An invoice is a legal document – and it must be treated with the proper respect. It is a statement of account – it tells your customer that he or she still owes you a certain amount of money, and that this money must be paid. Yet an invoice is much more than simply that – it is a legal document that is used by the government to calculate taxes and, furthermore, a legal document that can be used in court. In fact, it could be used as legal tender. To make sure your invoices follow the mandatory format and have all the legal requirements, here is a list of the crucial elements that must be included in every invoice:
- Your company name, address, and any other important contact information. The receiver of the invoice should be able to identify the one who created it immediately – and should be able to contact that person without delay should there be a misunderstanding or problem.
- The company name or name of the customer, address, and other contact information. The receiver needs to know clearly that the invoice is meant for him or her.
- The date of the invoice. The customer needs to see when the invoice was made.
- A serial or invoice number. This number is unique for that invoice and required by law.
- A description of the product or services. This should be in a clear list format – number of items, product code, description of items, price of items per unit, and total price. Don’t just write down the serial number of the product or a catalogue code – the reader should clearly see the items mentioned and know what it pertains to.
- The total amount charged. There should be no mistake about the amount owed – if there is a discount, make sure it is mentioned clearly and that the total amount is written clearly. If VAT or other expenses are charged, list them, and again, make the total amount to be paid clear.
- Terms of payment. Though not always required by law, it is wise to state when the payment is due. Don’t merely say “as soon as possible”. Be clear. “January 8, 2016” is much more apparent than “within fourteen days”.
There are some further considerations to be made which are equally important. This requires knowledge of the law – and we highly recommend that you, as creditor, are aware of this.
- If not mentioned, the term of payment is 30 days. This varies from country to country, but if you do not specify when the amount is due, the law will provide a term starting from the date of the invoice, usually 30 days.
- If there is late payment, you have the right to charge interest, but only within the limits of the law and if prior notice was given.
- You are required to keep one or two, sometimes even three copies of the invoice, for legal and tax purposes, for a certain amount of time – usually a few years. Your accountant should be aware of this.
Invoices are important documents and should not merely be treated as a written explanation for who owes what to whom – they are legal writings that can be used in court and that the government will examine if there is any issue. It’s incredibly important that the invoices mention all the necessary items. But when all is said and done and you are still having difficulties with late payments, non-payments, and the like – which are seriously affecting your cashflow – you can always rely on cashflow solution providers such as Ultimate Finance.
