The steps of how to write an invoice start with personalization, like adding your logo, brand, and contact details. Next, you want to provide important information, like due dates and descriptions of the products and services provided. While some business owners use spreadsheets or word processors, accounting software can make writing professional invoices easier.
Using CRM software that allows you to record notes from your conversations is an excellent way to keep track of the details from your sales pitch interactions. Pipedrive, for example, allows you to take notes and stay on top of any follow-ups with alerts and reminders with a helpful visual pipeline and dashboard reports. To learn more, start your Pipedrive free trial today.
1. Personalize Your Invoice
You can personalize invoices so that they reflect your company brand by choosing a style and adding color and your company logo. If you use invoicing software like FreshBooks, you don’t have to make an invoice from scratch. Instead, you can start with the default invoice template and customize it to suit your personal brand.
Below is a sample invoice for a fictitious company, Paul’s Plumbing Co.:
Choose an Invoice Style
The style of an invoice is the look and feel of an invoice. Whether you create invoices manually using Word or you use an invoicing program, there are a number of different invoice styles you can choose from. For example, QuickBooks offers four different invoice styles: Airy classic, Modern, Fresh, Bold, and Friendly.
The information that appears on the invoice is the same for each invoice style. However, the primary differences between each invoice style are the placement of the information such as company logo, invoice number, contact information, and details of the products and services sold.
Below is a snapshot of the Friendly Invoice style available in QuickBooks Online for a sample company:
Below is a snapshot of the Fresh Invoice style available in QuickBooks Online:
Add Your Company Logo
If you have a company logo, you should include it on your invoices. Similar to your business name, the company logo reflects your company brand and mission. If you don’t know where to start when it comes to creating a logo design, check out these logo design tips from the pros.
2. Add Your Contact Information
Be sure to include your contact information on all invoices. This includes your business name, address, telephone number, email address, and website. This information will ensure customers can contact you to ask questions about their invoice and inform them of where to send check payments. If you use accounting software, you only have to enter this information in the program once, and it will appear on every invoice that you create going forward.
Below is a sample invoice that shows you where your contact information will appear on invoices:
3. Select a Due Date
The invoice due date is one of the most important details that should be included on all customer invoices. It lets the customer know when payment is due, and it also allows you to keep track of invoices that are coming due or past due. If you use accounting software, it will alert you when an invoice is due. Best of all, you can run an accounts receivable (A/R) aging report to see a list of open invoices by customer.
Below is a sample invoice that points to where the due date will appear on all invoices:
If you are unsure what payment terms to select for customers, check out our small business payment terms guide to learn about the most common payment terms and tips on how to determine what payment terms to set for your customers.
4. Add a Detailed Description of Products and Services
The information included in the body of an invoice will differ slightly for products sales vs services sold. If you sell products, you will generally have fields for shipping date, shipping method, and a tracking number, if applicable. You will also have a field for quantity that you won’t have on an invoice for services. For service invoices, you will typically have a field for hours billed, hourly rate, and service date.
How to Make An Invoice for Product Sales
When creating invoices to bill for products sold, you will include a shipping date, shipping method like FOB Destination or FOB Shipping Point, and a tracking number, if applicable. A detailed description of the item along with the quantity and unit cost will also be included.
How to Make An Invoice for Services
When creating an invoice to bill for services, you will generally include the service date, a description of the services provided, the total hours billed (indicated in the “Qty” column above), and the hourly rate. If you use accounting software, the program will automatically multiply the total hours by the hourly rate to get to the total amount due.
5. Add Discounts
Discounts should be added below the subtotal of the invoice. There are a couple of different types of discounts that you can offer to customers. Early payment discounts, which are based on customer’s paying early and customer appreciation discounts which are given as a reward for the customer’s loyalty.
Discounts should be applied to the subtotal of an invoice as indicated in the snapshot below:
The two common discounts applied to invoices are early payment and appreciation discounts as indicated below:
Early Payment Discounts
Early payment discounts, such as 2/10, net 30, are dependent on the customer making their payment early. The 2/10 part of the discount means the customer will receive a 2% discount if the invoice is paid within 10 days of the invoice date. If the invoice is not paid within 10 days of the invoice date, then the full amount is due within 30 days of the invoice date.
You can also offer customer “appreciation discounts” that are based on customer loyalty. Instead, you may want to give a “good” customer a 10% discount to show your appreciation for their loyalty. These types of discounts should be reflected on the invoice directly below the Invoice Subtotal. If you use an accounting software, it will automatically calculate the discount for you.
6. Add Sales Tax
If you sell taxable products, you need to add sales tax to your invoices. Sales tax should appear below the invoice subtotal amount. Both FreshBooks and QuickBooks will calculate sales tax for you automatically and keep track of the sales tax collected so that you can file and pay sales tax when it comes due.
7. Send the Invoice to Your Customer
There are three ways you can send invoices to your customers. First, you can print them out and mail them. Second, you can email customers a PDF of the invoice. Third, you can send the invoice directly from your accounting software.
The three most common ways to send invoices to your customers are:
- Send via snail mail: Snail mail is an option, it’s not a great option. However, if you decide to do it, be sure to confirm that you have the mailing address before mailing the invoice. I also recommend putting the invoice to the attention to your contact or the accounting department.
- Email a PDF invoice: Emailing a PDF invoice is better than sending it via snail mail. However, there could still be issues with the customer receiving the invoice. If your customer doesn’t have your contact details saved, it could go into a spam folder.
- Send directly from accounting software: The best way to send invoices to customers is from your accounting software. Accounting software allows you to include a payment link on all invoices so they can be paid online. Plus, the software will keep track of when your customer has viewed the invoice so that you know it has been received.
If you’re looking for accounting software that will help you to streamline your accounts receivable process, FreshBooks is a great choice. You can send invoices directly from FreshBooks. Plus, you can accept online payments, track when a customer has “viewed” an invoice, and send payment reminders. Sign up for a 30-day trial and start creating invoices right away.
3 Common Methods Used to Write An Invoice
Most small businesses create invoices using accounting software like FreshBooks, a word processor like Microsoft Word or a spreadsheet program like Microsoft Excel. While using a spreadsheet or Word document is possible, it’s much more manual and will take longer than using accounting software.
Accounting software includes many features that you won’t find in Word and Excel that make it a lot faster to create and track invoices. First, you can customize invoices with your brand and logo. Second, you can enter the contact details of all customers once and then select them from a drop-down list for future invoices. Third, you can email invoices directly from the software and include a payment link.
Creating invoices in Word or Excel will require more time than using accounting software. Similar to accounting software, both Word and Excel include invoice templates so that you don’t have to start from scratch. However, you will have to enter the customer details each time you create an invoice―there is no database for you to save the information. Invoices created in Word will require you to manual calculations and invoices created in Excel will require you to create formulas.
Pros and Cons of Making Invoices With Accounting Software
Once you’re sending more than ten invoices per month, an accounting software program like FreshBooks often becomes the best solution. It’s easier and faster to create invoices in accounting software because there are no manual calculations required, and you can save all customer contact details. However, the software is not free, and you will need to invest the time to learn how to use it properly.
Pros of Making Invoices With Accounting Software
The pros of making invoices with accounting software are:
- Create invoices customized for your brand: Add your company logo, color scheme, and font of your choice to personalize your invoices.
- No manual calculations required: Calculates invoice totals for you automatically, including discounts and sales tax.
- Get paid faster: You can sign up for credit card payment processing to accept online payments from customers.
- Generate an A/R aging report: With most accounting software like FreshBooks, you can run an A/R aging report to see invoices that are coming due or past due. Staying on top of open invoices will help you to avoid sending collection letters to customers for delinquent invoices.
- Track invoice status: If you email invoices directly from FreshBooks, you can keep track of when the invoice has been viewed and/or paid by your customer.
- Send automatic reminders: With accounting software, you can create automatic reminders to send to customers when an invoice is coming due or past due.
- Create recurring invoices: FreshBooks can send invoices to customers you need to invoice automatically on a weekly, monthly, or quarterly basis. This will eliminate the need to create an invoice each time you need to bill these repeat customers.
Cons of Making Invoices With Accounting Software
The cons of making invoices with accounting software are:
- Limited in the number of templates: FreshBooks only comes with two templates, and QuickBooks has five invoice templates compared to the 200 or more templates you have to choose from with Microsoft Excel and Word.
- You have to pay to use software: Like most accounting software, you will have to pay a monthly fee to use FreshBooks and QuickBooks. However, you can do much more than create invoices with these products. You can manage all of your income and expenses and create key financial statements like a profit and loss statement.
Pros and Cons of Creating Invoices in Excel
Excel is another popular option for businesses who have a handful of customers and who want to learn how to write an invoice. The process is similar to Word, except you can typically find templates that will calculate totals automatically. For example, our Excel invoice template will add discounts, taxes, and subtotals to calculate your invoice amount automatically. One downside is it can be a tedious and time-consuming process.
Pros of Creating Invoices in Excel
The pros of creating invoices in Excel are:
- Automatic calculations: You can create formulas to calculate discounts, subtotals, and sales tax. This will eliminate the need to do any manual calculations.
- More templates from which to choose: Similar to Word, you have access to more than 200 templates in the Microsoft library so that you don’t have to start from scratch.
Cons of Creating Invoices in Excel
The cons of creating invoices in Excel are:
- Setup can be time-consuming: Creating invoices in Excel is a manual process that can be tedious. It will definitely require you to invest some time to set up.
- You must know how to use Excel: You must have a good understanding of how to create formulas in Excel; otherwise, your calculations will be incorrect.
Pros and Cons of Making Invoices in Word
There are pros and cons of making invoices in Word. On the pros side, there are more than 200 templates to choose from, and it’s easier to use than Excel because you don’t have to create formulas. On the negative side, all calculations are manual, which means that it is more prone to errors
Pros of Making Invoices in Word
The pros of making invoices in Word are:
- Many templates available: Like Excel, you can access more than 200 templates in the Microsoft library. The templates come in a variety of style and colors, which you can customize to fit your brand.
- Easier to learn how to use: Unlike Excel, there are no complicated formulas that you have to use in Word, which makes it easier to learn how to use it.
Cons of Making Invoices in Word
The cons of making invoices in Word are:
- Very manual and tedious: It is a very manual and tedious process that will require a lot of time. Unlike accounting software, you will have to go through the same steps of setting up invoices and entering your customer’s billing information and your contact information each time you create an invoice.
- Manual calculations required: Unlike Excel, you cannot create formulas to calculate discounts or sales tax automatically, You will have to do these calculations manually, which increases the likelihood of an error.
To avoid the hassle of creating manual and tedious invoices that are prone to errors, go with accounting software like FreshBooks. FreshBooks will do all of the calculations for you―no formulas required. Plus, you can send invoices directly from the software
5 Tips on How to Write an Invoice
Tips to keep in mind when creating invoices include:
Additional Invoice Writing Tips
Below are three additional tips on how to write an invoice.
1. Be Sure to Record the Sale on Your Books
Once you make a sale to a customer, you need to record that sale on your books. If you use accounting software like QuickBooks, the sale is recorded for you automatically when you make an invoice. However, if you use Excel or Word to create your invoices manually, you will also have to record the sale in your books manually. Depending on whether you sold products or services, the accounts will vary.
Journal Entries to Record For Product Sales
When you sell products, there are two journal entries you need to record on your books. First, you need to debit accounts receivable and credit to product sales or revenue to record the sale. Next, you need to credit inventory and debit the cost of goods sold accounts to reflect the decrease in inventory for the product that was sold.
Below is an example of the journal entry you would record for the sale of a product:
|Product Sales (Revenue)|
Below is an example of the journal entry you would record to reduce inventory and record the cost of the product sold:
|Cost of Goods Sold|
Journal Entry to Record For the Sale of Services
When selling services, you only need to record one journal entry to account for the sale. This requires a debit to accounts receivable and a credit to sales or income.
Below is the journal entry that you need to record for the sale of services:
|Service Income (Revenue)|
2. Understand the Difference Between an Invoice and Sales Receipt
An invoice is used to keep track of sales that are made to customers you have extended credit terms. Whereas, a sales receipt is used to record sales that are paid at the same time services or products have been fulfilled.
While the focus of this article has been on customer invoices, we thought it was important to explain when you should write an invoice vs when you should create a sales receipt. If you allow customers to purchase goods and services on credit, then you will receive payment from your customer sometime in the future, which means you need to create an invoice.
However, if you require payment at the time products and services are provided, you would create a sales receipt. It is common for businesses to use both invoices for some customers and sales receipts for those customers who you do not want to extend credit to.
3. Consider Using a Free Invoice Generator
If you can’t afford invoicing software, choose a free invoice generator over going the manual route. There are a number of great invoice generators on the market that won’t cost you a dime to send invoices. We have reviewed the top invoice generators and included the features, cost (if any) and how to get started in our best invoice generator guide.
Frequently Asked Questions (FAQs) About How to Write an Invoice
In this section, we have included the most frequently asked questions about how to write an invoice. If you don’t see your question below, head over to the Fit Small Business forum and post your question there. One of our industry experts will get back to you with an answer.
What information needs to be on an invoice?
Invoices should include basic information for both you and the customer to ensure you get paid in a timely manner. Contact information for you and your customer should be on the invoice. This includes business name, telephone number, email address, and website. Also, include the due date so that the customer knows when to remit payment.
How do I make an invoice for a small business?
You have several options for making an invoice for a small business. If you’re on a budget, use an Excel or Word template to create invoices. However, the best way to make an invoice is to use accounting software like FreshBooks. Accounting software saves you time and goes beyond invoicing by tracking income and expenses.
When should I send an invoice to a customer?
It is critical that you send an invoice to a customer immediately after you have provided the goods and/or services that were purchased. The longer you wait to send an invoice, the longer it will take you to get paid. To speed up payment, send the invoice via email and not snail mail.
Now that we have provided you with a number of ways you can make an invoice, it’s time for you to choose one. While using Excel and Word are more economical than accounting software, they are not nearly as professional-looking as invoices created in accounting software. Plus, they are more prone to errors in formulas or manual calculations. For this reason, we recommend you choose FreshBooks.
FreshBooks pricing plans start at $15 per month and include features that go beyond invoicing. You can track all of your business income and expenses, send automatic payment reminders, and run an A/R aging report to stay on top of unpaid invoices. Sign up for FreshBooks, and the first 30 days are free.