Welcome to this guide to invoicing with our free online invoice generator. In this article we will briefly explain the function of an invoice, how to generate one on your own (you can use our free invoice templates for this) or with our free invoice maker, how customize and send the invoice to your client (or invoice online), and what to do when you receive the payment.
Contents
- What is an invoice?
- What is an invoice used for?
- How to generate an invoice
- How to send an invoice
- How to send a payment reminder
- How to send a payment receipt
- How to manage invoicing with Hiveage
What is an invoice?
An invoice is a document you (the seller) send to your customer or client (the buyer) that indicates the amount and costs of the products or services that have been provided by you. It specifies what the customer must pay you according to your payment terms.
The formal definition of an invoice, as offered by the Oxford English Dictionary, is as follows: “A list of goods sent or services provided, with a statement of the sum due for these; a bill.” Thus, an invoice is a request for payment.
Invoices are an essential element in managing the accounts and financial records of your business. They keep track of your revenue, monies owed to you by clients, and in the unfortunate case of a client not paying you, record bad debts that are written-off.
An invoice is a legal document. If you issue an incorrect invoice to a client, it should be cancelled and a new invoice issued with the correct information. You should not simply delete the incorrect invoice from your records as this could lead to accounting problems later.
What is an invoice used for?
Invoices are used as a source document for business accounting. They are useful in keeping a complete record of the sales transactions your business makes with your clients. The functions served by different types of invoices include:
- To request payment from clients for products/services provided
- To keep track of sales
- To track of stock and inventory (for businesses selling products)
- To forecast and plan for future sales using past data
- To record revenue for business tax filings
How to Generate an Invoice
Creating an invoice is simple and straightforward. With software such as this online invoice maker, it becomes even easier to make invoices. In the following section we explain the essential elements you should include in your invoices.
Title
The invoice should be labelled as such: the title of the invoice template should say “Invoice” (in some jurisdictions, you must say “Tax Invoice”).
Contact Information
The invoice should clearly state who it is from (you, the seller), and who it is for (your customer). In the From field in this invoice creator tool, add the contact details of your business, such as your name or business name, the address, phone number, email and website URL. In the To field, mention those details of your customer. You can further customize your invoice with brand elements—for example, you can upload your logo to the header.
Invoice Number
This is sometimes referred to as the Invoice ID. The invoice ID is an essential element in your invoice, as it allows you (and your clients) to easily identify and refer to individual transactions without ambiguity.
Thus, every invoice you send should have a unique number, and duplicate numbers should be avoided. The simplest way to do this is to have a single invoice numbering format, and increment the number per each invoice you generate. The easiest approach is to simply start with one (1) and work up from there. However, it is common to have a prefix (e.g.: INV-001) or a bigger starting number (e.g.: 1001).
In some jurisdictions a sequential invoice number is required by law. In others, like in the U.S., you can have any invoice ID as long as its unique. The following are some non-sequential ways you can number your invoices:
Project-Based
If you work with your clients on a project-basis, it is possible to give a unique ID to each project and use that as a prefix for your invoices. For example, if you are creating an invoice related to the project 2550, the first invoice for the project can be 2550-001, the second 2550-002 and so on.
Customer-Based
You can give each of your customers a unique ID, and then have separate number sequences for each of them. For example, the invoice sent to customer 2550 can have invoice numbers as 2550-001, 2550-002, . . .
Chronological
Your invoice numbers can use the date of creation as its prefix. Any date format can be used, and if you use the ISO standard, it will be in the form of YYYY-MM-DD. For example, you were to generate an invoice on the 1st of July, 2021, it could be numbered as: 20210-07-01-001.
Dates
Don’t forget to include the date (as seen in the top middle of our invoice template) and make sure it specifies when it was created and sent to your customer.. It should also have a due date, which is when it becomes payable. If you expect to be paid immediately, you can choose the “Due upon receipt” option. For most businesses we have worked with, a due date of 14 days or less has shown to provide the best results.
Line Items
The invoice should include a sufficiently detailed listing of the products or services you are billing the client for. These details are organized as line items, specifying the product/service, amount, rate (per item) and the total amount to be paid for that particular item.
There are four types of lines to choose from in this tool. The most common is the Item type, where you mention the goods or services provided, their quantities and the rate. The amount will then be automatically calculated for you.
The Expense line item type can be used when it is a straightforward expense where you do not need to mention the quantity or rate: simply type in the description and amount.
With the Mileage line item type, you can set a per mile or kilometer rate (you can specify the unit—miles or km—by entering it in the Unit field. The free invoice generator will then calculate the amount based on the distance and rate.
Use the Time line item type to bill for your time: mention the task in the description field, enter the time you have spent on this task in HH:MM format in the quantity field, and set an hourly rate.
For all these line item types in the invoice template, you can include a date (e.g.: the date you delivered a service or worked on a task), and links (e.g.: a web URL where the work is available for view). You can also attach files and add labels for easier referencing—sign up for Hiveage for these and many other powerful invoicing features that are not present here.
Set Taxes, Discounts and Shipping Fees
You can add taxes, discounts and shipping fees to the invoice sub total using the above form. The discounts will be applied first. The taxes will be applied after discounts. The shipping fees will be applied at the end. The total will be calculated by deducting the discounts from the sub total, and adding the taxes and shipping fees.
Invoice Notes
The Invoice notes field in the app can be used to add further details about your service, such as terms and conditions, payment instructions, return policy on goods, and how many days the client has to make the payment before incurring a late fee. You’ll also want to thank your client and appreciate their business.
Once you fill in these details and submit the form to make an invoice, the app lets you instantly download your invoice as a PDF — and it’s free!
How to Send an Invoice
Once you have set up a professional invoice, you can send it to your client via post, email it directly, or send using online messaging software. It is important to have a clear understanding between you and the customer on what communication channels will be used.
Email is a common way for businesses to send invoices. The PDF invoice can be attached to the email, or made available online and linked to in the body of the email. Your message should have:
- A clear subject line that indicates the email is about an invoice
- Simple and brief content that highlights the important details
- A link to the invoice or the invoice as an attachment (preferably both)
When emailing clients you can use a template like the following, used in our online invoicing software:
Hi [Client’s name],
A new invoice has been generated for you by [company name]. Here’s a quick summary:
Invoice details: [invoice-number] - [a brief summary of invoice contents]
Total payable: [Amount]
Due date: [Date]
You can view the invoice or download a PDF copy of it from the following link:
[Link to online invoice]
Best regards, [Your name and email signature]
How to Send a Payment Reminder
In an ideal world, you will send your custom invoice and the client will make the payment without further prompting. However, you are likely to have a few clients that would need an additional reminder or two, perhaps because they missed the original invoice notification, forgot about it, or lack proper organization.
In such instances, you would want to remind the client about the payment that is due. Many freelancers and entrepreneurs find this rather uncomfortable, but it is an important part of doing business. You would want to send payment reminders that are polite yet firm, which do not negatively affect the customer relationship but get the job done.
Invoicing software like Hiveage has to option to automate payment reminders, which makes it hassle-free and easy for small businesses. If you want to send a manual payment reminder via email, you can use an email like the following general reminder template available in Hiveage:
Hi [Client’s name],
Just a quick reminder that a payment was due on invoice [invoice number] by [due date].
Please make arrangements to settle the outstanding amount of [total due amount] at your earliest convenience.
You can view the invoice or download a PDF copy of it from the following link:
[Link to online invoice]
Best regards, [Your name and email signature]
How to Send a Payment Receipt
When a client makes a payment, you can send them a payment receipt to acknowledge their payment. While a payment receipt looks somewhat similar to an invoice, the main difference between them is that an invoice is issued prior to a payment being made and a receipt is issued after a payment is processed.
Payment receipts typically include the following information about the transaction:
- Name and contact details of the issuer (i.e., your business)
- Name and contact details of the recipient (i.e., your customer)
- Clear identification as a payment receipt
- Reference to the corresponding invoice number
- Date of payment
- Payment amount
- Payment method (e.g., cash, check, bank transfer)
- Amount still owing, if applicable
As you can see from the list above, the layout of a payment receipt will be similar to an invoice. You can easily generate and send payment receipts using our online invoicing software. The following is the standard notification email sent by Hiveage when a payment receipt is sent manually or automatically:
Hi [Client’s name],
Thank you for the payment of [payment amount] you made on [date] for the invoice [invoice number].
You can view the payment receipt or download a PDF copy of it from the following link:
[Link to online receipt]
Best regards, [Your name and email signature]
How to manage invoicing with Hiveage
Whether you’re a freelancer or small business owner, the best thing you can do to ensure success is to keep the business end of your enterprise simple in order to keep the focus on actual work.
The problem with sending invoices randomly—either using our free invoice generator, a blank invoice template or a regular word processor—is that you don’t have a convenient way of recording what was owed, who was billed, when they were billed, when payments were expected, and if payments were received. It is easy for something to fall through the cracks. This is where having a proper tool to manage your invoicing comes handy.
Hiveage offers a simple, elegant and powerful platform for small business owners to prepare estimates, create invoices (and even create recurring invoices), email your invoice automatically, have evidence of when it was viewed, and know when it has been paid. Hiveage also make it easier to files taxes at the end of the year because all your financial information is collected in one place.
For freelancers and entrepreneurs who are just starting up their businesses, our invoice app even has a free plan that supports up to 5 clients (with no limits on the number of invoices). It also comes with many additional features such as estimates, time-, expense- and mileage-tracking, and support for online payments. Please see our pricing plans for more details. All Hiveage accounts come with a free, full-featured trial of 14 days (no credit card required).
