Invoices aren't exactly the most glamorous part of running a business. However, they're crucial to professional transactions, so —unfortunately— you're going to have to get used to them.
If you're a freelancer or you've recently decided to set up a small business, you'll need to nail down the invoicing process at some point. And, trust us, it's better sooner, rather than later! If you're new to invoicing, you might be wondering, "What is an invoice?" or feel like you're going around in circles trying to understand how to make an invoice. That's OK, you're not the only one.
We know that creating an invoice from scratch for the first time can be challenging. So, we're here to lend a helping hand. In this article, we'll guide you through the process of creating an invoice. So grab a cup of coffee, and let's dive into the wonderful world of invoicing! (Too far?)
First of all, let's go back to basics. Before we dive into how to make an invoice, it's important to understand what is an invoice and what is it used for.
By definition, an invoice (sometimes referred to as a sales invoice) is a document that lists goods services provided along with an amount due. It contains precise details (we'll get to those later) and is specifically labeled as an invoice. An invoice effectively tells the client how much they need to pay you, and sets the terms for that payment.
For small businesses, invoices are an integral part of the accounting system. Without them, you won't get paid. At the end of the day, getting paid is what covers your expenses, provides your salary, and keeps your business running nice and smoothly.
In order to pay you, your clients need to have a record of the work you did, how much they need to pay you, and when they need to pay you.
Invoices are legal documents that identify the payment amount due and the payment terms. The payment terms refer to the due date (eg. within 30 days) and any potential late payment penalties. They can be used to request and record sales transactions for various purposes, including:
Invoices are legally binding documents, so they can be used to take more formal actions - particularly in the case of missing or overdue payments. Although, we're sure it won't come to that.
When you send an invoice, it creates an "accounts receivable". This is integral to the bookkeeping and accounting part of your business. By sending an invoice, you establish a paper-trail record of the work you've completed and the payments you've received.
When the time comes to submit your tax self-assessment, you'll need to provide these as evidence of your business transactions. Proper invoicing will help you to keep track of your work and finances. Moreover, it's crucial for freelancers who need to file self-employment taxes.
What does invoicing look like in 2021?
First came envelopes. Invoices were written or printed manually, sealed in an envelope, and popped into the mailbox. Next came the fax machine revolution. Invoices were sent and received using those ostentatious machines that stood in the corner of every office. Nobody really understood how they worked. They still don't. Then along came E-mail and simplified our lives. Invoices were —and still are— sent as file attachments (PDF, Microsoft Word documents, etc.).
In today's age of digital transformation, manual methods of invoicing are slowly losing favor among forward-thinking freelancers and business leaders. They're being replaced with automated online cloud-based invoicing software that enables freelancers and small-medium businesses to seamlessly send, track, and manage your invoicing needs - all in one place.
All-in-one invoicing and accounting software like Bonsai take the stress out of bookkeeping by integrating and automating business processes in an easy-to-use platform. Bonsai stores all your important business data in one centralized location. You can use the invoice generator to create an invoice that's ready to send and keep track of all your proposals, billable expenses, accounting, and tax records effortlessly.
Whether you're a freelance writer, a web designer, or something else - once you've completed the job, you'll need to know how to bill a client.
There are many ways to make an invoice. You can create an invoice from scratch using Google Docs, Microsoft Word, or even Microsoft Excel which feature several invoice templates for freelance businesses. What matters the most is that you create an invoice with the right information. The smallest error could lead to your client not paying you on time —or worse— at all.
According to Amalto, 39% of invoices sent in the US are paid late and 61% of those late payments are due to incorrect invoices. Also, it turns out that female freelancers are more likely to be paid late than males! So what information should you include to make sure you get paid correctly and in a timely manner?
Let's find out.
Whether you're creating a standard, commercial, or VAT invoice - invoice details should include the following:
An invoice number, or invoice ID, is a number assigned to each invoice you generate. An invoice number is a crucial part of any invoice. It enables you to keep track of invoices sent, search for specific documents, and identify transactions with clients. From a client perspective, invoice numbers help them to keep track of upcoming payments due and payments made.
There are different ways to systemize your invoice numbers. You can assign an invoice number sequentially, chronologically, or by client or project ID. Numbering invoices sequentially is the simplest method, you assign a number to your first invoice (#001 is a good place to start) and assign the next invoice the following number in the sequence (#002).
Whichever invoice numbering system you decide on, it's important that it's consistent.
A simpler alternative is to use invoicing software like Bonsai. Bonsai automates the process of creating invoices so you don't have to worry about implementing and managing a numbering system - we'll do it for you!
Many freelancers and small business owners use an invoice generator to make, store, and send their invoices. A professional invoicing product like Bonsai offers ready-to-use invoice templates to simplify the whole process.
But how do invoice templates work?
All you need to do is select an invoice template, add any necessary information (contact details, payment terms, etc), download the invoice file as a PDF to send in an email, or use a link that enables the client or customer to download it directly.
When you complete an invoice template, you can save information like your company name and logo, email address, and phone number so that it appears pre-loaded the next time you use the template.
Bonsai offers an invoice template to suit every profession. Whether you're looking for a standard invoice template or a more specific one geared towards a certain profession, we've got all the bases covered. With Bonsai's invoice generator, you can automatically create your next invoice, remind your customer that a payment is overdue, and accrue late fees without having to
Making an invoice using a free invoice generator has several advantages. The template will already include all your essential information every time you make an invoice, saving you time, and establishing consistency in your invoicing process. Moreover, Bonsai's invoice generator includes branding and integrated payments to streamline your business operations.
When you use a professional invoice generator with free templates, you can avoid making any errors that might impede the payment process. No more checking and double-checking to make sure all of your contact information was entered correctly. With an invoice generator like Bonsai, you can send your client correct and consistent invoices that ensure you always get paid on time.
When it comes to invoicing a client or customer, don't wait too long. Once you've completed the work, it's best to create and send a professional invoice and send it as soon as possible. Attach your invoice as an attachment, rather than in the body of the email.
It's also a good idea to add the invoice number in the subject line so the customer knows exactly what to do. Once the payment is received, don't forget to flick the client an invoice thank you email for good measure.
If you're serious about nailing the invoicing process, consider implementing all-in-one freelancing software into your business tech stack.
Bonsai uses smart automation to manage all of your invoicing needs. You can create a professional invoice and customize it to your needs, as well as automate late payment reminders. Moreover, Bonsai's fully-integrated product suite features everything you need to effectively run your freelance business. From proposals to contracts to accounting and taxes - Bonsai makes business management simple.
Did we mention that Bonsai offers a free trial for its services? Well, now you know!
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?