Ask any business person, ‘what is the most important business document?’ Unquestionably the answer will be the invoice because without it you won’t get paid for any credit sales that you make. The invoice is a critical component to running any business as it has a major impact on your cash flow and also helps record your VAT.
Yet, many small business owners struggle with raising one. So, what are the details that you must include to make an invoice the fundamental accounting document that it is?
Let’s take a look. Sure, accounting software or a dedicated invoicing application will take care of these automatically but it is important that you understand what they represent.
The date that the invoice is issued must be included. This is fairly simple and obvious, just remember to include it if you’re not using a software solution.
2. A sequential number
Also known as the invoice number, this allows for the document to be uniquely identified from other documents in the accounting process. Keeping track of invoice numbers is essential for well managed business finances.
3. Details of the person who supplied the goods or services
The full name, address and registration number of the supplier. If you’re the one raising the invoice for your customer, these are your details.
4. Details of the person who received the goods or services
The full name and address of the person to whom the goods were supplied. If you are raising an invoice, these are your customers details.
5. VAT number of the person whom received the goods or service
If there is a case of reverse charge VAT, you must include your customers VAT number. Also, if you are supplying goods to a customer who is registered for VAT in another country, you must include their VAT number on your invoice.
6. Nature and quantity of goods supplied or nature and extent of services supplied
Remember to include a description of each individual type of good or service you have supplied as part of the transaction. When you use accounting software, the items that you set up as your products will fill this entry easily for you.
In the case of goods, you must specify what quantity of each item your are supplying. Services can be harder to quantify, so remember to specify the extent of the service provided.
7. The date on which the goods or services were supplied
The date which you supplied the goods may differ from the date that the invoice was issued. Therefore we must include this date for accurate record keeping, even if it does end up being the same as the invoice date for a number of transactions.
8. Specifics of goods or services supplied
There are a number of details we must include on invoices about the individual goods and services. The unit price of each individual good or service must be included on our invoices. Any discounts or price reductions that have not been included in the unit price must accompany this.
There are many different VAT rates which apply to different goods and services, depending on what industry you operate in. For that reason, the VAT rate for each individual good or service is to be included. Finally, we must include the amount that we are charging exclusive of VAT, which is what you may know as the subtotal before VAT.
9. VAT payable on goods and/or service
Of course, the total amount of VAT that will be charged for the transaction needs to be on the invoice. This will help us to keep track of all of our VAT obligations to Revenue when it comes time to make our VAT returns and payments.
So, these are the elements that you must include on your invoice, especially if you are not using a dedicated accounting or invoicing software, which will include these details automatically. However, here at Big Red Cloud we encourage you to make sure that you include your payment terms and bank details too. Doing this can help improve your cash flow, by making it easier for your customer to pay you.
Once you have raised your invoice, it’s time to send it to your customer so that you can get paid. There are benefits to invoicing online over sending a hard copy via traditional mail, but remember, whatever sending method you use, you must include these items.