What to put on an invoice

The basics, whether or not you are VAT registered

Every invoice needs a unique identifying number, your business name, address and contact details, and the name and address of the customer you are billing.

It needs a clear description of what you supplied, the date you supplied it and the date of the invoice itself. Those two dates are often different and both matter.

Then the money: the amount charged for each item, any VAT, and the total owed. Add how you want to be paid and by when, because an invoice that does not say when payment is due invites a customer to decide for themselves.

Write the description as though someone unfamiliar with the job is reading it, because at some point one will be. "Labour" is a dispute waiting to happen. "Front brake pads and discs replaced, 2 hours labour" is not.

If you trade as a limited company

Use your full registered company name exactly as it appears at Companies House, not your trading name on its own.

Company stationery and your website also have to show your registered office address, your company number and where you are registered. Putting the same details on your invoices keeps everything consistent and saves anyone chasing you for them.

If you name any director on the invoice, you have to name them all. Most businesses avoid the problem by naming none.

Once you are VAT registered

A full VAT invoice carries more than a plain one. Alongside the basics it needs your VAT registration number, a sequential invoice number, the time of supply or tax point if that differs from the invoice date, and for each line the quantity, the unit price excluding VAT, the VAT rate applied and the amount excluding VAT.

It also needs the total excluding VAT, the total VAT charged in sterling and the rate of any cash discount offered.

For small retail sales there is a simplified version, which is why a coffee shop receipt does not look like a builder's invoice. The threshold and the reduced field list are set out on GOV.UK, and if you mainly invoice businesses you will be issuing full invoices anyway.

One trap worth naming: only charge VAT once you are actually registered. If you are waiting for your number to come through, GOV.UK explains how to handle invoices raised in the gap. Charging VAT you are not yet registered to charge is a genuine problem rather than a paperwork slip.

Numbering is where people come unstuck

Invoice numbers have to be unique, and for VAT purposes they have to run in sequence. Two invoices sharing a number, or a sequence with unexplained gaps, is exactly the sort of thing that turns a routine enquiry into a longer one.

The usual causes are mundane. Someone raises invoices in a spreadsheet while the office raises them in the software. A prefix changes at the start of the year and the count restarts. An invoice is deleted rather than cancelled and credited, leaving a hole nobody can explain later.

Pick a format and let one system own it. A prefix, a fixed number of digits and an automatic increment is enough. INV 00042 tells anyone what it is at a glance and sorts properly.

If you cancel an invoice, issue a credit note against it rather than deleting the record. The gap is then explained by a document instead of by your memory eighteen months on.

Moving from another system is the moment to get this right. Carry on from your last number rather than starting again at one, or you will have two invoices numbered 1 in the same tax year.

Payment terms and what happens when they are ignored

State the terms on the invoice. Fourteen or thirty days is normal, and payment on receipt is fine for consumer work provided you say so before you start.

For business to business work, if you have not agreed terms the law fills the gap with thirty days. You can also charge statutory interest on a late commercial debt, currently set at eight per cent above the Bank of England base rate, plus a fixed sum in compensation that rises with the size of the debt.

Most people never invoke it. Quoting it in your terms is still worth doing, because it changes the tone of the second reminder without you having to write anything unpleasant.

Keep your records. VAT records generally have to be kept for six years, and business records for five or six years depending on how you trade. Digital copies are acceptable, and a system that stores every issued document is easier to defend than a folder of PDFs.

The part nobody legislates for

A correct invoice that looks like it was thrown together still slows down payment. Your logo, your colours and a consistent layout signal that there is an organised business behind the request, and organised businesses get paid sooner.

The practical version of this is not a design project. Set your layout, colours and logo once, set your payment terms, bank details and small print once, and let every invoice inherit them. The consistency does the work.

Add a payment link if you take cards. Removing the step where a customer has to find their card reader and type a sort code out of an email is the single cheapest thing you can do to your payment times.