How to Fill Out an Invoice to Get Paid

An invoice serves as a formal request for payment, detailing goods sold or services rendered. It functions as a record of a transaction, providing clarity for both the business and the client. This document is a fundamental tool for managing accounts receivable and ensuring timely compensation for work completed. Businesses rely on accurate invoices to maintain healthy cash flow and for proper financial tracking.

Information to Gather Before You Start

Before generating an invoice, it is important to compile all necessary information to ensure accuracy and professionalism. Begin with your own business details, including your legal business name, physical address, phone number, and email address. Including a federal Employer Identification Number (EIN) or other relevant tax identification is also a common practice for business-to-business transactions.

Next, gather comprehensive details about your client, which typically includes their full legal business name, billing address, and contact information for the accounts payable department. For the services or products provided, create a clear and concise description for each item. This description should be specific enough for the client to understand exactly what they are being charged for, avoiding ambiguity.

Define the quantity of each product or service, such as the number of items sold or hours worked. Alongside the quantity, specify the agreed-upon unit price for each item. Establish your payment terms in advance, which dictate when payment is due and accepted payment methods. Common payment terms include “Net 30,” meaning payment is due within 30 days of the invoice date, or “Due Upon Receipt.”

Consider if any late payment fees or early payment discounts apply, and ensure these are clearly understood before invoicing. For instance, a “2/10 Net 30” term offers a 2% discount if paid within 10 days, with the full amount due in 30 days.

Key Sections of an Invoice

An invoice typically begins with a prominent header, clearly stating “Invoice.” This section also includes a unique invoice number, along with the date the invoice was issued and the agreed-upon payment due date.

Below the header, the invoice generally presents two main blocks of contact information. Your business’s legal name, address, and contact details are listed. Adjacent to this, or directly below, the client’s business name and billing address are provided.

The core of the invoice is the itemized list of goods or services. This section typically uses columns to display each item’s description, the quantity provided, the unit price, and the total cost for that specific item. Clear descriptions are important here, referencing the information gathered earlier. Following the itemized list, a subtotal summarizes the cost of all goods and services before any taxes or discounts are applied.

Further sections detail any applicable taxes, such as sales tax, and any discounts. Finally, the invoice clearly states the total amount due, which is the grand total after all additions and subtractions. Payment instructions, including accepted payment methods like bank transfer details or online payment links, are then provided.

Calculating and Finalizing Amounts

Begin by determining the total for each individual line item by multiplying the quantity of goods or services by their respective unit price.

Once each line item total is calculated, sum all these totals to arrive at the subtotal for the invoice. This subtotal represents the cost of goods or services before any additional charges or reductions. After establishing the subtotal, apply any applicable sales tax. Sales tax rates vary significantly by state, county, and even city, and are generally calculated as a percentage of the taxable subtotal.

It is important to note that sales tax is not a flat federal rate but is determined at the state and local levels, often based on where the sale occurs and the type of product or service. If any discounts are being offered, these are typically subtracted from the subtotal before or after tax, depending on local tax regulations and the agreed-upon terms. The final amount due is then calculated by adding the sales tax to the subtotal and subtracting any discounts.

To finalize the invoice, clearly state the payment due date, which is typically based on the agreed-upon payment terms, such as “Net 30.” This ensures the client understands the deadline for payment. Including clear payment instructions, such as bank account details for transfers or links for online payments, makes the payment process straightforward for the client.