How to Invoice: Invoicing Questions you were Afraid to Ask
Maria Peloponisiou~ 5 min Reading time | 16. May 2019
If you’ve never sent an invoice before, the prospect of making and sending one can be nervewracking. Having questions about how to invoice is normal, and sometimes the answers to them may surprise you! While they seem simple, the details on invoices have important ramiﬁcations in the accounting cycle. Below are answers to some common questions about invoices that you may have been afraid to ask.
Should I Write an Invoice Cover Letter?
Cover letters usually aren’t necessary for physical invoices, but it’s common in some industries such as law, where clients are paying a lot for very personalized services. However, usually if you’re sending invoices via email, it’s often a good idea to greet the client in the body of the email and brieﬂy state what the invoice is for, thanking them for their business.
What is an Invoice Number?
An invoice number is a unique number you give to each invoice to identify it quickly. You’ll often need to refer back to older invoices, and numbering them in a logical way can help you ﬁnd them eﬃciently. You have free reign to create any alphanumeric or strictly numeric numbering system you want for your invoices, but make sure to have a system in place before you start numbering them.
Are Invoice Numbers a Legal Requirement?
This depends on the country you’re invoicing in – in the US, there is no speciﬁc legal requirement for invoices to have numbers; however in the UK, you are legally required to have a unique invoice number in order for your invoice to be valid. This is why it’s good to get into the practice of using them whether or not you legally need to, since you may end up sending an invoice to a country that requires them once business is under way.
What Info Should be in the Invoice Header?
An invoice header usually has your business name and logo on the left, and the date, invoice number, and project number or client number. Beneath your name and logo is often the customer’s address. It’s a good idea to use letterhead and an invoice template for each client – accounting software can save you the hassle of entering this information each time by having templates for each client ready to go.
What is the Diﬀerence between an Invoice and a Bill?
These words are usually used interchangeably, but have slightly diﬀerent connotations. An invoice is generally a detailed breakdown of commissioned goods or services, that speciﬁes a window of time within which payment is expected (eg Net 30 days). A bill is usually a more simpliﬁed list, and generally implies a request for a more immediate payment, such as a utillity bill or dinner bill.
What is the Diﬀerence between an Invoice and a Receipt?
An invoice is a request for payment before it has been sent, while a receipt is proof of payment issued to the client after a sale. Some companies send both, but often companies will either send invoices or issue receipts depending on how transactions usually happen. If you have an online store, for example, it’s possible that you may send receipts to customers who buy one item at a time, but send invoices to business clients making larger orders.
What is the Diﬀerence between an Invoice and a Statement?
While invoices are a request for payment for speciﬁc goods and services, statements are a summary of a client’s outstanding invoices and their total balance. Statements are usually used as part of a collections process, sent to clients with overdue invoices at regular intervals.
Can an Invoice be Backdated?
Backdating is sometimes associated with fraud, so it’s best to be careful about how you approach this. Generally, invoices created after the sale of products or services rendered should specify both the date the of services and the date the invoice itself was issued. So if you’re invoicing in May for services provided in April, your invoice should make it clear what dates you provided goods and services and what date the client received their invoice.
Can an Invoice be Cancelled?
Yes, however invoices need to be cancelled with a credit note, and the new invoice must be reissued with a new number. Using accounting software like Billomat can help you avoid the error of reissuing an invoice under the same number, which may have ramiﬁcations down the road when you refer back to your records.
Can Anyone Create an Invoice?
Yes – any individual can create an invoice. As mentioned above, in some countries a unique invoice number is a requirement for it to be legally identiﬁable as an invoice, and you may need to add tax to the goods or services you’re invoicing for, depending on how much you make per year. If you’re adding taxes, you have to be registered with your tax authority and have a valid tax number in order to charge sales tax.
Can I Create an Invoice in Excel or Word?
You can, but this solution isn’t ideal. It’s easy to mess up the formatting when adding new information in these programs, and manually inputting amounts increases the likelihood of human error. It’s best to use the invoicing function of Billomat to generate invoices so they are uniform over time, and as accurate as possible.
Can an Invoice and Packing Slip be Combined?
Packing slips and invoices serve two very diﬀerent functions, and although technically you could include an invoice inside a package containing the goods sold, it’s not a good idea. Often invoices go to separate individuals than packing slips do, and companies might overlook your invoice if it’s easy to mistake for a packing slip.
Can an Invoice be Negative?
An invoice can’t be negative – if a client pays you too much, you’ll need to create a credit note to balance out their account. A credit note is formatted the same way as an invoice, but speciﬁes a credit on their account which they may either request as a refund or use towards other invoices. Credit notes should also show up on statements, so that they are included in the net total a client owes.