How do I prepare invoices?

An invoice is a document which is sent by a business to its customers for goods or services supplied. It states the amount to be paid and the due date. An invoice is not the same as a receipt, which is an acknowlegement of payment. 

The customer should check the invoice against any purchase orders and delivery notes and the calculations on the invoice should be agreed.

An invoice can either be issued on paper or electronically.

When most retail sales are made, the customer cannot recover the VAT charged and the retailer is not required to provide an invoice, unless the customer asks for one.

However, if your business is VAT registered, then whenever you supply taxable (standard or reduced rated) goods or services to another VAT registered business, you must provide a VAT invoice.

The following bits of information needs to be included:

Other terms you could see on an invoice are:

When a decision has been made to grant a customer credit, then the customer will be advised (usually in writing) the following:

1. Credit period – how long the credit will be available to the customer
2. Credit terms – how long has the customer got to pay
3. Credit limit – how much can they have on credit (often 2 months estimated sales)
4. Discounts – trade or early settlement
5. Late payments – usually there will be a section on late payment, penalties and interest, but many businesses may not enforce them.

The Chartered Institute of Credit Management (CICM) has created a useful guide to help you with your invoicing process. Click the button below to download.