If you're providing goods or services in exchange for payment as a one-man team, you are running a sole proprietorship business. As a sole trader, you'll issue invoices to companies to receive payments for your services.
As a sole trader, it is important to look as professional as possible as it can impress your clients and make them comfortable giving you work. This includes everything from business cards, letterhead, and invoices.
What exactly is an invoice? It's where sole traders define the goods delivered/services performed, the amount charged, and the payment terms for the clients or customers. Creating a new invoice may seem like a pain... but we'll walk you through everything you need to know in order to easily craft a sole trader invoice.
You'll discover the quickest way you can create invoices and the details for what should be included in the commercial document.
Note: If you are a sole proprietor and you want to try a simple way to edit/send invoice information, try Bonsai. Our invoicing software makes it incredibly easy for you to send professional invoices and get paid. Our invoice templates have all the necessary details like contact information, address, due date, description, and more. Save time with Bonsai. Claim your 14-day free trial today to use our invoice template.
As a sole business owner, you do not need to contact the tax authorities in advance in order to be able to issue a private invoice. Unlike corporations, sole proprietors have the freedom of issuing invoices without restrictions or formal requirements.
Although there are practically no requirements for how an invoice should look or what information it should have, the presentation of your invoice as well as best practices is important to appear credible and professional. The easiest way you can accomplish this is by using invoice templates.
There are a ton of sole trader invoicing software on the market, but we'll review the one we know best--our own. Bonsai is an all-in-one freelancer software with "ready-to-edit" professional-looking templates.
Our templates make it a breeze to send professional invoices.
Whether you need an invoice template for graphic designer or social media marketer, we got you covered. We'll include all the vital details in the invoice you can quickly edit and make it look more appealing. On top of that, you'll get access to all our other templates for contracts or sole proprietor proposals.
Try a 14-day test run of our free invoice templates today. You'll see how our software can make life easier to create and send unlimited invoices.
However, if you opt to make your own and not use an invoice template, here are some details for what to include in the invoice.
It's a great idea to hash through all the details of the invoice before you perform your service. Before you send your first invoice to a customer, we'll review what should be included.
You can generate an invoice on Microsoft Word or Google Sheets with this info:
Note: If you want to save time and have a sole trader invoicing software take care of all of this for you, try Bonsai. Our all-in-one freelancer software can help you send out nice invoices to get paid without you having to constantly create invoices from scratch. Claim your 14-day free trial and try an invoice template today.
First, you'll want to write down the details of your business on the invoice. This would include your name or the business name, address, invoice number, contact, and payment information.
Your company name or full name should stand out at the top of your invoice in an easy-to-read font. We recommend the front of your name to be a little bit bigger and bold compared to all the other text on the invoice in order to stick out. To add an additional touch of professionalism to your invoice, consider creating and including a business logo.
An accurate billing address helps invoices and bills reach the company's correct location. In other words, it is an important piece of identifying information that a credit card issuer or other financial institution – has on your file. This information would help protect you from credit card fraud or identity theft.
You'll also want to include an address where any legal documents can be delivered to you. If your shipping address is different than your billing one, be sure to clearly state that.
If a consumer or client has a problem with an invoice, they'll need to quickly get in touch with you to work it out. That's why it is important to have contact information placed on the sole trader invoice. Place your main phone number that can be answered on a timely basis in bold and your best email.
This will make it much easier for the billing or accounting department to connect with you if any problems arise.
A unique invoice number is vital to say organized. This unique identifier will allow you to track and manage your invoices for customers so you'll know which ones got paid and unpaid. The invoice number would also connect the client with the transaction to help with the bookkeeping process.
The invoice date is essentially a time-stamped time and date on which the goods have been billed to the client and the transaction officially recorded. Along wih the date of the invoice, important information regarding the payment and the due date of the bill will be included.
You can include a "due upon receipt" where your customer would have to pay the invoice as soon as they receive it.
There are all sorts of ways an invoice could be paid. For instance, you can include payments to be received in cash, credit card, bank transfers, checks, etc.
If you require payment before releasing goods or performing services, you might consider adding "payment due upon receipt". If you want to get paid faster, bank transfers are always a great way to go.
Bank account transfers are a common way to send payments. If you decide to use a bank transfer as your method of choice, then include the following details in the invoice:
Read our guide on how to write invoices to send via email.
At the bottom of the invoice, you can include instructions for payment terms. Sometimes you can include a short phrase, "Terms: Net 30" which means you expect to be paid in full in the next 30 days. In this example, if you set the payment guidelines to be 30 days and the client is late, follow up with an email.
It is not uncommon for a sole proprietor or sole trader to charge 1.5 percent interest per month on outstanding bills as a late fee. Just be sure you work out clear guidelines with your clients. By charging a late fee, you'll give your customers a nice incentive to send money on time.
Try this government calculator to sum up your late fee interest.
You could also include a small note to attract new clients. After all, finding more work or new business is one of the hardest tasks as a self-employed business owner. When invoicing clients, include a small note to state you'll give a discount on your services or a referral kickback if they introduce or mention you to a new customer.
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?