How to Write an Invoice - A Complete Guide

We’re long past the days where businesses would pay one another with cash or cheques. Technology has allowed for the rapid expansion of digital invoicing, or e-invoicing - so much so that 42% of SMEs now send invoices via email, with that number likely to increase year-on-year.¹

But what exactly is an invoice? Why is it now considered to be the most efficient way of handling accounts payable tasks by a large number of businesses? In this article we’ll take a look at what an invoice is and the benefits of using them. We’ll also take you through a step-by-step guide on how to create one from scratch.

As an added bonus, Wise offers all Australian businesses an efficient, easy-to-use invoice template, as well as a whole host of other features that will make monitoring your invoicing a breeze.

Table of contents
What is an invoice? Why use an invoice? How to make an invoice How to make an invoice through Wise Business

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What is an invoice?

An invoice is an electronic or paper document that details all the information related to a financial transaction. They are used for both B2B and B2C situations. The purpose behind them is to remove the risk of customers not understanding their payment obligations for aspects such as due dates, payment amounts, and Goods and Service Tax (GST) expectations.

You should make your customers aware of these expectations prior to a transaction taking place, just so they’re given no reason to dispute anything or try to delay payments.

Why use an invoice?

There are several reasons why businesses are moving away from more traditional methods of payment and turning to invoicing instead.

They set out legal expectations

As long as you make your expectations clear, your invoice acts as your legal proof of transaction. If everything is there in writing, it makes it very difficult for customers to avoid paying.

They help with cash flow

By adding due dates to your invoices, you’re able to get a good picture as to when you can expect certain amounts of cash injections. This can help you manage your business’s overall cash flow.

They help with customer relationships

For particularly expensive transactions, customers often appreciate the payment terms laid out in invoices. It means they don’t have to pay everything immediately. Having everything in black and white, with no room for disputes, also makes sure that everyone is on the same page at all times. This helps foster trust between your business and your customers.

They are professional documents

Sending a customer a branded invoice, with clearly defined expectations, gives off the impression of authority and professionalism to your customers. It’ll make them more likely to do business with you again if they know you’re serious about how you conduct yourselves.

How to make an invoice

Learning how to write an invoice from scratch is quite straightforward, but it’s still something that needs to be done with care and diligence. The last thing you want is for an error to creep in, as the consequences of these can be quite severe.

What follows are the necessary steps and considerations that we believe are important for invoice creation.

Identify the type of invoice to send

There are actually several types of invoices that could be sent to a customer. Some are quite niche, and won’t be used very often at all.

The main types of invoices include:

• Proforma - this type of invoice is sent before goods and services are authorised. The customer will receive the invoice with terms and payment amounts and settle the invoice. Then the business will send the goods or initiate the service.
• Sales invoice - this is the invoice issued after goods and services have been sent or initiated.
• Tax invoice - for business transactions, this is the most common type of invoice. It’s essentially the same as a sales invoice, only it’ll have an additional line detailing the GST tax amount. If your business is GST-registered, all invoices must include this line (as well as any other applicable taxes).
• Overdue invoice - if your customer goes past the due date and they still haven’t paid, you can issue them with an overdue invoice. It’ll look the same as a sales or tax invoice, but it’ll make it clear (usually with bold font) that it is now overdue.
• Consolidated invoice - if a business has several ongoing transactions with a customer, they can group the individual invoices into a single master invoice.
• Retainer invoice - these are similar to proforma invoices in that the payment is requested upfront. However, instead of being paid in one go, the customer will call upon the business to use the service whenever they need it, and a specific fee can be collected from the initial amount until the customer has exhausted its limit.

Whichever one you choose will depend on the type of business or service being bought, or the relationship with the customer. For example, if a business is dealing with a brand new customer, they might insist on sending a proforma invoice for the first transaction to confirm that the customer is capable of paying.

Invoice requirements in Australia

Each business will format their invoice slightly differently - this is usually dictated by brand and style preferences. However, the main elements that need to be on an invoice for Australian businesses includes:

• Due date - the final date for payment from the customer
• Unique invoice number - these are used to easily locate invoices in the event of a late payment or dispute
• Australian business number (ABN) - both the business and customer ABNs should be listed
• Type of invoice - it should be made clear what type of invoice is being sent
• Payment terms - the terms agreed for payment (these are often 30- or 60-day terms)
• Payment method - the preferred method of payment (usually bank transfer) as well as the banking address
• Business address - the full address of your business premises
• List of goods and services - the full list of what’s been purchased
• Quantities - the quantities of each item ordered
• Subtotal - the total amount for just the goods and/or services
• Goods and Service Tax (GST) - the amount of GST required
• Grand total - the total amount expected to be paid

It’s important that each of these lines are included on your invoice. If you miss one off, you could face delays in payment if the customer doesn’t have all of the necessary information.

Negotiating payment terms

A lot of businesses will have a fairly fixed expectation on payment terms for all their customers, and it’ll be up to the customer to meet these terms. However, some businesses are happy to take things on a case-by-case basis, taking into account their customer’s particular circumstances.

As mentioned, many businesses will use proforma invoices in the first instance. If the customer makes the first payment swiftly and without issue, the business will feel more confident about negotiating more lenient terms with that customer for any subsequent transactions.

The size of the customer’s business might also be a factor. If your customer is a small SME, you could consider offering them an installment plan as part of their terms. This will lessen the pressure on them as they build up their revenue streams. Many customers will also appreciate the opportunity to pay up early in return for a small discount or incentive.

You should also be very clear (in writing) about any penalties that the customer might incur in the event of late payments. This could be in the form of late fees, or potential accruing interest added on for continued missed deadlines.

Choosing your payment method

The vast majority of Australian businesses will use some form of digital payment when receiving their money. Most will be happy with a direct bank transfer. Some will be happy to take card payments over the phone. And many can arrange for direct debits to be set up.

This is something that Wise Business also facilitates. With a Wise business account, you can link your invoices to your preferred payment method without any hassle. And with our industry-leading international account features, you can choose from over 40 currencies worldwide.

So, if you’re a business with a global customer base, or an Australian SME looking to expand in the near future, then invoicing with Wise could be the perfect choice.

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GST and tax information

All Australian SMEs should be GST-registered. This is a largely universal tax of 10% on domestic Australian goods and services. If you’re sending a tax invoice to your customers, the GST addition must be included.

Without adding GST onto your invoices, you might not be able to claim GST back as part of your tax returns. You also run the risk of legal questioning if you mention a tax amount that you cannot then validate if it’s missing from the invoice.

Your invoice - putting it all together

Once you are in a position to send your customer an invoice, and you’ve gathered all of the necessary information, it’s time to bring it all together.

Most businesses will place their invoices on branded, letterhead documents to make it clear who and where it’s coming from. It also gives off a much more professional and attentive feel if the invoice is branded rather than generic.

You should make sure that the information is easy to read and formatted in a clean manner. The most vital pieces of information should be listed in bold - in most cases, this would be things like the type of invoice and the grand total.

Most of the key information is generally present in an invoice that includes the invoice number, address, items ordered, quantities purchased, the customer address, the issue date and due date, and the various amounts. We would still recommend adding an additional line detailing the payment terms as well.

Managing invoices

As your business starts to scale, you might find that keeping track of your invoices starts to become a bit trickier. This is particularly true for businesses who still use manual input systems to track all of their financial information.

It’s vital that you don’t lose control of this. Once you’re in a position where you’re not managing invoices efficiently, you’ll likely find that missed payments start to become more frequent. You might even forget to send the invoice out in the first place.

That’s why Wise Business makes it possible to track invoices on our portal. We’ve also made it very easy to integrate our platform into any existing accounting software you might be using, so as to not disrupt your business operations.

How to make an invoice through Wise Business

If you’re new to invoicing and not quite sure where to start, then our platform is an ideal solution. We lay out everything with our user-friendly interface, providing templates to get you started as well as more nuanced tools such as currency conversions at mid-market exchange rates.

If you want to have a look at how to make an invoice and get a taste of what we can offer, you can sign up for access to our demo build, allowing you to get to grips of how we do things and whether we’re the best fit for your business.

Wise Business serves as a cost-effective solution where you can receive money from around the world at the speed and price of local payments.

Transform the way you receive payments with Wise Business:

• One-time fee of 65 AUD for local account details in 8+ currencies, including AUD, NZD, USD, and more—no recurring fees
• One account to hold, send, and convert money with no hidden fees or exchange rate markups
• Create and send professional invoices directly to your customers through Wise Business
• Create payment links to request money in specific currencies
• Seamlessly receive payments from customers, online sales, or PSPs like Stripe and Amazon.
• Wise is safe and secure - Trusted by 13 million people and counting

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Sources:

1. Docuclipper - invoicing statistics