How to send an invoice: A step-by-step guide for businesses


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  1. Introduction
  2. What is an invoice?
  3. What’s included in an invoice?
  4. When to send an invoice
  5. How to send an invoice
  6. Invoicing best practices for businesses

Invoicing is an important part of business operations – and one that is often overlooked as a tedious back-office chore. The right invoicing system can contribute to timely payments while fostering trust between businesses and customers.

Below, we'll cover the steps of the invoicing process and explain how automated billing systems can contribute to a smooth payment experience.

What's in this article?

  • What is an invoice?
  • What's included in an invoice?
  • When to send an invoice
  • How to send an invoice
  • Invoicing best practices for businesses

What is an invoice?

An invoice is a commercial document that a seller issues to a buyer, outlining the products or services provided and indicating the amount that the buyer owes the seller for these goods or services. It is both a demand for payment and a record of the sale for both parties, once payment has been rendered.

Invoices play a key role in managing and tracking financial transactions. They are an important accounting tool for businesses, helping monitor sales, manage inventory and track income. For customers, invoices provide a detailed record of purchases, which is useful for personal budgeting and general record-keeping. Invoices can also help resolve disputes over payments, because they provide a legal record of the agreed-upon transaction between seller and buyer.

What's included in an invoice?

Some of the specific information an invoice must include will vary depending on the nature of your business, the types of customers you work with and the terms of your contracts. However, most invoices include the following components:

  • Header: The "invoice" label clarifies the purpose of the document, ensuring that the business's financial system processes it correctly.

  • Seller information: Details of the business tell customers where the invoice is coming from, while fulfilling legal obligations related to taxation and business identification.

  • Buyer information: Customer information is necessary for accurate record-keeping and can be an important tool in the event of any disputes or audits.

  • Invoice number: A unique identifier simplifies tracking and organisation of financial records, which helps with efficient account management and reconciliation.

  • Invoice date: Including the date is required for purposes of cash flow management and financial planning, as well as for determining the timing of revenue recognition.

  • Payment terms: Clearly defined terms help with maintaining positive cash flow, preventing disputes and managing customer expectations about due dates and late fees.

  • Goods or services provided: Detailed descriptions help justify the invoice amounts and prevent disputes, and can be necessary for both parties' financial records or in case of audits. This can also affect taxation, especially when goods and services have different tax rates.

  • Costs: Itemised costs show the customer what they're paying for and can simplify the seller's process for calculating tax and managing inventory.

  • Tax information: Appropriate sales tax or VAT calculations and identifiers are necessary for compliance with local and national tax authorities.

  • Notes: This space provides an opportunity for businesses to communicate additional information to customers, clarify unique aspects of the transaction or strengthen the business relationship through a personalised message.

Every part of an invoice serves a function for a business, whether it's for business operations, financial management, customer service or legal compliance.

When to send an invoice

Not all businesses will follow the same invoicing schedule or practices. The ideal timing for sending an invoice can vary, depending on factors such as the nature of the business, the type of goods or services provided, the agreed-upon payment terms and the relationship with the customer. For example, a business that offers physical products might invoice at the point of sale, while a consulting firm might bill monthly for ongoing services.

Each business needs to establish an invoicing schedule that suits its operational model, enhances cash flow and fulfils customer expectations. Here's a rundown of the ideal timing for sending invoices, for several common business models:

  • Service-based businesses
    These businesses typically send an invoice after the service has been rendered. For example, a graphic design firm might invoice a client upon completion of a website design, or a consulting company might invoice at the end of each month for services provided in that period. However, in some cases, service businesses may require a deposit or partial payment up front, especially for larger projects or when working with new customers.

  • Product-based businesses
    These businesses generally invoice at the point of sale, when the goods are delivered or the order is fulfilled – similar to a retail transaction. For example, a furniture manufacturer might invoice a retailer upon delivery of the items. However, in the case of customised or made-to-order products, such as bespoke suits or customised cabinetry, businesses may require an up-front deposit, with the balance invoiced upon delivery.

  • Progress billing
    This applies to larger projects that span an extended period, typically in construction or similar industries. Here, businesses send invoices when they reach specific project milestones or on a regular schedule (e.g. monthly). For example, a construction company building a house might bill 25% up front for materials, 25% upon completion of the foundations, 25% at the "lock-up" stage (when the building is enclosed) and the final 25% upon completion.

  • Recurring billing
    A business providing an ongoing service or subscription might use a recurring billing model. Businesses send invoices at regular intervals, usually monthly, quarterly or annually. For instance, a fitness studio or a software-as-a-service (SaaS) company would use this model to invoice customers each month for the next month's service.

  • Up-front payment
    With up-front payments, businesses send an invoice before providing the service or product. This model is often used when there's a significant investment or high risk involved. For example, a bespoke jeweller might require full payment before sourcing expensive materials and beginning work on a piece.

  • Retainer model
    Here, businesses send an invoice for a set amount before the work begins, and the client makes regular payments (often monthly) to retain access to the business's services. Law firms and consulting agencies often use this model by billing a client a set retainer fee each month for a certain number of hours of service.

While these invoicing practices are typical, the specific invoicing schedules can vary and should be adjusted to meet the needs and capabilities of each individual business and its customers. Maintaining strong, open communication and clear agreements with your customers and clients about your invoicing schedule is key to maintaining a healthy business relationship and ensuring timely payments.

How to send an invoice

Sending an invoice is an important part of managing a business's finances and maintaining steady cash flow. Here are the steps that make up the invoicing process:

  • Understand your client's invoicing process: Before creating an invoice, familiarise yourself with your client's invoicing process. Some clients may require specific information, such as a purchase order number, or may prefer a specific invoice format. Understanding these requirements up front can help ensure that your invoice is processed quickly and correctly.

  • Prepare and review the invoice: Based on your understanding of your client's needs and the nature of your business transaction, prepare an invoice using the necessary template or software. Include the key components, such as seller and buyer information, invoice number, date, description of goods or services, costs and payment terms. Review the invoice to make sure all information is accurate and complete.

  • Send the invoice: Once you have prepared and reviewed the invoice, send it to the client by email or a dedicated invoicing or accounting software system, such as Stripe Invoicing. Make sure you send the invoice to the correct person within the company, or the correct department, to avoid unnecessary delays.

  • Follow up: After sending the invoice, track it. If payment doesn't arrive by the due date, you'll need to follow up with the client. This could consist of a friendly reminder email or phone call to check if there are any issues with the invoice. Keep a record of all communications.

  • Receive payment: Once the client has made the payment, record it in your accounting system. This will help you track your revenue and maintain accurate financial records. You may also need to send a receipt or payment confirmation to the client, depending on your business practices or the client's needs.

  • Manage late payments: If the payment is overdue, you may need to take additional steps. This could involve sending a more formal demand for payment, adding late fees if specified in your payment terms or, in extreme cases, resorting to legal action.

  • Maintain records: Keep copies of all invoices, payment receipts and related communications for a specified period, typically at least for the length of time specified by the tax authorities. These records can be necessary for tax purposes, audits, resolving disputes or analysing your business's financial history.

Invoicing best practices for businesses

For businesses that want to maximise operational efficiency and maintain healthy cash flow, improving the invoicing process is important. Here are the best practices that businesses should prioritise:

  • Provide clear identification
    Every invoice should carry a unique identification number. This simplifies tracking, allows each party to refer to the invoice easily in communications, and helps with financial record-keeping.

  • Include a detailed breakdown
    Include a thorough breakdown of services or products provided. Detailing unit costs, quantities and cumulative amounts minimises disputes and accelerates payment approvals.

  • Send invoices promptly
    Businesses should send invoices immediately after delivery of the products or services. Delayed invoicing often correlates with deferred payments.

  • Set clear payment terms
    Including the payment due date, preferably within a 30-day window, can accelerate payment timelines. Businesses should also state any late fees or incentives for early payments to set clear expectations.

  • Adopt electronic invoicing
    Online invoicing makes it possible to automate many parts of the invoicing process, particularly if you deal with recurring invoices on a regular basis. E-invoicing, which Stripe provides, can also improve precision and accuracy with invoice templates, as well as a faster delivery and acknowledgement loop, which can boost cash flow dynamics.

  • Send out regular follow-ups
    Sending customers a gentle reminder one week before the due date, and a follow-up message soon after, is an effective way to nudge clients towards on-time payments. Businesses can set up automated systems for this purpose, ensuring consistency without significant manual intervention.

  • Maintain accurate records
    Access to a complete archive of sent, pending and paid invoices helps with financial forecasting, tax computations and audit processes. Businesses should keep records for at least the minimum period required by law, which is often seven years.

  • Accept multiple payment methods
    By providing a variety of payment options – such as bank transfers, credit cards and digital wallets – businesses can make payments more convenient for clients, potentially expediting the payment process.

The content of this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy or currency of the information in the article. You should seek the advice of a competent lawyer or accountant who is licenced to practice in your jurisdiction for advice on your particular situation.

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