I’m not teaching you to suck eggs here, but there are key factors we need be aware of when it comes to invoices for our business’s benefit.
All invoices need to have certain key pieces of information as supporting evidence for tax and VAT purposes. Before starting to trade, it is important to seek advice from an accountant or from HM Revenue & Customs (HMRC) to ensure that all relevant details are included on sales invoices and receipts, particularly if the business is registered for VAT. Some of this information will also depend on the legal status of the business.
Sole traders and partnerships
If the name of the business is not the surname of the sole trader or partnership, the invoice must include the business name as well as its full trading address. For example, if Joe Brown trades as ABC Carparts, his invoices should show either ABC Carparts or Joe Brown trading as ABC Carparts.
Limited companies
A limited company must include the following details on its invoices:
- The full registered company name and company registration number.
- Any trading name that the company may be using that is relevant to the
- The address of the
Information required on all invoices
All invoices should also include:
- The name and address of the customer.
- A unique invoice reference
- The date of supply (the tax point).
- A description of the goods or services
- The gross amount due to be
- The payment terms for this invoice and, ideally, a due date for payment.
Additional details required for VAT invoices
If a business is VAT registered, additional information must be added to its invoices:
- The business’ VAT
- A unit price, if multiple units are supplied.
- The VAT rate applicable to the goods or services
- The net amount charged for the goods or services, excluding
- The amount of VAT charged, at each VAT rate.
- The rate of any cash discount offered
Other information that can be included
Depending on the nature of the business, the following information could be included on invoices:
- A customer reference or order
- The business’ bank account details, to facilitate customers paying by
- A reservation of title clause, which means that ownership of the goods supplied does not pass to the customer until they have been paid
- Reference to the fact that interest will be charged, and costs incurred, for late payment of the invoice.
Information to include on a receipt
Retailers typically provide customers with a receipt produced by a point-of-sale till. If a retail business is VAT registered and it has signed up for one of the specialist retail schemes, there is no obligation to issue retail customers with a VAT invoice unless they specifically ask for one. Most retailers provide receipts that show simplified VAT information and this is acceptable as evidence of expenditure for VAT- registered customers, up to a sale value of £250.
The key information that each receipt should show is:
- The name and address of the business.
- The VAT number (if the business is VAT registered).
- The date of
- A description of the goods purchased and the price paid, inclusive of
- The rate of VAT charged (if applicable).
Retailers do not need to keep copies of individual receipts issued, but they do need to have a record of their daily gross takings, which should normally be supported by a till roll print out and copies of sales vouchers.
When should an invoice be issued?
Customers should always be invoiced promptly, as soon as possible after the delivery of goods or completion of a service. This will help to avoid queries from the customer and makes it more likely that the invoice will be paid earlier, which will help with cash flow.
Sometimes the arrangements for invoicing are negotiated and agreed as part of the sale process. For example a software firm may want their customer to pay for a combined software and hardware package when the order is placed, while the customer wants to pay for everything 60 days after the hardware and software has been installed. An agreed compromise could be as follows:
- Invoice for hardware when the order is placed – payment terms seven days.
- Invoice for software licence one month later – payment terms 30 days.
- Invoice for customisation and installation of software when delivered – payment terms 30 days.
A common request from customers who regularly buy lots of small value items is to receive a consolidated invoice once a month. This will detail all items purchased in the month on one invoice, which reduces the number of invoices that need to be produced by the supplier and processed by the customer.
A business that provides regular services that are for a fixed monthly fee and are liable to VAT may consider providing customers with an annual tax schedule, rather than producing individual invoices each month. The tax schedule details the tax points for each monthly payment (usually collected by Direct Debit or standing order) and the net amounts for the services supplied and VAT charged.
Invoicing systems
If a business issues only a small number of invoices (for example, one-off requests in a retail business), they can be written out manually, or produced using a spreadsheet or word-processing software. This simple approach can work well, but once a business starts to offer credit, has the complication of being VAT registered or produces many invoices a month, it will soon become more practical and efficient to use an integrated accounts system that manages both invoicing and credit control.
Invoices can be given to customers by hand when goods are delivered, but they are usually sent out in the post or by e-mail after the goods or services have been provided. Many accounting systems allow invoices to be generated in PDF format, which is then sent as an attachment in an e-mail. When the customer receives the e- mailed invoice they will still need to print it and enter the details contained in the invoice into their accounting systems.
