
  •  
  • Do Provide Payment Instructions: Make it easy for your client to pay you. Include your bank details for bank transfers or other accepted payment methods.
  •  
  • Do Include VAT Information (if applicable): If you're registered for VAT, include your VAT number and charge VAT accordingly.
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  • Do Keep Records: Keep copies of your invoices for at least 5 years, as recommended by HMRC.
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  • Do Consult with a Professional: If you're uncertain about tax or legal compliance, it's wise to consult with an accountant or tax advisor.
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Don't:

  • Don't Overcomplicate: Keep your invoice simple and straightforward. Avoid jargon and complex language.
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  • Don't Forget Contact Information: Ensure your contact details are up-to-date and easy to find on the invoice.
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  • Don't Miss Deadlines: Stick to your payment terms and send reminders for overdue payments when necessary.
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  • Don't Ignore VAT Rules (if applicable): If you're VAT-registered, make sure to charge and report VAT correctly.
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  • Don't Be Inconsistent: Maintain a consistent format and numbering system for your invoices.
  •  

Best Practices to Get Your Invoice Paid QuickerSet Clear Payment Terms

State your payment terms on the invoice, including the due date. Be firm but fair to set clear expectations.

 

Offer Early Payment Incentives

Encourage prompt payment by offering discounts for early settlements. It's a win-win – your clients save money, and you get paid faster!

 

Send Professional Invoices

First impressions count. Use professional invoice templates or accounting software to ensure your invoices look the part. A well-presented invoice reflects professionalism.

 

Follow Up on Overdue Payments

Don't be shy about sending payment reminders when payments are overdue. Timely communication is key to prompt settlements.

 

Stay Organised

Keep track of all your invoices and payments. Use accounting software to help you stay on top of your finances, reducing the chances of missed payments.

 

Provide Multiple Payment Options

Offer various payment methods to cater to your clients' preferences, such as bank transfer, credit card, or PayPal. The more convenient it is to pay, the quicker they're likely to do it.

 

Build Good Client Relationships

Maintaining positive relationships can lead to quicker payments. Be professional, courteous, and communicative in your interactions. Good relationships make your clients more inclined to pay promptly.

 

Offer Self-Chasing Invoices

Consider using tools like self-chasing invoices that automate payment reminders, making your life easier. They're like your personal payment assistants, sending gentle nudges to your clients.

 

Consider Repeating Subscriptions

If you have regular clients who require ongoing services, consider offering repeating subscriptions. This streamlines the payment process and makes it convenient for both parties.

 

Outsource Accountancy and Bookkeeping

Running a business involves numerous responsibilities, and managing finances is a crucial but time-consuming task. Consider outsourcing accountancy and bookkeeping to experts who can manage your finances efficiently, ensuring smooth operations and freeing up your time to focus on what you do best – providing your services.

 

By following these dos and don'ts and implementing these best practices, you'll be well on your way to getting your invoices paid quicker and maintaining a healthy cash flow for your business. Invoice like a pro, and keep those business wheels turning! 🛠💰

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