Invoicing

How to Write an Invoice: A Complete Step-by-Step Guide

As a business owner, you may have wondered how to write an invoice. Creating invoices is a critical element of running many types of businesses. Of course, it may not be a particularly glamorous element of business ownership, but it’s important each and every business owner is at least familiar with how to make an invoice.

Setting up a proper invoice process sets your business up for success, as it helps ensure you’re paid on time and for the correct amount. So, if you’re in the dark about how to write an invoice, continue reading for everything you need to know to create an invoice.

What is an Invoice?

An invoice is a document a business sends to its clientele to request payment for goods or services rendered. It includes an itemized list of all the goods or services the client purchased, applicable discounts, applicable taxes, shipping costs, and other various costs for which the client is responsible. This is not to be confused with a purchase order, which is sent to the seller from the buyer detailing the desired goods or services.

It not only lists the amount due but also when it’s due. Businesses send their clients an invoice to ensure the amount is paid in the time frame specified in the document.

Why proper invoicing etiquette is important

tattooed woman using a calculator to create an invoice

Using a professional invoice system is helpful in ensuring that payments are convenient for both parties. After all, the last thing you want to allocate resources to is pursuing payments from your clients, making your accounts receivable process a nightmare.

Likewise, it’s important for your clients to receive timely, accurate invoices. The document acts as a bill, without which the client’s accounts payable team may not issue payment.

While invoices are an important part of bookkeeping for the business and the client, invoices are also used for recordkeeping and tax purposes.

What Information is Included on an Invoice?

When you create an invoice, it should include:

  • Your company and your client’s name, addresses, phone number, and email address
  • Date of invoice
  • Unique invoice number
  • Itemized list of price per unit, quantity per unit, and total price for each item
  • Appliciable discounts, taxes, and other costs or cost reductions related to the sale
  • Total invoice amount
  • Payment terms

Structure

When you create any type of invoice, the basic structure should include:

  • Header (typically where the business’s and client’s contact information are found)
  • Invoice number
  • Itemized table of goods or services purchased
  • Appliciable footnotes

Formatting

Properly formatting an invoice will make it easier for your client to spot the important details. Here are some formatting guidelines:

  • Your business information is at the top acting as the header
  • Your client’s details listed below your business information
  • Next to your client’s details, the following: invoice number, date issued, and payment due date
  • Underneath your client’s information, add the itemized list of services or goods rendered
  • Below the itemized list, break down applicable discounts, taxes, and other related costs for which your client is responsible
  • Add the total amount due at the top and the bottom portion of the invoice

How to Create an Invoice

Once you create an invoice template, writing an invoice for your clients is fairly straightforward. The below eight steps detail how to write an invoice. Follow these steps and you’ll create an invoice properly each and every time.

1. Determine where you will be creating the invoice

You can use a number of different applications to create an invoice. Below examines three common modes of invoice creation you may choose as your business’s standard method of how to write an invoice.

Excel or Google Sheets

If you’re comfortable using spreadsheets, Excel or Google Sheets might be the easiest application with which to create an invoice. A spreadsheet is especially useful when creating the itemized list portion of the invoice. Be sure to double-check any formulas or calculations used to total the price.

Word or Google Docs

Many businesses use a simple Word or Google Doc to write invoices. While these word processing platforms are lacking some of the functionality of spreadsheets, they do allow you to add tables. This makes creating the itemized list a breeze.

Email

If you plan to send invoices through email, you might create a standard email template. Here is an example:

Subject Line: Invoice #[Invoice Number] for [Product(s) or Service(s)] due on [Due Date]

Hi [Client’s Name],
I hope you’re doing well. Invoice #[Invoice Number] for [Product(s) or Service(s)] is attached. It is due on [Due Date]. Please let me know if you have any questions.
Best,
[Your Name and Email Signature]

2. Include a header with your business information

Your header should include the name of your business, address, phone number, and email address. This helps your client identify your business. If you have a logo, consider including that in the header too.

3. Add the invoice number

Including a unique invoice number allows you to keep track of the different invoices you send. Determine a numbering system that works for your business. It should be consistent to avoid confusion.

4. Detail an itemized list of goods and services provided

Your client should know exactly for which products or services they’re being billed. Presenting this information as a table makes it easier to scan. Include information like the goods or services rendered, date rendered, quantity of goods or hours of service, price per unit, and subtotal.

5. Add up the total money owed

The total amount owed should be at the top and bottom of the invoice, as it’s the singular most important information on the invoice. At the bottom of the invoice, add the subtotal, applicable taxes, applicable discounts, other applicable costs or cost reductions, and total amount.

6. State payment terms

It should be clear when and how you expect your client to pay you. Thus, one of the most important steps in how to write an invoice is the inclusion of an invoice due date. For example, let’s say you use a 30-day billing cycle. If you issue the invoice on June 1, the payment would be due on July 1. The invoice should communicate as much.

Additionally, include information about the payment methods you accept (i.e. check, credit card). If your business charges late fees, the invoice should outline these charges as well.

7. Include applicable taxes

The type of business your run, as well as its location, will affect the amount that you must collect in taxes. You can contact your local IRS office to find out how much to charge your clients for taxes.

It’s important that taxes be included in the addition of money owed. Otherwise, you’ll be on the hook for paying those taxes yourself, thus reducing your profit margin.

8. Add any footnotes

Invoices are usually clear about the services and/or products, price per each, and quantities. At times, you may need to add a note explaining something unclear. For example, if you applied a discount to one of the products a client has purchased, it’s wise to add a footnote explaining such. This ensures your client is aware they’ve received a discount on this order.

Otherwise, you could also add a little thank you note detailing discounts. The personal touch could even help get you paid faster.

Should you use a template or start from scratch?

businessman's hands using calculator because he knows how to make an invoice

When deciding your business’s standard invoice process, you may create your own invoice or utilize a template. If you’re less experienced with how to write an invoice, the better choice might be to utilize a template. Of course, you can still customize a template to better fit your needs.

Here are a few websites on which you can find invoice templates:

If you’re more well-versed in how to write an invoice, you may prefer making one from scratch to completely tailor it to your business.

Make Your Invoice Look Professional

Because invoices are external documents received by clients, they should look professional. In addition to professionalism, invoices should align with your business’s branding. If possible, consider adding your business’s logo or color palette to the invoice.

Take Advantage of Invoicing Software

An easy way to ensure professional-looking invoices is by using invoicing software. These solutions provide more options and support when in the creation and tracking of invoices.

Additionally, invoicing software typically has generator tools that create e-invoices and automatically insert your information. This saves you time, and saving time saves your money.

Benefits of automation

By using invoicing software, invoice creation is automated. Its advantages include:

  • Increased accuracy
  • Options for customization
  • Faster payments and easier billing
  • Invoice tracking and reconciliation
  • Access from anywhere
  • More security
  • Reports on your business’s finances

Final Thoughts on Creating an Invoice

Every business benefits from implementing a uniform invoicing system. By adopting online invoice software, you ensure uniformity, professionalism, and accuracy throughout all your invoices. However, business owners may also benefit from the flexibility that comes with creating their own invoice template as well.

Regardless of whether you opt for online invoice software, utilizing a template, or creating your own system from scratch, following the guidelines in this post will help ensure your invoice system is a success, thus helping ensure your business, too, is a success.