Writing invoices: guide­lines for busi­ness­es and the self-employed

An invoice informs your customer about the sum of money that is to be paid for a good or service. Most receive a request for payment with the invoice. Nowadays invoices are usually written with office programs like Microsoft Word or other spe­cial­ized programs, which are often available online or as a cloud service.

Invoices are then used by companies, self-employed people, and free­lancers to show the tax au­thor­i­ties their income and ex­pen­di­ture. Therefore they are of great benefit to both to the supplier as well as the consumer. Only with an im­pec­ca­ble invoice is a pre-tax deduction possible, with which the company can reclaim tax from the state. If it is the case that the invoices are not correct, then a conflict can arise with the customer and/or the tax au­thor­i­ties. The following article reveals how to create an invoice that is legally correct as well as which ad­van­tages are offered by spe­cial­ized online invoice software.

It is primarily self-employed people and small busi­ness­es that ask them­selves how to create an invoice that is legally accurate. A further question is then what you should use to write the invoice – alongside the classic office ap­pli­ca­tions like Microsoft Word and Excel, there are now various web ap­pli­ca­tions, with which you can write and organize invoices online. All you need to know about creating an (online) invoice can be read here.

In terms of formal in­for­ma­tion, writing an invoice does not differ all that much from writing a proposal, an order con­fir­ma­tion, or even a delivery note. All of these are struc­tured very similarly and require the same in­for­ma­tion at several stages through­out.  

As with any other business letter, the company logo should be of good print quality and clearly visible on the invoice – most are placed in the upper section of the document. If it so happens that you have no logo or you don’t want to use one, you can al­ter­na­tive­ly place the company name there.

There­after follows the usual for­mal­i­ties of a business’ cor­re­spon­dence with a customer, i.e. the name, title, and address of the customer, as well as the ap­pro­pri­ate in­for­ma­tion of the firm. It is also of course advisable to include your own contact details (telephone, e-mail) for future inquiries that might be sent back to you. At this point it is also a pos­si­bil­i­ty to include your tax iden­ti­fi­ca­tion­num­ber or GST reg­is­tra­tion number (depending on which you use for the company). Al­ter­na­tive­ly, it is possible to list the tax number with ad­di­tion­al in­for­ma­tion, e.g. account in­for­ma­tion, in the header or the footer.

After the title (usually ‘Invoice’ is suf­fi­cient for this) comes the in­di­vid­ual portion of the invoice. The customer number and date should be written next to the invoice number. In the brief running text of the letter you should thank the customer for their order and list the products and/or services. Then you note the amount of products (or services) being provided. Using bullet points or ab­bre­vi­a­tions you can outline the type of product/service, and finally then the cor­re­spond­ing price for each.

If it is the case that you are selling more than one of the same product to a customer, then you should include not just the quantity, but also the in­di­vid­ual price alongside the total price.

Once all the in­di­vid­ual payments have been listed it is now time to com­mu­ni­cate the total amount of the invoice. Next you should list the sum of all the named payments followed by the total amount of GST, which will be added to this net amount. Finally, add these two figures to reveal the final amount of the invoice.

Un­der­neath the gross sum, you should inform the consumer of the date that the payment is due (don‘t forget to include your account details within the invoice) and also stipulate the delivery date as well.

The U.S. gov­ern­ment does not specif­i­cal­ly outline what in­for­ma­tion should be included in a com­mer­cial invoice for a domestic purchase. But there is still a general knowledge relating to what the minimum is that should be included in an invoice, and they are given in the following checklist:

• Name, address, contact details, and possibly tax ID number of the seller

• Name, address, contact details, and possibly tax ID number of the buyer

• Name, address, contact details, and possibly tax ID number of the recipient

• Time and place where product/service has been sold

• Product in­for­ma­tion – e.g. quantity, price per unit, origin, HS number

• Country of shipment

• Signature and date of signing

• Method of payment

• Import license re­quire­ments

The days of writing invoices with a type­writer are long gone. Nowadays the computer is the most important tool for creating invoices and it is often the case that text editing programs or other office ap­pli­ca­tions are used for this purpose. Software packages like Microsoft Office and Li­bre­Of­fice are very popular and already installed on many users’ computers. This means that you can begin right away with writing invoices and without any ad­di­tion­al charges.

As with office ap­pli­ca­tions, more and more self-employed people and companies are using smaller and medium-sized busi­ness­es are using invoice software and programs. Many of these ac­count­ing programs can be purchased sep­a­rate­ly, and they are programs that specif­i­cal­ly serve the purpose of writing invoices. On the other hand, other ap­pli­ca­tions are then part of a complete ac­count­ing software package, with which you can carry out many different tasks, alongside the creating of invoices. Most of these ap­pli­ca­tions can be used online – they are offered via a cloud hosting system and follow the SaaS (Software as a Service) principle.

Apart from templates for invoices, this software often offers several other very useful features. For example, when writing an invoice, these programs can retrieve customer in­for­ma­tion from a database. This means that this data only needs to be manually entered once and there­after can always be retrieved by the tool; avoiding un­nec­es­sary typing. Generally with invoice software, it is the case that many processes are automated, meaning that all stan­dard­ized data is taken over when it comes to the writing of invoices – e.g. the suc­ces­sive numbering of invoices and the cal­cu­la­tion of sales tax. On top of this, many of the programs offer control functions that comprise of all the statutory in­for­ma­tion required for an invoice.

Several tools will remind you of out­stand­ing invoices if a customer does not pay within a certain time period. Ad­di­tion­al­ly many programs will offer the pos­si­bil­i­ty of writing payment reminders based on still out­stand­ing invoices. Such control functions and aids are there to help ensure that invoices, and any processes involved, can be dealt with easily and flaw­less­ly.

If you use a cloud connected ap­pli­ca­tion to draw up your invoices online, you can save even more time and effort. This is because many online tools for writing invoices also feature a sending feature, with which all written invoices can then be dis­patched directly via the program. This can involve more than just e-mail address con­nec­tions – many providers go further and offer to send invoices and/or payment reminders by post. This of course then saves you the effort of having to go to the post office yourself.

With a cloud service you will also profit from the fact – assuming you are connected to the internet – that you can access your invoice accounts and database no matter where you are in the world via your PC (and often also via your smart­phone). With a ‘Software as a Service’ solution it is also not necessary to have to busy yourself with the data backup of your files. These are saved au­to­mat­i­cal­ly on the server of the provider. Even the in­stal­la­tion and updating of the software is not your re­spon­si­bil­i­ty, as the service provider also takes over this re­spon­si­bil­i­ty.

The dis­patch­ing of the document can take place both digitally and by post. With regards to the latter, the customer should always first have given their per­mis­sion for this method. This can be done through a clause in the general terms and con­di­tions or via consent given either before or after the trans­ac­tion. The invoice can then for example be sent by e-mail or as a download.

Elec­tron­i­cal­ly storing a paper invoice is permitted as long as the printed version is scanned in a way that makes it easily legible. If it is the case that the cir­cum­stances are reversed, then the digital invoice must be saved elec­tron­i­cal­ly. Solely keeping the printed version is not allowed.

Make sure that your elec­tron­i­cal­ly stored invoices are kept on a storage device with a long life guarantee – modern hard drives are much more suitable compared to the likes of CDs or DVDs, which tend to have a much shorter life ex­pectan­cy. From time to time you should also create backup copies of your invoices (as well as all other company documents that may be required for proof) across different storage devices.

Even here, online invoice programs with cloud functions can be of benefit, as they save invoices on the servers belonging to the provider, where they are also kept long term. The USA currently has no mandatory data retention law. However, it is rec­om­mend­ed that files are stored for a minimum of three years up to seven years, depending on how important it is to your tax state­ments. This is not just in your interest but also in that of the tax au­thor­i­ties.

There are some fun­da­men­tal dif­fer­ences between an invoice and a bill.

• An invoice indicates that payment of the sum is still out­stand­ing. It gives an overview of the products and/or services provided and lists the re­spec­tive costs involved.

• A receipt, on the other hand, is proof of a provided service. It usually records the sum of money involved. 

However it is also the case that an invoice can function as a receipt, and vice versa. As soon as a receipt contains all details legally required for an invoice, it can then also be used as such. This also works the other way around; an invoice can also serve as a receipt, if it records that the payment sum has been received, and also outlines the date involved as well as the signature of the payee.

These days the or­ga­ni­za­tion and creation of invoices takes place primarily on computers. By coming up with a sample template of your invoice, which contains your logo as well as all other required in­for­ma­tion relating to your business (e.g. name, address, and tax number), you can save yourself time and effort with the creation of all invoices. This will mean that for future invoices all you will need to do is enter the details of the customer and the scope of the product or service being supplied. There are several different office ap­pli­ca­tions that are suitable for writing an invoice. The writing, editing, and or­ga­niz­ing of these invoices can be done even quicker if you make use of an online invoice generator. Software like this is par­tic­u­lar­ly worth the in­vest­ment if you are dealing with a large amount of orders. Es­pe­cial­ly efficient are the cloud ap­pli­ca­tions, with which you simply have to register your customer details once. Then, in no time at all, you can complete an invoice and send it by e-mail or by post. The basic re­quire­ments always remain the same – re­gard­less of the program with which you create the invoice. Make sure that you are in pos­ses­sion of all necessary in­for­ma­tion, keep a detailed eye over the accuracy of all data, and send your customers the documents as quick as possible. Bear in mind that both the customer as well as the tax au­thor­i­ties expect the invoice to be written properly and correctly. Click here for important legal dis­claimers.