What you need to know about small business invoicing
A small business invoice is essentially a financial document for your business that keeps a record of sales and payment terms. Small business invoicing can also help with organisation, cash flow management and can act as a legal record. You can track when payments are due and when payments are overdue. Plus, keeping track of your services rendered using invoices can be handy at tax time.
Did you know that humans actually started invoicing in Mesopotamia, 5000 BC ago?
How did invoicing start?
The basics of invoicing have not changed for many years. It is the delivery and execution of invoices that have changed. In ancient times, business invoices were recorded on stone or made with simple scribblings on clay while it was still wet. Then we used animal skins and parchment to record payments owed. As technology improved, businesses started using printing machines to create invoices. They also used graphic symbols on paper documents as a means of marketing.
Today the importance and frequency of small business invoicing has led to more simplified documents. It can be beneficial to invest in the right self-service invoicing platform for your business. Some platforms even allow you to send invoices via your mobile phone. Meaning a plumber could finish a job with a client and invoice them immediately from their phone.
What are the types of invoices?
- Standard invoice. These are issued by a business to the client and include the business’s name and contact information, payment details, and the client’s name.
- Credit invoice. Issued by a business to a client to provide credit or a refund. This could be if there was an invoicing error on a previous invoice.
- Debit invoice. Used if a business needs to increase the amount they wish to charge the client. If an electrician underestimated the cost for providing electrical work to a residential house or if they need to put in place extra lights or power outlets etc.
- Timesheet invoice. This is issued if a business or employee is billing for hours that they provided. For example, a security guard working for 6 hours at a sporting event will include their hourly rate multiplied by the number of hours of service they provided into the one invoice.
- Proforma invoice. This is an estimate of the cost to complete a job, aka quote, that is sent to a client before the work is commenced. You might need to adjust a proforma invoice once the job is complete.
What to include in an invoice?
An online invoicing software modernises your business and makes it look and feel more professional. Additionally, it allows you to be in the driver’s seat by choosing a payment system that is faster and some even accept online payments. Let’s look at some of the basic elements to include in your invoice:
- Particulars: You need to include the term ‘Tax Invoice’ if your business is registered for GST, your business details, ABN, date invoice is issued, price, and GST applicable. You can find more information on the ATO website about how GST works.
- Keep it professional & branded: The great thing about a lot of small business invoicing tools is that you can normally pre-load your company information and even your logo. So, every time you create an invoice it will automatically have your information ahead of time.
- Clearly mark your invoice: Using a system it will automatically generate a unique invoice number per customer as well as the customer details, that way it will be clear for you and your customer to keep track of the service received.
- Add in payment terms: Most systems now offer an automated approach to paying invoices. You can include your bank details and some of them even include buttons in the online invoice whereby a customer can input their credit card details on the spot.
- Add in product information and services: If you keep each line in the invoice detailed you will prevent any back and forth with the customer trying to understand what their invoice is for.
How can small business invoicing software benefit your business?
Manual invoicing is vulnerable to human error and can result in big financial losses for a business. Imagine having to keep hard copies of all those invoices for tax time, wouldn’t it be easier just to store them all in an online space?
There are many tools available to small business owners today. Some of the ones that you may have heard of are Xero, Quickbooks, and Freshbooks. So, using one of these tools is not only easier, but it’s also environmentally friendly to use an online invoicing tool as opposed to printing or writing on hard copies. Having the invoicing process done electronically takes the hassle out of small business invoicing.
Cash flow is the key to any business success. And having the right invoicing tool in place can reduce your administration hours and keep track of our business’s income. Some of the benefits of getting your business electronic invoicing ready are listed below:
- You can track sales and payments
- Reduce missed payments
- Charge for services rendered quickly
- Get a notification when you receive a payment
- Automatically send reminders to your clients who are late on payments
- Generate reports and see trends in your customer behaviour
Small businesses have to fulfill many tasks on a daily basis. From running the team, executing projects, completing jobs, and keeping customers happy. A small business needs an easy-to-use automated system to keep track of customer payments!
It’s important to look for a small business invoicing software that is user-friendly and can streamline your finances. Lumi can provide the necessary funds for an upgrade in the technology you use to improve your invoicing process.
If you want to find out about the best funding solution available for you or get some advice about any business loans available, you can email us at email@example.com or call one of our friendly team members on 1300 00 5864.
Your Lumi team