All contractors should do it!
You need to be consistent and detailed when it comes to creating an invoice. Don’t wing it.
Like all record keeping — making sure your invoices are accurate is important for your business’ survival. Each item on an invoice can impact your cash flow since you want to be paid the correct amount in a timely manner. It impacts your cash flow and if you leverage your accounting system, it can save you time and money, thus making your more productive. Companies known for inaccurate invoices will not stay in business very long. For example, you need to get paid so you can keep your business running! And if you overcharge your vendors, they probably will not want to do business with you very long. Also most companies require an invoice in order to pay another company.
Today, most invoices are sent electronically.
In the On-Demand Economy, however, companies might just ask your to go to a website and fill in some information which often is just confirming your hours and your percentage of the profits. If this is the case, you should still keep track of your hours on your own. I repeat. Keep track of your hours. Even if it is in a spreadsheet.
But not every On-Demand company is ‘hooked up’ — or set up to easily record hours.
Your invoice provides a branding opportunity and also represents your company’s approach to business: Does the invoice look professional, is it sent in a timely manner (some companies want to be invoiced on time), etc.
Key elements of your invoice include:
- Your Logo (Opportunity to brand and also make it easy for the person to find it)
- Company name if you re incorporated
- Address (street, city and state)
- Purchase Order number (probably not applicable with the Ubers of the world)
- Invoice Date and Number (if applicable).Pick a number that includes vendor number and the actual invoice number. For example 1001-0003 might indicate that 10001 is the vendor and 0003 is the invoice number for that client.. You might even consider adding the date to the invoice, so based on the above, the invoice number would be 1001-0003-5123015 (for May 12th 2015). If you ever get audited by the IRS, an organized system with the proper numbering system will give the IRS more confidence that you have reported your income accurately. You don’t want to create any doubt with the IRS. You can read more @ http://www.ehow.com/about_6509697_invoices-important-business_.html
- Services rendered or performed
- Date Range for services performed
- Hours worked (Unless you are paid by project)
- Total amount owed
- Total Amount for your service amount
- When it is due: Net 30 or Net 45 or Net 60 is common (Include a Penalty indicator if the invoice is not paid on due date, such as you will charge 5% if it is not paid but a specific date. Increase the penalty amount over time.
- Payment Method. I like Paypal because it is used by many people, is easy to access, integrates into tax related software programs and creates decent reports.
- Contact name and address for the person and company that hired you.
Copies of all invoices should be kept somewhere safe and backed up!