What is an invoice and how do you create one?

Understanding how to create a clear, accurate and professional invoice is a fundamental skill for any business owner, limited company, freelancer or contractor. This guide will walk you through the process step by step, so you can write invoices that help you get paid on time and help maintain your financial records.

What is an invoice?

An invoice is a time-stamped commercial document that itemises and records a transaction between a buyer and a seller. You can create one yourself or use software like Zempler's invoice generator.

Your invoice serves as a formal request for payment for goods you've sold or services you've rendered. It should specify the exact amount you're owed, any applicable tax (like VAT), the goods or services the client is paying for, and your payment terms. Think of it as a bill you issue to your client after a you've completed a sale but before the client has paid.

Why are invoices important for your business?

Invoices are crucial for several reasons:

• They provide a legal record of a sale, which is invaluable for dispute resolution and auditing purposes.
• They streamline the payment process by clearly outlining what's owed and when it's due, reducing ambiguities for your clients and creating an added safety net for small businesses especially.
• They enable you to monitor your revenue, manage cash flow and prepare for tax obligations for accurate financial tracking.

Without proper invoicing, it's much harder to maintain a clear financial picture of your business.

Essential information to include on every invoice

To be effective with your invoices you should be professional, clear and contain specific information. Omitting anything important can lead to confusion, delayed payments and issues with your record-keeping.

Your business information

Your invoice should clearly state who's requesting payment. Include your full business name, business or registered address, phone number and email address. If you operate as a sole trader, your legal name may suffice in place of a trading name. Providing this information makes it easy for clients to contact you should they have any questions, and helps them identify and verify the source of the invoice.

Client's business information

Similarly, the invoice needs to clearly state who's responsible for the payment. Include your client's full business name (or individual name if applicable), address, phone number and email address. Make sure everything is accurate – otherwise the invoice may end up with the wrong person or department, which can delay payment.

Invoice number and issue date

Every invoice should have a clearly labelled unique, sequential invoice number and issue date. These are critical for tracking payments, organising your records and referencing specific transactions. Consistent numbering and dating are foundational for effective financial management.

Description of goods or services

Describe exactly what you're invoicing for and any agreed supply date. This section should be a clear, concise and detailed description of the goods or services you provided.

Ambiguity here can lead to client queries and payment delays, so be specific. For services, specify the work you did and where relevant, how long it took. For goods, detail the specific items and quantities.

Quantity and unit price

For each itemised good or service, you should specify the quantity provided and its corresponding unit price. For instance, if you sold five units of a product at £10 each, you would list '5' as the quantity and '£10' as the price per unit. For services, this might be an hourly or daily rate, or a fixed rate per deliverable.

Breaking it down like this helps clients understand exactly what they're paying for and how you derived the total amount.

Total amount due

After itemising all goods and services, and applying any relevant taxes or discounts, your invoice should clearly state the grand total amount that the client needs to pay. This figure should be unambiguous and prominently displayed.

Payment terms and due date

When do you expect to be paid by? What payment options are available? This is where you specify the terms under which you'll be paid. Common payment terms include 'Net 30' where the payment is due within 30 days of the invoice date, and 'Due upon receipt' where payment is immediately due. You can of course also specify your own terms or instalment schedules.

To make it completely clear, include a definitive due date for when you expect payment. You should also include your accepted payment methods – your business bank account details, PayPal information, or other instructions like a QR code.

Step-by-step: how to create an invoice

Now that you understand the essential components, how do you go about creating an invoice?

Step 1: Choose your invoice creation method

Your first decision is choosing which tool you'll use to create your invoices. Do you prefer a simple, manual approach, or something more automated?

• Word processor or spreadsheet software – Programmes like Microsoft Word, Google Docs, Excel and Google Sheets offer flexibility. You can create a custom template or download a premade one. While this method provides control, it requires manual calculations and tracking.
• Online invoice generators – There are lots of platforms and websites offering free invoice generation services. Many are very user-friendly – you just input details into predesigned fields and they'll generate a professional-looking PDF invoice immediately.
• Accounting software: Dedicated accounting software from the likes of QuickBooks, Xero or FreshBooks (among others) is designed to streamline invoicing, payment tracking and financial reporting. This is often the most comprehensive solution if your business generates a lot of invoices or has more complex financial needs.
• Integrated bank account features: Some business bank accounts offer built-in invoice generators. With Zempler’s business accounts you’ll get access to an invoice generator that cuts through the admin and frees up your time.

Choose the option that best aligns with your business needs and scale – and with your comfort level with technology.

Step 2: Input your business and client details

Once you've decided how to create your invoices, the next step is to populate them with your identification information. At the top of the invoice, clearly place your business's full name, address, phone number and email address. Below this, dedicate a section for your client or customer’s personal or business name, their address and contact information.

Make sure everything is accurate and up to date – it's paramount for clear communication and record-keeping. For a full breakdown of what’s required on a business invoice, check out GOV.UK.

Step 3: Describe the goods or services provided

This is where you itemise the specifics of the transaction. Create a table or list that includes the following columns:

• Description – A clear, concise explanation of each good or service.
• Quantity – The number of units sold or hours/days worked.
• Unit price – The price per unit or hour/day.
• Line total: The quantity multiplied by the unit price for each item, totalled and clearly stated.

Be thorough and specific. For example, instead of just writing 'consulting' as a description, specify 'marketing strategy consultation for – 3 hours'.

Step 4: Calculate the total amount due

After listing the goods or services you're invoicing for, calculate the subtotal by adding up all the line total amounts. Below the subtotal add any applicable taxes like VAT or sales tax, clearly stating the tax rate and the calculated tax amount. If any discounts apply, subtract them here as well making sure to state the discount percentage or fixed amount.

Finally, clearly display the total amount due that the client needs to pay including all taxes and discounts. Double check your calculations to avoid discrepancies!

Step 5: Specify payment terms and due date

Clearly stating your preferred payment terms is a must, be it 'Payment due within 30 days of invoice date' or 'Due upon receipt'. Include a specific due date to remove any ambiguity about when you expect payment – for example, 'Payment due by: June 1, 2026'.

Don't forget to include instructions on how the recipient can pay you. Your business bank account number and sort code details, a link for online payment, services like PayPal, etc. You might also include late payment policies if applicable.

Step 6: Review and send your invoice

Before sending, meticulously review your entire invoice. Check for:

• Accuracy – Are all figures and dates correct? Is the total accurate?
• Clarity – Is the description of goods or services understandable? Are your payment terms clear?
• Completeness – Are all essential and mandatory details included?
• Professionalism – Does the invoice look clean and well-organised? Are there spelling errors?

Once you're satisfied, save the invoice, typically as a PDF to ensure formatting consistency, and send it to your client via your agreed-upon method, usually email. Always retain a copy for your own records.

Tips for effective invoice management

Beyond simply creating your invoices, adopting good management practices will really help your financial operations.

Keep detailed records

Maintaining comprehensive records of all your sent invoices and received payments  is a necessity. Organise your invoices systematically, digitally or physically, so when HMRC comes knocking, you can track payments, reconcile accounts and retrieve information for tax purposes or client inquiries easily. Consistent record-keeping provides a clear financial history of your business.

Follow up on overdue invoices

If an invoice remains unpaid past its due date, proactively follow up with the client or customer. A polite reminder email or phone call shortly after the due date can often prompt payment.

Establish a consistent process for following up late payments, as they're sadly not uncommon. For example, send a series of reminders at specific intervals and highlight next steps should the invoice remain unpaid. Timely follow-up demonstrates professionalism and helps maintain healthy cash flow.

Final thoughts

Creating professional invoices is essential for getting paid on time, managing cash flow, and keeping your financial records in order. The good news is that you don’t need to spend hours formatting documents or worrying about missed details.

Available with our business bank accounts, Zempler’s built-in invoice generator lets you create and send invoices in just a few clicks. It’s designed to cut down on admin, save you time, and help you stay on top of payments with ease.

If you’re ready to simplify your invoicing and keep your business finances running smoothly, apply for a Zempler business bank account today.