An invoice is kind of like a receipt. We say kind of, because instead of receiving it after payment, you would invoice a client before payment is received – essentially to say “Hey, I did this for you and now you owe me this much for it”.
Just like a receipt, however, an invoice should give you information on the goods or services that were purchased, pricing, payments dates, and a couple other bits and bobs – more on this later.
Why send an invoice?
The short answer: it’s good to keep records for business purposes.
The long answer: as a sole trader, you’re responsible for all your own bookkeeping. Getting into good habits, like sending detailed invoices, can save you headaches down the line. For example, setting due dates can be the difference between getting paid when you expect to or not at all. Here’s a few reasons why it’s good to invoice:
1. Tracking income
Having a record of how much you’ve charged a client will be useful when you’re expecting a payment. You’ll be able to match your income against specific invoices, track errors in payments, and you’ll always know when a payment is overdue, and who hasn’t paid.
2. Legal reasons
Invoicing is a great way to outline any terms and conditions you may have. Maybe you have a return policy or maybe you’re selling food items and need to inform them of any allergens – you can see how you might have to be upfront about these things just in case.
3. Claiming GST
Adding relevant GST information may be a requirement for you and for your clients when it comes to claiming back GST – again, more on this later.
4. It’s professional
As the saying goes “you eat with your eyes first”. A great-looking and detailed invoice can go a long way in giving your business credibility, earning respect from your client’s, and increasing customer satisfaction – happy customers mean you’re more likely to get paid!
What if I charge GST?
As we said earlier, an invoice should tell you if GST was added to the cost of the goods/service or not.
If you’re GST registered, there’s some information you’re required by the IRD to include on your invoices (which we’ve listed below). The information you need to include will also depend on how much you’re invoicing for, just to make things a little more interesting.
If you’re invoicing for less than $200, your invoice must include:
- Your name
- The invoice date
- A description of your goods/service
- The price of your goods/service
If you’re invoicing for $200 - $1000, your invoice must include:
- The above
- Your GST number
- Mention that the price is inclusive of GST
If you’re invoicing for over $1000, your invoice must include:
- Everything above
- The invoice recipient’s name, phone number, email, trading name, NZBN, or website
Including all of this information means the invoice recipient can claim GST back on their purchase - a win/win situation!
If you’re not GST registered but still want to create beautiful yet professional-looking invoices, here is some some things you might want to include:
- Your business name, address, and logo (everything is a brand opportunity!),
- The invoice number
- Recipient details like name, number, etc.
- Descriptions and quantity of the goods/services
- Unit prices – each item’s individual price
- Total cost
- Reimbursements – here you would list any costs that your client has agreed to reimburse you for.
- Payment details – so your client knows how they can pay you e.g. bank transfers (you’ll need to provide a bank account number), credit card, or another method.
- Additional comments – e.g. your Terms and Conditions.
Including ALL this info and any relevant GST info will have you invoicing like a pro in no time. That’s still a lot of bullet points though, and it’s easy to forget some info – luckily Hnry makes invoicing easy!
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