How To Get Paid: Essential Invoicing Tips
As a small business owner you clearly love your business and what it does, otherwise you wouldn’t be in business. But at some point you will want your customers to pay for your products or services.
How can you make sure this money comes in when it should?
Emily Coltman ACA, Chief Accountant to FreeAgent, gives her five top tips for invoicing to help you collect your dues.
Don’t be embarrassed about sending invoices to your customers – they don’t expect you to work for nothing.
Send your invoices regularly. Maybe set aside a day each month to do your invoicing, or else make use of time-saving features like FreeAgent’s recurring invoice profiles and automatic invoice e-mails, to speed up your invoicing.
When are you dating your invoices? If you’re registered for VAT, and invoice accounting, dating your invoices the first of a new month rather than the last of the previous month can defer your VAT for three months on to the next return!
For example, if you’re preparing your VAT returns to March, June, September and December each year, and you’re invoice accounting, an invoice dated 31st March will go on your 31st March VAT return – but if that invoice is dated 1st April, it will go on the 30th June VAT return, deferring the VAT payment for three months!
Get your VAT right
If you’re selling your products or services abroad, or if you’re in the process of registering for VAT, be particularly careful with your VAT invoices.
For example, you may be able to zero-rate some sales of goods outside the UK, and if you’re selling services to business customers who belong in the EU, these sales could be outside the scope of UK VAT.
If you’re in the process of registering for VAT, remember that you’ll have to charge VAT on all your sales made after your registration date. HMRC recommendthat you increase your prices by 20% from this date to allow for this. If you don’t, but instead send your customers a “VAT-only invoice” at a later date, HMRC can’t confirm that your customer would actually have to pay this invoice!
Make sure that you ask for – and receive – the right amount of money from your customers, and ensure you pay the correct amount of tax to HMRC in order to avoid fines and interest charges.
Invoice in your customer’s currency
If you’re selling to customers outside the UK, how easy is it for them to pay you in Sterling? Might they incur charges from their bank if they have to do that – and might that put them off buying from you again? And remember to make it easy for your customers to pay you by invoicing them in their own currency.
Put bank details on your invoices
You’ll have the cash a lot earlier if your customers pay you online, than if they send you a cheque which you then have to remember to take to the bank.
Put your bank account name, account number and sort code on your invoices, then your customers will be easily able to pay you online.
Finally, have you considered whether you should stop accepting payment by cheque? This not only involves a lot of extra paperwork and admin, but cheques can bounce!
Use automatic reminders
Once you’ve made sure the VAT is right, put your bank details on, and issued the invoice to your customer – check that they pay it!
Credit control (which is accounting-speak for chasing your customers for payment), is time-consuming if you have to ring round everyone who is late paying you.
Consider instead using automatic invoice reminders, like the ones that FreeAgent generates. It’s important to make sure your customers pay you for the work you’ve done, and following these tips should help you collect your dues more easily!
Emily Coltman ACA is chief Accountant to FreeAgent, who provide award-winning online accounting software designed to meet the needs of small businesses and freelancers.
This article links back to FreeAgent. The content contained in this article is for information purposes only.