Writing invoices: guidelines for businesses and the self-employed

An invoice informs your customer about the sum of money that is to be paid for a good or service. Most receive a request for payment with the invoice. Nowadays invoices are usually written with office programs like Microsoft Word or other specialized programs, which are often available online or as a cloud service.

Invoices are then used by companies, self-employed people, and freelancers to show the tax authorities their income and expenditure. Therefore they are of great benefit to both to the supplier as well as the consumer. Only with an impeccable invoice is a pre-tax deduction possible, with which the company can reclaim tax from the state. If it is the case that the invoices are not correct, then a conflict can arise with the customer and/or the tax authorities. The following article reveals how to create an invoice that is legally correct as well as which advantages are offered by specialized online invoice software.

It is primarily self-employed people and small businesses that ask themselves how to create an invoice that is legally accurate. A further question is then what you should use to write the invoice – alongside the classic office applications like Microsoft Word and Excel, there are now various web applications, with which you can write and organize invoices online. All you need to know about creating an (online) invoice can be read here.

In terms of formal information, writing an invoice does not differ all that much from writing a proposal, an order confirmation, or even a delivery note. All of these are structured very similarly and require the same information at several stages throughout.  

As with any other business letter, the company logo should be of good print quality and clearly visible on the invoice – most are placed in the upper section of the document. If it so happens that you have no logo or you don’t want to use one, you can alternatively place the company name there.

Thereafter follows the usual formalities of a business’ correspondence with a customer, i.e. the name, title, and address of the customer, as well as the appropriate information of the firm. It is also of course advisable to include your own contact details (telephone, e-mail) for future inquiries that might be sent back to you. At this point it is also a possibility to include your tax identificationnumber or GST registration number (depending on which you use for the company). Alternatively, it is possible to list the tax number with additional information, e.g. account information, in the header or the footer.

After the title (usually ‘Invoice’ is sufficient for this) comes the individual portion of the invoice. The customer number and date should be written next to the invoice number. In the brief running text of the letter you should thank the customer for their order and list the products and/or services. Then you note the amount of products (or services) being provided. Using bullet points or abbreviations you can outline the type of product/service, and finally then the corresponding price for each.

If it is the case that you are selling more than one of the same product to a customer, then you should include not just the quantity, but also the individual price alongside the total price.

Once all the individual payments have been listed it is now time to communicate the total amount of the invoice. Next you should list the sum of all the named payments followed by the total amount of GST, which will be added to this net amount. Finally, add these two figures to reveal the final amount of the invoice.

Underneath the gross sum, you should inform the consumer of the date that the payment is due (don‘t forget to include your account details within the invoice) and also stipulate the delivery date as well.

The U.S. government does not specifically outline what information should be included in a commercial invoice for a domestic purchase. But there is still a general knowledge relating to what the minimum is that should be included in an invoice, and they are given in the following checklist:

• Name, address, contact details, and possibly tax ID number of the seller

• Name, address, contact details, and possibly tax ID number of the buyer

• Name, address, contact details, and possibly tax ID number of the recipient

• Time and place where product/service has been sold

• Product information – e.g. quantity, price per unit, origin, HS number

• Country of shipment

• Signature and date of signing

• Method of payment

• Import license requirements

The days of writing invoices with a typewriter are long gone. Nowadays the computer is the most important tool for creating invoices and it is often the case that text editing programs or other office applications are used for this purpose. Software packages like Microsoft Office and LibreOffice are very popular and already installed on many users’ computers. This means that you can begin right away with writing invoices and without any additional charges.

As with office applications, more and more self-employed people and companies are using smaller and medium-sized businesses are using invoice software and programs. Many of these accounting programs can be purchased separately, and they are programs that specifically serve the purpose of writing invoices. On the other hand, other applications are then part of a complete accounting software package, with which you can carry out many different tasks, alongside the creating of invoices. Most of these applications can be used online – they are offered via a cloud hosting system and follow the SaaS (Software as a Service) principle.

Apart from templates for invoices, this software often offers several other very useful features. For example, when writing an invoice, these programs can retrieve customer information from a database. This means that this data only needs to be manually entered once and thereafter can always be retrieved by the tool; avoiding unnecessary typing. Generally with invoice software, it is the case that many processes are automated, meaning that all standardized data is taken over when it comes to the writing of invoices – e.g. the successive numbering of invoices and the calculation of sales tax. On top of this, many of the programs offer control functions that comprise of all the statutory information required for an invoice.

Several tools will remind you of outstanding invoices if a customer does not pay within a certain time period. Additionally many programs will offer the possibility of writing payment reminders based on still outstanding invoices. Such control functions and aids are there to help ensure that invoices, and any processes involved, can be dealt with easily and flawlessly.

If you use a cloud connected application to draw up your invoices online, you can save even more time and effort. This is because many online tools for writing invoices also feature a sending feature, with which all written invoices can then be dispatched directly via the program. This can involve more than just e-mail address connections – many providers go further and offer to send invoices and/or payment reminders by post. This of course then saves you the effort of having to go to the post office yourself.

With a cloud service you will also profit from the fact – assuming you are connected to the internet – that you can access your invoice accounts and database no matter where you are in the world via your PC (and often also via your smartphone). With a ‘Software as a Service’ solution it is also not necessary to have to busy yourself with the data backup of your files. These are saved automatically on the server of the provider. Even the installation and updating of the software is not your responsibility, as the service provider also takes over this responsibility.

The dispatching of the document can take place both digitally and by post. With regards to the latter, the customer should always first have given their permission for this method. This can be done through a clause in the general terms and conditions or via consent given either before or after the transaction. The invoice can then for example be sent by e-mail or as a download.

Electronically storing a paper invoice is permitted as long as the printed version is scanned in a way that makes it easily legible. If it is the case that the circumstances are reversed, then the digital invoice must be saved electronically. Solely keeping the printed version is not allowed.

Make sure that your electronically stored invoices are kept on a storage device with a long life guarantee – modern hard drives are much more suitable compared to the likes of CDs or DVDs, which tend to have a much shorter life expectancy. From time to time you should also create backup copies of your invoices (as well as all other company documents that may be required for proof) across different storage devices.

Even here, online invoice programs with cloud functions can be of benefit, as they save invoices on the servers belonging to the provider, where they are also kept long term. The USA currently has no mandatory data retention law. However, it is recommended that files are stored for a minimum of three years up to seven years, depending on how important it is to your tax statements. This is not just in your interest but also in that of the tax authorities.

There are some fundamental differences between an invoice and a bill.

• An invoice indicates that payment of the sum is still outstanding. It gives an overview of the products and/or services provided and lists the respective costs involved.

• A receipt, on the other hand, is proof of a provided service. It usually records the sum of money involved. 

However it is also the case that an invoice can function as a receipt, and vice versa. As soon as a receipt contains all details legally required for an invoice, it can then also be used as such. This also works the other way around; an invoice can also serve as a receipt, if it records that the payment sum has been received, and also outlines the date involved as well as the signature of the payee.

These days the organization and creation of invoices takes place primarily on computers. By coming up with a sample template of your invoice, which contains your logo as well as all other required information relating to your business (e.g. name, address, and tax number), you can save yourself time and effort with the creation of all invoices. This will mean that for future invoices all you will need to do is enter the details of the customer and the scope of the product or service being supplied. There are several different office applications that are suitable for writing an invoice. The writing, editing, and organizing of these invoices can be done even quicker if you make use of an online invoice generator. Software like this is particularly worth the investment if you are dealing with a large amount of orders. Especially efficient are the cloud applications, with which you simply have to register your customer details once. Then, in no time at all, you can complete an invoice and send it by e-mail or by post. The basic requirements always remain the same – regardless of the program with which you create the invoice. Make sure that you are in possession of all necessary information, keep a detailed eye over the accuracy of all data, and send your customers the documents as quick as possible. Bear in mind that both the customer as well as the tax authorities expect the invoice to be written properly and correctly. Click here for important legal disclaimers.