The Practical Guide to Limited Company Tax
If you have chosen to operate your business as a limited com...
By Jonathan London on 20th May 2015
As a contractor or freelancer, invoicing is one of the most important paperwork tasks you need to stay on top of. If you don’t get those invoices out on time or with the correct information, then it can lead to delays in being paid and impact on the cash flow of your business.
Our guide on how to tackle invoicing should ensure you can send clear and accurate bills to clients and receive prompt payment – allowing you to enjoy the rewards of a successful contractor business.
It is also key to understand an invoice is not the time to show off your creative skills – you need to keep it professional and simple. A complicated and over-designed invoice is not going to get the money in any quicker.
Include the right details
This may seem obvious but make sure you include your details on the invoice – so the company can tell who needs paying. Including a contact telephone number and email is also good practice so they can get in touch if they have any questions.
As well as your own details, make sure you include the client’s contact name for whoever deals with your account – this means the invoice will not be misplaced and will hopefully speed up the payment process.
Keep track of invoices
It can be hard to keep track of invoices so think of a system so you can make it clear when corresponding with a client. This can simply be the initials of the client followed by a number – it just makes it a lot easier to refer to the invoice if you have to chase payment or the client has a query.
Your client wants to know what they are paying so make sure you break down the invoice so they are clear what you have done for them. Provide details of each product or service and explain whether a charge is project-based or at an hourly rate. Have you remembered to include or exclude VAT?
Make sure you include your payment terms
Include your terms so the client knows the deadline for when they need to make payment. It is also good practice to explain details of what happens if payment is not made on time – do you charge a late fee or interest on outstanding amounts? Outlining your expectations at the invoice stage can help to clear up any confusion at a later date.
How do they pay?
Do not forget to include details of how you can be paid. Cheques can often be a pain for large companies, so consider accepting payment by BACS – therefore you will need to include your business account number and sort code.
Consider going electronic
Traditionally invoices are posted to clients but using email may be a better option – it is quicker, you can track delivery and make sure it reaches the right person.
Under HMRC rules you are required to keep important records for six years, therefore it may be easier (and save space) if you keep electronic copies of invoices rather than hoarding stacks of paperwork.
Or if you’d of the mindset to step into the modern age why not consider our accounting service? You can invoice your customers directly through either our online desktop accounting portal, or even via our mobile app. You can just sit back while our system calculates your tax, what you can withdraw from your business (and how), plus have your dedicated accountant there when you need them for support.
Chase up unpaid invoices
Finally, it is vital to make sure you keep track of which invoices have not been paid and deal with them as soon as possible. If the client has failed to follow your payment terms, then make sure you have a reminder notice on standby to send as soon as the deadline passes. If you still don’t have any joy then give them a call to remind them you need to be paid.
Our handy guide to claiming expenses through your limited company looks at what you can and can’t claim tax relief on through your company
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If you need a little help to find the right accountancy service, don’t worry.
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