Invoicing for Small Businesses

We’ll look into the basics of invoices and then how you can use invoice financing as a tool to get a quick injection of cash.

An invoice is a formal request for payment from a customer that has received goods or services from you. It is an itemised document that clearly states what they brought and how much they will need to pay. Invoices are part of bookkeeping and need to be clear, accurate and organised.

Google sheets have invoice templates, so do cloud based accounting systems such as Quickbooks or Xero. You want all your invoices to have the same format and look professional. Ensure you include the following:

The invoice number will help you do this. Set them up sequentially and have your own spreadsheet which is updated every time you send out an invoice. Carry out a weekly review of who is due you pay you and send a friendly reminder if they aren’t a regular client. You can also save a copy of the invoice in folders, think how you would like to organise these in line with your type of business. Is it more useful to organise them by invoice number, month sent or possibly, by client? Most businesses send their invoices by email, save as a PDF that can’t be edited and attach to the message as timely as possible.

Although very similar a receipt is issued after payment, an invoice is a request for payment. Be aware that an invoice isn’t legally binding within itself. To make a transaction legally binding you need to have a contract signed between the two parties or, at least, have an agreement in writing of some sort, for example an email exchange. To cover yourself it is good to outline what your payment terms are, what services/goods you will provide and what the costs will be to ensure you and your client are on the same page.

If you and your client are NOT VAT registered you shouldn’t issue a VAT invoice. You should simply charge for the goods/services provided including the information from point 1. If you and your customer are VAT registered you are required by HRMC to provide a VAT invoice for goods/services subject to sales tax. This also applies if the invoice between the two VAT registered parties includes non-sales tax items. VAT invoices look very similar to regular invoices but include a little more information:

Now we’ve gone through the basics of invoices, we’ll explain the basics of what invoice financing is and how it can benefit you.

You can use your outstanding invoices to raise cash for your business quickly. You can sell the invoice to a company or borrow against the invoice, both minus a fee. Some companies will require your company to be a certain size and want all your outstanding invoices sold/borrowed against together, others will be happy to work with smaller businesses and allow you to select which invoices you raise cash with.

Invoice financing can be a quick way to get a good amount of urgently needed cash into your business. When deciding on if you think it may work for you consider