Invoice

How to Write Invoices the Right Way

The invoice should speak for the client and the job you did for them. If the client cannot instantly identify what they are being charged for, it is very likely your invoice to end-up into the ‘deal-with-later’ pile.

What should an invoice look like?

How many times have you received an invoice or bill that looks all mixed up with bad layout and information scattered all around? Well, we’ve received them quite too often. Some of the bills we get are so unclear that we literally have to beat our brain out in order to understand what they’re charging for.

But your business doesn’t have to be like that. When it comes to preparing your legal and business documents you should never neglect their look & feel. Those are important just as the services or products you provide and receive payments for. Crystal clear invoices will not just make you stand out from the crowd, but will also get you paid faster.

The look and language of your invoices should be in keeping with the rest of your branding and the message you’d like to deliver. It should match your business card design, letterhead, tagline, even your site colors. Even though the invoice structure is industry dependent, there are some general elements and rules that should be followed. To remember this easier, you can divide the invoice into 6 different sections:

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Section 1: Your details

Contains details about your company (or your full name if you’re freelance), company logo, contact details, payment info etc.

If your company holds a specific legal status, for example, if in the US it’s a corporation, or in the UK it’s limited then you should include the information specific to your jurisdiction. That usually means an official address and registration number, but rules vary so check with your local tax office. In Europe, if you’re V.A.T. registered, you must include your V.A.T. number as well.

TIP
Always include your logo. Using logo on your invoices will not just make the invoice look more professional, but will make your brand more recognizable. One glimpse on it and the client will instantly know who’s on the other side, even can guess what he’s being charged for if he’s doing business with you on a regular basis.
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Section 2: Rules of the game

Here you should specify the invoice options such as issue date — date of the invoice, net terms, due date, currency, and P.O. Number.

In business, the term net 30 is used to indicate payment within 30 days, or it’s fairly common to see 10/15, net 30 which is another way to say 10% discount if paid in 15 days, and net due within 30 days.

However, people who are less aware of business terminology may not know what this means, so depending on who your buyer is, it may be better to use plain English instead: “Please note that payment is due on or before 07/09/2015″.

NOTE
Bear in mind that the date formats differ internationally. Payment due 07/09/2015 may mean payment in July, or September depending on the client’s location — so to avoid any ambiguities consider a more formal expression such as July 9th, 2015.

Another term that may also cause confusion is “Upon Receipt”. The accounting company Freshbooks produced an interesting study which says that many people seem to interpret this as “whenever you feel like it”.

“It’s as if they receive an invoice with the words ‘payable upon receipt’ and immediately dump it into the ‘whenever’ pile. Instead, using specific terms such as ’21 days’ seems to focus the client’s mind around a specific timeframe and will actually get you paid faster than asking for immediate payment.” — Zach Mathew

TIPS
Use specific terms such as “21 days”. This will focus the client’s mind around a specific timeframe and will actually get you paid faster than asking for immediate payment.

Consider adding a discount incentive for on-time payment. For example 10% off if paid within 15 days (in business language this would read: 10/15 Net 21).
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Section 3: Your client

This part contains the name and address of the customer you are invoicing.

If you’re addressing a multi-office company you need to specify the right person or department (you can write “Attn: Fred Flintstone”, which means attention).

This may not be the person you’ve been communicating during the project, so in order to get paid faster, make sure to ask who will be dealing with paying you. A company with three employees can easily figure out what you’re doing; but in big companies, invoices get misplaced, especially if there’s confusion over who belongs to which project.

EXAMPLE
Bill To:
Slate Rock and Gravel Company
222 Rocky Way
3000 Bedrock, Coblestone County
+ 1 7 123 - 5261
fred@slaterockgravel.bed
Attn: Fred Flintstone
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Section 4: Title and number

Usually, the word Invoice indicates the title, but depending on the type, it can also be Bill, Tax Invoice, Pro-Forma, Quick Invoice etc. If in doubt, stick with Invoice. The number of the invoice is a unique reference ID and is used in case of correspondence.
The rule is to never use the same number for multiple documents.

In some jurisdictions, it is mandatory that your invoice numbers ascend chronologically. But, they don’t have to be consecutive. If you don’t want your client knowing how much work is crossing your desk consider increasing the invoice number by a random number every time you write a new invoice: your first invoice would be ‘00007’, the next would be ‘00012’, then ‘00014’ and so on.

TIPS
Work codes into your invoice number to jog your memory come tax time. For example, 2015-06-WDD-002 can be translated as “Second Invoice for Webdesigner Depot in June 2015″.

If you are sending it by email, make sure to include “Invoice” in the subject line. If using snail-mail, title the outside of your envelope “Invoice” in bold letters. This will help your document land in the right inbox, “to do” bin, or ideally the right person’s hands from the moment it gets delivered.
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Section 5: List of products and/or services

The itemized list should clearly describe what you are charging for — name/description of the product or service, quantity, unit price, discount (usually given as a percentage), tax and the total amount charged.

The description should match the terms you have agreed with your client, so be as specific as possible. Always double-check for typos, grammatical or computational errors as they create a poor impression and can damage your reputation. In fact, triple-check your invoice before sending it out.

Another thing you should consider is the quantity and unit price entries and check what the rules are. For example, for UK businesses, if your company is VAT registered HMRC rules about VAT invoices say that you must include the price per unit on your invoice.

If you charge by the hour you might specify the number of hours you have spent as well as your hourly rate. Subtotals and totals with a breakdown of taxes should be calculated below the table.

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Section 6: Mambo jumbo

This is a box for your custom message or note that describes your invoice terms more thoroughly. For example, if you accept more than one payment method, here you may specify which one you prefer. Is it a check, bank transfer or PayPal?

Although a late fee is not our preferred way to ask for on-time payment, keep in mind that here you can specify this too. For example: “Interest accrued at 5% per month thereafter”.

NOTE
Threatening your clients with interest on late payments does two things - it gets you paid slower, but it also seems to ensure a higher percentage of invoices will get paid.

Perhaps when your clients see an interest rate it gives them a mental excuse to prioritize other debt payments like credit cards versus your invoice, but at the end of the day they don’t want to push it too far, so they end up paying. In their minds, there is always a chance that you won’t apply the extra interest if they are “only” a month late.
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Pay special attention to your invoice design

Lots of people spend hours on their website designs, business cards, logos and resumes, but neglect the importance of a properly designed financial document.

Often times they forget that the invoice is their last contact with the client, and see it only as a mean of payment.

Invoice Template

But what if you could use it as a marketing weapon to reinforce your branding, boost your reputation, win more work, and most importantly - encourage on-time payment?

Using psychology patterns and design principles, the wording, the layout, and the color of your invoices can be tweaked to speed-up your payment.

While you should definitely use your default branding, logo, and colors, you could also utilize few psychology tips to stimulate quicker payment.

TIPS
Smart colors. Blue is associated with trustworthiness, and turquoise is the best color for attention-grabbing wording, like “second notice”. Turquoise is not frequently used by other businesses, so your use of it will stand out that much more. Another great option is purple, a color highly favored by women. The darker shades of purple signal competence and firmness.

Visible company name and logo. Make sure to include your company name and logo in the next most prominent line. People are more likely to remember images and logos than just words. If the invoice recipient immediately remembers your business dealings, they are more likely to pay promptly instead of first sorting through records to jog their memory.

Personal signature. Include a headshot of yourself (or the head of the company) in the contact details or the bottom of the document. This creates similar psychological pressure to your physical presence. If you personally sign the invoice, the recipient will feel compelled to pay - it’s like you’re personally asking them for payment.

Professional design. It's recommended to use professional invoice templates in order to avoid the risk of poor design. That way you'll stay on top of your competition and ensure your brand position.
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Just imagine how it would feel if you could make your invoice stand out among hundreds of others. Below are given few eye-catchy examples that are definitely hard to ignore.

    Invoice Template 1 Invoice Template 2 Invoice Template 3 Invoice Template 4 Invoice Template 5
NOTE
Many times writing an invoice can be extremely time-consuming, even frustrating. So it's always a good idea to try using an invoicing tool such as Invoicebus. This will not only help you create mistake-proof invoices in seconds but will also help you keep everything organized in one central place.

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