So you’ve found a client, completed some
work, and now it’s time to get paid. Great! That’s the best part.
Invoicing, though, can be a daunting process the first time. You may have a number of questions you need answered, such as: What does a professional invoice look like? How can you create one? What information should you include?
So in this tutorial, I’ll start from the very beginning and take you through the basic steps of creating a professional invoice. To start with I’ll define an invoice, and then I’ll go through the key pieces of information you should always remember to include. I’ll finish by talking about how your invoice should look, and introduce you to some helpful templates and apps that you can use.
Before we begin the tutorial, if you're looking for an invoice template that has all the components of a professional invoice built in, browse through our collection of invoice templates to find just the right one for your business needs.
Now let’s get started with the first part: What exactly is an invoice?
1. What Is an Invoice?
To understand what an invoice is and what purpose it serves, let’s look at an example from everyday life.
Invoicing: A Basic Definition
Let’s say you go for dinner at your local pizzeria. You eat to your heart’s content, and at the end of the meal, the waiter brings you the bill (or if you’re in the U.S., you’ll get the check—it’s the same thing!).
The bill/check lists everything the restaurant gave you, the price of each item, and a total of what you owe. When the waiter hands you the bill, it’s a polite way of saying: “You’ve bought all these things from us. Now it’s time for you to pay for them.”
An invoice is exactly the same thing. You’ve done some work for a client, and now you need to get paid. So you list everything you’ve done, detail the prices, and provide the total amount that the client owes you.
Because you’re probably not handing the invoice to a client directly and expecting cash in your hand, an invoice also needs to include other information, like how to make a payment, where to send it, when to send it, etc. We’ll go through all of that in the next section. But as a basic definition, it’s helpful to think of an invoice as being like a bill for services you’ve provided.
The Purposes of an Invoice
The main purpose of an invoice, then, is to ask for money, but it also serves some other purposes.
For one thing, it acts as a record of the transaction for both parties. As I mentioned in my guide to basic bookkeeping, you’ll want to hang on to invoices as proof of the work you did and the amount you charged for it—both for tax purposes and in case the client later comes back with queries or requests for new work. The proof of payment is also important, but it’s the invoice that breaks down the details of what was done and how much it costs. Your client will want to receive an invoice for similar reasons.
An invoice is also important in defining the payment terms: when you expect payment, what happens if the payment is late, and so on. There are many different ways of asking for payment, and I’ll delve more deeply into those in my next tutorial. But whichever payment terms you choose, the invoice is important in defining them clearly from the outset (most importantly the due date), and avoiding unnecessary delay and confusion.
And finally, a prompt, well-formatted invoice serves the subsidiary purpose of impressing your client. It shows that you are organized, efficient and professional. It makes it more likely that you’ll get paid quickly, and the good impression you create may even help you get more repeat business from that client in the future.
2. What Should a Professional Invoice Include?
If you want to get paid promptly, it’s crucial that your invoice includes all the right information. If it doesn’t, the client will have to query it, and it could lead to delays that cost you money. One survey found that 25% of small and medium-sized businesses had at least $5,000 a month delayed due to invoicing errors.
So in this section, I’ll list all the key pieces of information that a professional invoice should include. Depending on the industry you work in and the type of work you do, there may be some particular things that you need or want to add, and that’s fine. This is a checklist of basic items that all invoices should include, and you can always add extra things based on your particular needs.
Don’t worry for now about where each item should go—that will become clear when we talk about formatting in the next section.
Your Name and Contact Information
Any invoice should include your business’s name, address, phone number, email, website, and logo. (And if you’re part of a larger company, give specific contact details for the person within the company whom the client should contact with any queries.)
Your Client’s Name and Address
Don’t forget to name your client! It may seem obvious since you’re sending it to them, but remember that this is also a formal record of the transaction, and the client’s name and address should appear on it.
Create a reference number, so that the correct invoice can easily be identified in case of queries. It doesn’t really matter what this number is—I often base mine on the date, e.g. 08122015 (8 December 2015). You could also simply number your invoices sequentially, starting from a random number (or from 0001 if you don’t mind showing your lack of experience!).
Whichever numbering system you use, just make sure that each invoice you create has a different number—if you create two with identical numbers by accident, it could lead to a world of confusion.
The Invoice Date
This is an important baseline—it establishes when you sent the invoice, and any payment terms (e.g. pay within 30 days) start from this date. (Note: you may also include somewhere on your invoice the date when you actually did the work, but make sure that the invoice date is more prominent, because it’s more important to the process of getting paid.)
A Due Date
How quickly do you expect to be paid? Within 30 days is quite common, although it can vary widely depending on the type of work, your needs and the client’s expectations. I’ll talk more about this in my next tutorial, but for now, the important thing is to include a due date on your invoice.
Total Amount Due
This is the important part—how much money the client owes. It should be prominent on the invoice. You’ll also need to give a breakdown of the charges, as we’ll see next.
Details of the Work and the Charges
Any invoice must include basic details of the work you provided and how much you’re charging for each component.
How much detail to include depends on how complicated the project was and how the payment was structured. If it was a simple project with a single, one-off payment on completion, then it could be just a single line, such as:
Business card design for XYC Corp: $500
But if you completed multiple projects, or a single project with many separate components or milestones, then you should list each one separately and show the price of each one. For example:
- Business card design: $500
Website design: $1,000
- Logo design: $500
And if you’re charging by the hour, you’ll need to provide full details of the hours you worked, your hourly rate, and show your calculation of the total, such as:
Business card design, 10 hours @ $50/hour: $500
Ultimately, the purpose is to ensure that your client understands exactly how you arrive at your total amount due, and doesn’t have any questions.
It’s like in the pizzeria: you don’t want to get a bill saying just: “$50”. You want to see how much each pizza and glass of wine cost, so that you can add it all up and feel comfortable that you’re paying the right amount. On the other hand, you don’t want or need a bill that breaks down everything: “Making the dough, 50 cents. Adding olives, 75 cents....” Just include what the client needs to know in order to feel that your charges are fair and accurate.
Tax & Delivery
Tax details vary widely for different parts of the business and in different parts of the world, so I can’t cover specifics here, but if you need to charge sales tax or some other form of tax, you should definitely include that on your invoice (you may need to include a tax ID number too).
And if you’re shipping physical products, don’t forget to charge for delivery as a separate line item.
How should the client pay you? It’s important to specify this, and to include any information the client will need. For example, I normally write, “Please pay by PayPal” and include my PayPal ID on the invoice. You could also offer multiple options—there are plenty of other payment processors out there, and bank transfers or other electronic transfers are also an option.
Just be sure to offer at least one option that’s widely used: unless you have a very strong relationship with a client and do lots of business together, it’s unrealistic to expect them to sign up for a little-known payment processor just to save you a few bucks in fees.
Additional Payment Terms
This last item is not a must, but it’s often a good idea to include additional terms and conditions on your invoice, as a way of encouraging early payment. For example, you could offer a discount for people who pay in the first 10 days, or you could impose interest or penalties on late payments.
3. What Should a Professional Invoice Look Like?
So now for the formatting. What should your invoice look like?
To understand, let’s go back to our pizzeria example. What does the bill in a pizzeria look like?
In truth, you’ve probably seen all sorts. If it’s a basic kind of pizzeria, it may be just a list scribbled down on the waiter’s notepad in illegible scrawl, with the total at the bottom circled in pen. If it’s a classier place, it usually comes neatly typed or printed, with the restaurant’s name, logo and contact details at the top and a friendly “Thank you” message at the bottom.
I’m sure you want your business to be seen as classy, not basic, so we’ll ignore the scribbled notepad idea. But just as there’s no single format for pizzeria bills, there’s no prescribed format for business invoices either. There are some common layouts, but there’s wide variation in styles. The important points are:
- Use a professional-looking template to ensure a consistent look and feel.
- If your business has its own logo, branding and colour scheme, make sure you can adapt the template to include those.
- Include all the key items mentioned above.
- Enter all the information clearly, ensuring that the important points are easy for the client to find and read.
In general, your name and contact information usually appear right at the top, with the client’s name and address underneath, and the invoice number and date nearby. Then the details of the work take up most of the page, with the grand total at the bottom, along with the other details like tax, delivery, payment options, due date and other terms.
But none of this is set in stone. As long as you include all the important information clearly, you can use any professional-looking invoice format you like.
You could get started by browsing a collection of professional invoice templates to see what’s available. You can refine your search with tags like clean, modern, corporate, or creative, and see how the designs vary.
Another option is to create your invoice with an invoicing app such as Harvest, or accounting software like QuickBooks or FreshBooks. These apps and software packages will usually have some good formats built in.
In this tutorial, you’ve seen what an invoice is, the key items it should include, and what an invoice should look like. You’ve seen a collection of templates that you can use to create the format you want for your business, depending on its brand. You can find more invoice templates here:
- Invoicing32 Invoice Templates for Corporations & Small BusinessesMelody Nieves
- Invoicing20+ Best Simple Microsoft Word Invoice Design Templates for 2021Marc Schenker
- InvoicingHow to Make an Invoice in Word: From a Professional TemplateLaura Spencer
Creating the invoice is just one part of the process, however. If you want to know how to handle things like following up on unpaid invoices and dealing with late payments, see my guide to getting paid on time. And in a future tutorial, I’ll go into more detail on the payment terms you can use to encourage prompt payment.
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