10 Essential Elements of an Effective Invoice

If you’re starting with invoicing, you want to make sure you’ve got everything right. You’ve come to the right place – in this post, we’ll explain the essential invoice elements. Read on to learn which 10 invoice components must not be forgotten on your invoice.

What to Include on an Invoice?

What is on an invoice? And why does all this matter? Let’s look closely at all the important invoice elements.

Since an invoice is your bill for services or products sold, you need to keep one around for company records. And after creating an invoice, you send it over to receive payment and keep track of transactions from customers.

The invoice is an extremely important part of any business transaction and has many uses to keep the company going strong. So whether you tend to generate invoice online or in an app (check out our iPhone invoice app, iPad invoice app and Android invoice app), this tutorial will help you consider the importance of selected parts of an invoice.

An invoice maker does a lot of the hard work for you and allows you to create service invoice templates with plenty of easily customizable fields to work with. An invoice maker not only makes things simpler, but it also speeds up the process, optimizing company time. And thanks to it, you can rest assured all important parts of an invoice will be correctly filled in.

If your product or service isn’t paid in full when it’s received, you’ll need a professional invoice as a formal way of requesting payments. (And the invoices will serve as a paper trail afterward for the transaction.)

You’ve got to make sure, then, that each invoice is thorough and laid out in a way that is comprehensive and easy to understand. Ensure your formal invoice checks all the following boxes when creating it using one of the free invoice templates or building it in your invoice maker.

10 Parts of an Invoice

In this part we’ll show you what should not be forgotten on every valid invoice.

1. A Standout Header
2. Invoice Number or a Unique Identifier
3. Your Company’s Details
4. Client’s Details
5. Due Date on the Invoice
   
6. Goods or Services Sold
7. Fees or Taxes as an Invoice Component
8. Total Amount Due
9. Payment Methods
10. The Terms of the Transaction

1. A Standout Header

Not everyone thinks the same way as everyone else, so don’t think that adding a distinct header to company documents is common sense. Label the invoice in clear text somewhere at the top, naming exactly what the document is.

This will save you a big headache and the confusion over what all these random papers flying around your office are. Include a logo in your header and make it look as professional and presentable as possible.

2. Invoice Number or a Unique Identifier

Every invoice should come with its own invoice number (or some other unique identifier) to separate it from the rest in the stack. It could be a filing code, a unique chronological number, or some kind of data-based purchase order number.

If you’re sending the invoice requesting payment, then you should make sure the organization doesn’t require any unique company details. This could be purchase order numbers or maybe specific billing codes.

A unique identifier makes all the difference in the world, especially when it comes to receiving timely compensation.

3. Your Company’s Details

What is an invoice if the recipient doesn’t know who it’s from? It’s important that you include all distinguishing information about the payee at the end of the document. This information should include:

• Company name
• Payee legal name, if different than company name
• Company address (including the address where payments may be mailed if different from company address)
• Phone number
• Fax number (if applicable)
• Email address
• Tax Identification Number – TIN (if applicable)

This helps to differentiate who is paying and who is receiving payment (on top of keeping things really simple and clear). The format of such information isn’t important, as long as it is clear and concise.

If there are any issues along the way, any customers with an invoice can call a company number or send over information if needed. Make sure all your information is printed accurately and is in a place that is easily seen.

4. Client’s Details

The client details section of an invoice is crucial as it specifies who is being billed for the goods or services provided. It establishes the recipient for legal and accounting purposes and is essential for payment processing and customer relationship management.

The “payer” is the individual or company responsible for paying the invoice. Similar to the key company information, the payer information section should include the following:

• Payer name
• Payer company name
• Payer address (this is generally where the invoice will be mailed if sending a hard copy)
• Phone number
• Fax number
• Email address

Accuracy of this information is key. Misspellings of client/customer data do not give a good impression!

5. Due Date on the Invoice

One of the most important pieces of information you can include is the actual date of the transaction. This will help to simplify the process of cataloging when products were sold or services were rendered.

It also helps out if there is ever confusion over when something was sold. Say there was an issue with the shipping of a product: without the actual date of the transaction, how will anyone figure out where the post office went wrong?

The due date should absolutely appear on the invoice and might be the most important item on this list (along with the product description and total amount). The due date will help keep the process and invoice history organized.

6. Goods or Services Sold

This seems to many like the “meat” of the invoice. It doesn’t have to be presented in any particular way but should be fairly easy to read and understand. You’ll probably want to include things like:

• The item name or title of service that was provided
• The price of the item or service
• The amount or quantity of product or service sold

There are bound to be other details about the product you might want to include. Keep them here in your “sold” section to keep things from getting confusing.

If your business sells goods (products), use this section to detail this information. Provide relevant data such as product ID, product name and description, quantity sold, and per-unit price. If you decide for Billdu invoicing app, you can quickly add items to your invoice by scanning their barcode.

If your business provides services, use this section to detail this information. Provide relevant data such as the date the service was provided (and by whom,) the number of hours of service provided, and the hourly rate (unless it was billed as a lump sum.)

Keep in mind that often, internal auditors review invoices for unclear detail in this section, as it can often be a red flag for fraudulent invoicing. For this reason, it’s imperative that you provide as much information in this section as reasonably possible.

For example, short descriptions such as “consulting services” are not recommended. A better alternative would be “March 23, 2017 – John Smith consulting services (procurement report analytics) – 4 hours, $150 per hour – see rates in contract addendum FY15a.”

7. Fees or Taxes as an Invoice Component

Going along with the products and services sold, you’ll probably want to include the price of any taxes or fees associated with the item. You might need to apply the rates or taxes in a different budget or record on the filing end.

The biggest takeaway here is to include any extra taxes or fees very near the price of the product or service. That way you can tack it all together in the “total amount due” field.

8. Total Amount Due

This one’s probably the most obvious on the list. Yes, you need to include the total amount due in the transaction on your invoice. Not only will this settle the amount, it also serves as a good reference point for you and the customer.

9. Payment Methods

Payment methods refer to the various ways by which a buyer can settle the amount due on an invoice. This section is a key element of the invoice as it outlines how the seller expects to receive payment and provides the buyer with necessary information to complete the transaction.

Typically, this part of the invoice will detail whether the seller accepts checks, credit card payments, bank transfers, online payment platforms like PayPal, or other forms of electronic payments. It may also include specific details such as the seller’s bank account information for direct deposits, a mailing address for checks, or a link to a payment portal.

10. The Terms of the Transaction

Inevitably, the transaction will include some important verbiage in the transaction terms. They do not form a compulsory part of a formal invoice, however, to make the terms more apparent, it’s a good idea to include them on the invoice so that customers can easily reflect back on them.

The terms may include penalties for paying late or not paying in full. There could be additional percentages of the bill due at certain later times. Whatever your company’s terms, try to include as much of them as you can on each invoice.

Best advice: Set yourself apart with a designated spot for personalized messages. This can be used to say “thank you” to a client or make reference to something unique to the project.
Think about when you send a gift or flowers from an online order; there’s usually a place to include a special message to your loved one. Make all your customers feel like loved ones with personalized messages right on the invoice!

…Plus Anything “Extra”

What is an invoice add-on? Apart from the actual goods and/or services provided to the client, you may also have extra fees or add-ons, like taxes, service fees, included tips, etc.

Be sure to itemize these details. For example, don’t simply say, “add-ons.” Your customers likely won’t know what this means and, once again, an auditor may find issue with this vague information.

Bonus tips – make your invoice look professional!

Creating a professional-looking invoice not only reflects well on your business but also promotes prompt payment. Here are key elements to consider:

• Detailed Clean Layout: Begin with a clean and structured layout for your invoice. This involves organizing the content in a logical order, ensuring that there is a clear distinction between different sections such as the header, body, and footer. Adequate spacing and divider lines can enhance the readability and guide the recipient through the invoice effortlessly.
• Prominent Brand Elements: Make your invoice stand out and reinforce your brand identity by incorporating key brand elements. This includes using your company’s logo, which should be placed prominently, typically at the top of the invoice. Apply your brand’s color scheme as accents throughout the document to make it more visually appealing and immediately identifiable as coming from your business.
• Selection of Clear Font: The font you choose plays a significant role in the overall professionalism of your invoice. Opt for a font that is clean and easy to read, avoiding overly stylized fonts that can be difficult to decipher quickly. Standard fonts such as Arial, Calibri, or Times New Roman are often recommended, and the font size should be large enough to read without straining, typically no smaller than 10 points for the body text.

By meticulously crafting each of these aspects, you can create an invoice that not only looks professional but also facilitates a smooth transaction process.

What are Invoices for Sole Traders?

As a sole trader, the invoice template must adhere to certain standards that go beyond basic billing details. It is imperative that your invoices reflect not only the transactional details but also specific personal and business identifiers, which include:

• Personal and Business Names: The invoice should prominently feature your full legal name alongside any business or trading name you operate under. This clarifies the identity of the sole proprietor for legal and administrative purposes.
• Legal Correspondence Address: If you employ a business name, it’s essential to include a physical address where you can receive legal documents. This address may differ from your primary place of business or home address and is a necessary provision to meet legal requirements for business correspondence and potential legal notices.

These details are crucial for maintaining transparency and ensuring that your business complies with legal standards for sole traders. They not only help in establishing the legitimacy of your business but also provide a clear avenue for clients and legal entities to initiate formal communication if necessary.

Discover comprehensive guidance on Australian sole trader invoicing in our forthcoming article.

Why do you need an invoice?

Understanding the importance of invoices is crucial for businesses and freelancers alike. An invoice is not just a request for payment. It serves as a legal document that outlines the specifics of a transaction between a seller and a buyer. It helps in tracking sales, managing inventory, and can be indispensable during tax time for accurate financial reporting.

Furthermore, a well-drafted invoice adds professionalism to your business, helps expedite payments, and provides a legal safety net for both parties involved.

Discover how to create your invoices with our comprehensive guide: Excel or Word, which is best for you?

When laying out an invoice in your invoice maker for Australia, make sure to include these essential ten items for an effective document. There’s a lot of responsibility balancing on the invoice pages, so they should be as thorough as possible.

Looking for other beneficial tips for small businesses or professional invoicing? Check out the Billdu blog for all things helpful for small businesses and freelancers!

There’s No Need to Ask, “What Is An Invoice?”

Pick up any invoice laying around at home or in your office – this might be your mortgage bill, a medical invoice, or an invoice you’ve received from one of your suppliers. You’ll be able to identify most (if not all) of the sections we’ve shared above.

Remember: above all, your invoice must be clear, concise, and error-free, whether you create it manually, use an online invoicing platform or invoice generator apps. For further assistance in developing your own invoicing management process, contact us today.