Invoicing clients in 5 steps
To help make invoicing your clients an easy process, here are 5 simple steps that you can follow.
1. Find out what type of invoice you need
The type of invoice you need to send your clients is based on whether your business is registered for goods and services tax (GST). There are two main types:
- Businesses registered for GST must provide customers with a tax invoice that shows how much GST was included.
- Businesses not registered for GST can use regular invoices, which do not include the words “tax invoice”.
2. Prepare a client services agreement or engagement letter
It may sound obvious, but before you send your client an invoice, it is important to make sure that they are expecting to receive it. If your client suddenly receives an invoice out of the blue, they might not pay it promptly or they may even be annoyed. It’s a good idea to start any new business arrangement with a client services agreement or engagement letter. This is where you set out your invoicing rules, such as your payment terms and how overdue payments are managed. Having such an agreement in place at the start of the relationship helps to create transparency and ensures that everyone has the same expectations.
3. Choose a method for creating your invoices
You may choose to create your invoices yourself using word processing software, such as Microsoft Word. Another option is to use a template. You can find many different types of invoice templates online or in Microsoft Word or Excel. You could also use an accounting software package. They can usually generate invoices for you using the information you provided when you created your account.
Whichever method you choose, consider customising your invoices. Adding a personal touch, such as your business logo, brand colours, slogan or an inspiring quote that relates to your business will help to reflect your business’ brand and identity. Given that they are part of your overall company communication, it’s not a bad idea to align your invoices with the other documents you send to your clients.
4. Know what details you need to include
Essential information
If your business is registered for GST, you need to send your clients a tax invoice. If your business isn’t registered for GST, you only need to send a regular invoice. The ATO lists seven items that you must include in a tax invoice for it to be valid. These are:
- The words “tax invoice” to indicate that the document is intended to be a tax invoice. It’s customary and preferable for these words to be at the top of the invoice. If your business is not registered for GST, the title could just be “invoice”.
- Your identity as the seller. This could just be your business name or trading name. It’s recommended that you include your contact details, but this is not mandatory.
- Your Australian Business Number (ABN).
- The date you issued the invoice. On your invoice, you could simply write “date” or “invoice date”.
- A brief description of the items sold or services rendered, including the quantity and price.
- The GST amount payable (if any). You should list the GST amounts separately. However, if the GST is exactly one-eleventh of the total price, you can simply include a statement such as “Total price including GST”. If your business is not registered for GST, you do not need to include GST information in your invoices.
- The extent to which each item you sell includes GST. You can either show the GST for each item or simply state that the total price includes GST.
Other information
So, we’ve covered the essential information that you need to include to make your tax invoices valid. However, there are other important details that you should have in any invoice that you send to clients. While you should aim to keep your invoices concise (preferably one single page), they should include enough information for your client to know exactly what they are being asked to pay for. This will help to avoid payment delays. In addition to the information above, it is standard practice to include these details in invoices:
- A unique invoice number. This is helpful in case you or your client need to refer to the invoice.
- In addition to your business name, you can include other details about your business, such as your business logo, postal address, website address, email address, phone and fax numbers.
- The customer’s details, including:
- your customer’s contact details: their postal address, email address and phone number,
- the name of the person who ordered the product or service,
- the name of the person responsible for paying the invoice,
- the customer’s purchase order (PO) number or contract agreement dates.
- Payment details. These usually include:
- the terms, for example, when the payment is due or a discount for early payment,
- payment options, such as direct deposit, credit card, EFTPOS or cash,
- your bank details, including your BSB and account number, account name, the name and branch of your bank and the reference number that your client needs to include in the transaction description.
5. Send it to your client
Now that you’ve created your invoice, you’re ready to send it off to your client. There are four main ways you can do this: by post, email, online invoicing or e-invoicing.
- Post: This may be a good option for customers who tend to miss emails or who don’t use email at all. However, the disadvantages are that it is slower and less secure than other methods.
- Email: The advantages of this method are that it is fast, secure and reliable. Invoices cannot get lost en route to the client, provided that you enter their email address correctly.
- Online invoicing: For this method, you will need online invoicing software. You can generate and send the invoice using the software program, and the invoices have built-in payment options. This makes the process of paying the invoice a lot easier for your customer, and it means they are more likely to pay the invoice quickly.
- e-invoicing: Alternatively, if you use accounting software, you can send your invoice directly to your customer’s accounting software, where they will see it as a draft bill awaiting payment. This works even if your client uses a different accounting software package.
Invoicing best practice tips
- Check in with new customers: After sending an invoice to a new customer for the first time, it’s a good idea to call them to make sure the right person has received it, that they know what it is for and that they have all the details from you that they need.
- Send reminders: As the due date for payments gets closer, it’s advisable to send your client a polite reminder, especially if you’ve given them a long time to pay. As a general rule, you should send a reminder if you give clients 14 days or more to pay an invoice.
- Send invoices promptly: To increase your chances of getting paid quickly, make sure you invoice clients at regular intervals or as soon as the order is completed.
- Keep records: Australian law requires you to keep business records, including invoices, for a minimum of five years. You can choose to keep either printed or electronic records. Make sure you store your invoices somewhere secure and easily accessible.
- Offer a range of payment options: Making it easier for your customer to pay your invoices by providing a few different payment options means they will be more likely to pay quickly. It also demonstrates your flexibility.
- Show appreciation: Sometimes, a little appreciation can go a long way when it comes to building positive client relationships. Consider including a friendly note of gratitude, such as “Thank you for your business”.
