Leave your details below and we’ll give you a call to chat about how we can help your business move forward.
A crucial aspect of running your own business is getting your head around invoicing.
For many new small business owners, this can be overwhelming - but at Harlands, we’re here to help.
Today, we’re all about simplifying and demystifying the complexities of invoicing. Answering all of those invoicing questions you might have felt too embarrassed to ask, we’ll be covering the obvious to the obscure.
In business, there’s an assumption that everyone who runs their own business will know what an invoice is. But that isn’t always the case.
So, let us do the honours and clear this one up for you.
Essentially, an invoice is a written payment request listing the details of the services or products supplied and what the customer owes in exchange for them - like a receipt you receive when you buy something from a shop.
However, it’s important to know that your invoices are also tax documents. By law, you’re required to keep copies of all invoices to provide a record of your business revenue and how much VAT you generated if you’re VAT-registered.
Good question - and yes, there are different types of invoices.
Depending on the nature of your business, you’ll need to know what type of invoice will be best suited to you, whether you’re sending them or receiving them.
Here are some of the more common invoice types:
If you’ve never issued an invoice before, you may not know exactly what details to include - but we have you covered.
With the right details on your invoice, you can make sure your invoice is taken seriously and provides customers with all of the relevant information in one place.
As a rule, this should include the following:=
Invoices should be paid in line with the specified payment terms, which could be 7, 30 or 90 days from the date of issue. But it isn’t always as simple as that.
It’s important to be aware that, just because you’ve specified your payment terms and a due date, not all payments will be received on time. In fact, you should expect at least a third to be late.
With pending payments in the balance, it can be tricky to manage cash flow while you wait for funds to be received. However, there are a few things you can do to promote prompt payments with your customers:
Keeping a close eye on your business’s financial activity is crucial to effective cash flow management, and invoice accounting is a key part of this.
Essentially, invoice accounting is making a record of invoices that are sent, paid and outstanding. To balance your books, you’ll need to record the debits and credits on your account, which is the money going in and out.
A reputable accountant can help you to get this right - and if you use digital accounting software, many platforms automatically process book entries, making the job significantly simpler.
Another important part of the invoice process is invoice reconciliation. This process involves cross-referencing payments received to your bank account against outstanding invoices.
Once a payment has been received, identified and assigned against the correct invoice, it’s considered reconciled and can be moved from pending to paid.
Staying on top of this reconciliation process is crucial to making sure overdue payments are chased up and don’t have a long-term impact on your company’s cash flow. It can be a slow and arduous task combing through your accounts but, with digital accounting software, much of it can be automated.
No - invoicing and accounts receivable are essentially the same thing. They both focus on monitoring and managing what’s owed to your business.
Some of the confusion comes with the fact that many people assume invoicing is just the act of sending out an invoice, but it’s much more than that. Invoicing refers to the whole process, from issuing invoices to making sure they’re paid, correctly recorded and reconciled within your accounts receivable system.
If you’ve been struggling to get your head around your business invoicing, we hope we’ve helped to answer some of those burning questions.
Of course, if you need a little more guidance around invoicing or you have a question that we haven’t covered here, don’t hesitate to get in touch with Harlands today. Our team of experienced accountants are always happy to talk you through the process and help your business grow through best-practice accounting.