You’ve done the hard work; you set up your business, locked in your first client, and completed your first job. Now it’s time to send your first invoices. It may sound straightforward, but invoicing is a critical part of running a service-based business that can’t be overstated. Beyond kickstarting the process for getting paid, invoices are a key extension of your brand. It’s important that your invoices are clean, clear, and informative. Let’s jump into Hopscotch’s guide to invoicing!
Starting with the basics
What’s an invoice? An invoice is a formal document sent to a client or customer that outlines the amount owed for any work performed or item purchased. Think of it as a way to formalize the transaction.
Invoices are important because they bind two parties to a transaction, which has implications when it comes to tax season and company financial reports. Every small business owner should have a baseline understanding of what an invoice is and does for their company.
What’s included on an invoice?
Building an invoice is easy, as long as you have all the information you need and a way to send the invoice to the recipient. Generally speaking, invoices contain three primary sections.
Who is the invoice from: this section should include your company’s name and a point of contact. If you’re getting paid via paper check, be sure to include an address.
Who is the invoice going to: this section should include your client’s name, and a point of contact.
Invoice number: there isn’t a right or wrong way to create an invoice number, as long as it possesses information that allows you to refer back to that invoice in your records. A recommended practice is to include the date or month in the invoice number (i.e. Hopscotch_JAN2022)
Date invoice is sent: the date in which the client or customer is receiving the invoice.
Date invoice is due: the date on which they must send payment to your company.
Line item + description: this is the most important part of an invoice. List what you did, how much of it you did (quantity), the rate (cost), and the subtotal (rate * cost) for that line.
Total amount owed: tally up the final cost of the invoice, apply any taxes or additional fees, and clearly state the amount owed to your company from your customer. Be sure to do the math and ensure that each individual line in your invoice correctly adds up to the grand total.
Invoice note: this is an open-ended section for business owners to include any final information they want to be included in their invoice. Oftentimes, instructions on how the company can send payment is included in this section. It’s also a good idea to leave a nice send-off, like “thank you for your business” to remind your client or customer of your appreciation.
Who is this guide for?
If you’re creating an invoice for the first time or thinking about revamping your invoices, this guide is for you! Whether you’re running a business with a few employees, or lone wolfing it as a solopreneur, small business invoicing is an important piece of keeping track of your payments and maintaining a healthy cash flow.
Reading and implementing this guide will help you create an internal process for creating, managing, and reconciling your invoices. This can be especially helpful as your company grows because if you have a process in place to get your company paid, scaling up becomes that much easier.
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Frequently Asked Questions
- How are invoices different from receipts?
Invoices are sent to the client or customer before payment has been sent. Receipts are given to a client or customer after payment has been received.
- How do you choose an invoicing platform?
When selecting an invoicing platform, it’s important to consider costs and payment processing times. Many invoicing platforms charge subscriptions fees and/or high transaction fees. Additionally, these platforms force you to wait 1-8 business days to access money once your client has paid you. As a small business owner, you shouldn’t have to wait or pay to access money that you’ve already earned.
- What’s the best way to create invoicing numbers?
Anything that lets you refer back to the invoice easily. Using a date, and client name or code can be helpful in that pursuit (i.e. CLIENT_02.25.22)