It doesn’t matter whether you’re selling a product or providing a service, the chances are you’ll need to issue an invoice somewhere along the line. Invoices help you get paid, so they’re pretty important.
Like a lot of things in life, timing is everything. It’s essential to think about when to invoice a customer, because that decision will be based on the type of product or service you’ve provided – and how often you provide it. First, let’s go over what exactly an invoice is and why they’re a great way to get paid.
In this article, you’ll learn:
- What invoices are and their benefits
- When to send an invoice
- When to expect payment
What are invoices?
An invoice is a legally binding document that lists the products or services that were provided to a customer, with a detailed breakdown of costs. They’re usually used for B2B (business-to-business) transactions. The law states that if you and the other party are registered for VAT, you have to provide an invoice.
There might be times when a private individual asks for an invoice, but in most circumstances, B2C (business-to-consumer) invoices are not compulsory.
Make sure not to get invoices confused with receipts, which are given as proof of payment.
Why use invoices?
They remind people to pay
We all forget things, invoices are a handy way to make sure your customers don’t let their outstanding payment slip under the radar. It’s also a great way for them to check what they bought and see how much each thing cost.
They help you keep track
Invoices supply detailed accounts of your transactions. Businesses are required by HMRC to keep records for 6 years, or 5 years if you’re self-employed.
Protection
Invoices are legally binding, including your payment terms, so they can be helpful if you’re trying to get hold of an overdue or missing payment.
When to issue an invoice
Invoicing in advance
There might be times when a customer wants a pre-invoice. It could be for an appointment that’s part of a larger event that they’re trying to budget for, like having their hair done on their wedding day. They’ll want to consider your offer and see how it fits into their wider plan.
If the services you’re providing are quite costly, you might want to consider requesting upfront payment or a deposit, particularly if the unexpected cancellation of your services would affect on you financially.
Invoicing there and then
If you’ve sold something to a customer in person or done a one-off job, you can invoice them on the spot. If you’re in-store, your customer will most likely want to pay with cash or card, but if you’re offsite and the customer is there at the time, you can provide them with an invoice directly.
Providing a customer with an invoice at such short notice might seem like a difficult task, given that preparing them used to be quite time-consuming. Luckily, there’s a ton of new ways to issue an invoice without creating it in Excel and sending it by post or printing it out beforehand.
You can send online invoices right from your phone, whether it be via email or through an online service or software, which makes invoicing much easier. If you need help with this, contact the VeeToo team for advice, we’ll point you in the right direction.
Invoicing after you’ve finished the job
When it comes to completing a service, whether it’s a large project or a small piece of freelance work, it’s best to check with your customer that they’re happy with the final product before issuing an invoice. You can be proactive and send your customer an email doublechecking if any changes need to be made.
Once you’ve confirmed that everything is as it should be, you can go ahead and issue their invoice.
Recurring invoices
If you’re a business that provides a repeat service, like a cleaning company, you might want to set up a repeat invoice. If you’re providing the same service each time, it’s likely that the costs will always remain the same. You can create an invoice that goes out at specified intervals, weekly or monthly, for example.
If you work bi-weekly or weekly, you might not want to issue every time a job is completed, so monthly invoices can include all your services for that calendar month.
Invoicing at agreed milestones
If you’re working on a long-term project, it’s best to agree on certain milestones with your customer. You should agree on the terms and costs that will be included on the invoices specific to each section of the project.
Devising a payment plan is particularly important as it guarantees cash flow, meaning you can continue to cover costs and avoid building up an enormous bill for your customer to pay at the end of the project.
When will you get paid?
Unless you’ve agreed on a different payment date, your customer has 30 days to pay the invoice, from the date it was issued or when they received the goods or services. If you want your customer to pay sooner, this has to be agreed upon and the due date has to be included on your invoice.
One of the many great benefits of online invoicing is that you’re likely to get paid 14 days faster than with a postal invoice, so don’t be afraid to suggest a 2-week payment deadline.
If you have issues getting paid, it’s important to know your rights when it comes to overdue payment. According to the UK government, you’re entitled to begin charging interest should a customer fail to pay on time. That being said, it’s entirely up to you whether you decide to charge interest. If you do, you’ll have to issue an updated invoice including the additional charges.