Getting your invoicing system and payment terms right can be the key to a healthy cash flow. You need to ensure your customers understand how much they need to pay and when they must settle up. Customers are more likely to pay you on time if these terms are clearly set out in writing from the start.

This guide outlines the information you are required by law to include in an invoice. Looking to write your invoice terms & conditions? Find our guide for Terms & Conditions as well as setting payment terms here.

Invoicing and payment terms

All invoices should clearly state that this is what they are with the word "invoice".

Here’s the information that invoices need to contain;

• A unique identification number
• Your company name, address and contact information
• The company name and address of the customer you are invoicing
• A clear description of what you are charging for
• The date the goods or service were provided (supply date)
• The date of the invoice
• The amount(s) being charged
• The VAT amount if applicable
• The total amount owed
  

In addition, if you are a limited company, sole trader and/or VAT registered, the law requires you to provide certain information on any invoices you send to your customers.

Limited companies' invoices

Limited companies must have the following additional information on their invoices:

• The full company name as it appears on the certificate of incorporation
• Any business name used in your business
• An address where any legal documents can be delivered to you if you are using a business name

Limited companies may include the names of the directors on their invoices. However, if you are going to publish this information on your invoices, you must include the names of all directors.

Sole traders's invoices

A sole trader must have the following additional information on their invoices:

• The trader's name or any business name being used
• An address where any legal documents can be delivered to you if you are using a business name

VAT details on invoices

If you are registered for VAT, whether the business is a limited company or a sole trader, you must also put the following information on your invoices:

• A unique and sequential identifying invoice number
• The date the invoice is issued
• Your customer's name and address
• Your business' name, address, and VAT registration number
• Date of supply to the customer
• A description sufficient to identify the supply of goods or services
• The quantity of the goods or services with a unit price - excluding VAT
• The rate of VAT per item
• The total amount of VAT amount owed without VAT added
• The total amount of VAT
  

It's best to set up records and invoice correctly for VAT from the time your business starts. You may find it useful to set up a pro forma invoice. A pro forma invoice can be an invoice drawn up by you and sent to the buyer to confirm the details of a contract, or a polite reminder to the buyer that a debt will be due for payment.

You can also add additional information to your invoices as you see fit to avoid delays in them being approved for payment.

We hope you enjoyed this itsettled guide. Are you struggling with cashflow and late payments? itsettled's credit management and debt recovery software has helped thousands of businesses across the UK boost their cashflow. Join them today and claim your free 7 day trial of itsettled.