Many business owners are great at making sales and delivering their product to customers. However, one of the areas that many small businesses struggle with is sending out invoices in a timely manner so that they can actually be paid for their goods and services. Why do so many small business owners struggle to invoice? More often than not, it is simply a matter of time and know-how.
How to write an invoice in Australia
Invoicing can be daunting at first. What needs to be included in an invoice? How do you write an invoice? How will you keep track of what invoices have been issued? Who has paid? What should your payment terms be? How do clients pay their invoices? What is the best way to manage your invoicing?
The simplest and most time-effective way to ensure that your invoices contain everything that is required is to use a template. There are many templates available online, and most cloud-based accounting software programs will have an invoicing feature that once set up makes invoicing rather simple and efficient. Alternatively, you can download our Australian Invoice Template here.
For guidance on what accounting software is best for the invoicing needs of your business, give us a call on 1300 728 875 or drop us a line.
What items do I need to add to my invoice?
When invoicing in Australia, there are a number of details that need to be included in order to comply with the requirements of the Australian Taxation Office. These are:
Tax invoice identification
A simple notation on the invoice stating that it is an invoice, along with an identification number for tracking is required. This enables you to keep track of what invoices you have sent out, which invoices have been paid and how many invoices you have raised. Most commonly, businesses use sequential numbers (i.e. INV0001, INV0002 etc.) and you may also choose to include dates or customer identifiers within this structure as well.
Business name and Australian Business Number (ABN) of the seller
It is important that the person receiving the invoice is able to identify who they are paying money to. If you’re invoicing a business, they will need your business name and ABN when entering payments into their accounting system. These details help with data entry and reconciliation, as well as identifying what expenses are most commonly incurred.
Date of issue
This is key when it comes to ensuring that invoices are paid in a timely manner. It is important that you have a record of when the invoice was raised so that you can follow up payments that are not forthcoming in an appropriate amount of time. It’s also important when reconciling accounts to know when the invoice was raised and paid, as well as knowing what time period the income needs to be reported within.
Details of goods or services, including quantities and pricing
It is essential that businesses are able to keep track of what goods and services they have used and what they have paid for these services. Having clear details on your invoices means that any disputes as to what goods or services were agreed upon versus what goods or services were delivered can be quickly resolved.
Goods and Services Tax (GST) payable
The amount of GST payable can either shown separately or as a total amount. Where there is a mixture of GST applicable and GST-free or exempt items, the GST must be itemised, however if GST is applied to the entire purchase it is acceptable to include phrase ‘total price includes GST’ with the total amount owed.
Differentiation of cost of goods and GST
Unless using the phrase ‘Total price includes GST’, you must include a breakdown and differentiation of costs that outlines the total paid, GST payable and cost of goods/services exclusive of GST.
Name and/or ABN of the buyer
If the invoice total is over $1,000, then the name and/or ABN of the buyer must also be included. However many businesses include this as a standard as it helps with reconciliation of accounts and chasing up payments for invoices. It is also beneficial to know who your customers are and how they are spending money with you in order to develop your marketing strategies.
For more details on what the ATO requirements are for invoicing, see their guidelines.
How to add GST to your invoice
GST can be confusing, but put very simply, if you are registered for GST then you need to charge GST (10% of total cost) on certain goods and services. You are then required to pass the GST you have collected on to the ATO with your quarterly BAS. If you are not registered for GST then you do not charge GST and are not required to pass GST on to the ATO.
Not sure if you need to register for GST? Read our blog about the advantages of registering for GST.
When quoting clients for goods or services to be provided, it is important to note that most people would expect that the amount quoted would be inclusive of GST, thus you should factor in GST when setting your prices if you are registered for GST. If you are quoting on services and then adding GST then it is important that you make it clear to the client that your prices are exclusive of GST or to state X amount plus GST.
For example, if you were registered for GST and quoted $900 for a job, it would be assumed that the cost of the job would be $818.18 and the GST you would collect and pass on to the ATO would be $81.82. If you were expecting that the cost of the job was $900, then you would need to quote $900 ex GST or $900 plus GST to be clear to the client.
If you are registered for GST, when invoicing in Australia, it is common for your invoice to have a columns for price of item, GST and total cost of item, thus making it simple for all to see the breakdown of goods, GST and total cost.
Payment terms and methods
It is also good practice to include payment terms and methods. This makes it clear and simple for clients to ensure that they pay on time and in the right format. When payment details are easy to find, clients are more likely to pay on time than if they need to go looking for how to pay you and when.
A good rule of thumb for payment terms is either 7, 14, 21 or 30 days as these allow for the inputting of data at the buyers end and regular payment cycles associated with their accounts payable processes. It is advisable to be clear on your payment terms when quoting so that all parties have clear and realistic expectations with regard to how and when payment will be made.
Review your invoice
Before sending out your invoices, it is important to ensure that all fields are included and correct and ensure that you have the essentials included in your invoice:
- Invoice number
- Business name and ABN Date of issue
- Details of goods / services provided
- Cost of goods and GST breakdown if applicable
- Name and/or ABN of buyer
- Payment terms and method
How to send an invoice
For most businesses today, email is the quickest and easiest way to send invoices. However, some businesses may still prefer to receive a hard copy of their invoice either included with the delivery of goods or sent by mail. However you send your invoices out, it is essential that you retain a copy for your own records in an organised manner. This will help for your own reporting purposes, or in case you are audited and are required to reconcile payments against invoices.
How to invoice as a sole trader
As a sole trader, it is very important that your invoicing process is smooth, efficient and effective in order for your clients to pay you in a timely manner. Invoices are most often raised for goods and services that are not necessarily paid for at delivery. As such, it is vital that customers are very clear on the expectations as to how and when you require payment.
In order to receive payment promptly, your invoicing needs to be regular and as close to the delivery of service as possible. Your invoices should look professional and be clear, concise and uncluttered. Information should be complete and easy to locate, as well as being free of errors.
Create a robust invoicing process
Once you have established your basic invoicing template, you will find that it can become a rather simple, fast and easy process to create your invoices. The next step is to develop a routine where you invoice regularly — be it daily or weekly — so that you can stay on top of sending out invoices and the process does not become overwhelming.
It might help to have a template saved to your computer. Then, you can keep a folder purely for invoices in order to keep everything in one place. This system also helps with ensuring that your numbers are sequential and ordered.
Many people find that using the invoicing features in their accounting software helps to take the hassle out of invoicing and helps to keep everything very organised and neat. Many of the accounting software products on the market today make invoicing super simple and are very reasonably priced, saving time for business owners and thus saving them money in the long run.
How can Darcy Bookkeeping & Business Services help with your invoicing?
Our team of expert bookkeepers are highly experienced in creating and raising invoices for clients. We are able to consult based upon the unique invoicing needs of your business and to advise as to the best way for you to manage your invoicing so that you get paid appropriately for the work that your business does for your clients. Give us a call on 1300 728 875 or send us an enquiry to see how we can assist with you’re the invoicing needs of your business.
