A Quick Guide to Invoicing

With the free invoice generator by Hiveage

Welcome to this guide to invoicing with our free online invoice creator. In this article we will briefly explain the function of an invoice, how to create one on your own or with our invoicing software, how to the invoice to your client, and what to do when you receive the payment (or when you don’t).

Contents

What is an invoice?

An invoice is a document you (the seller) send to your customer or client (the buyer) that indicates the amount and costs of the products or services that have been provided by you. It specifies what the customer must pay you according to your payment terms.

The formal definition of an invoice, as offered by the Oxford English Dictionary, is as follows: “A list of goods sent or services provided, with a statement of the sum due for these; a bill.” Thus, an invoice is a request for payment.

Invoices are an essential element in managing the accounts and financial records of your business. They keep track of your revenue, monies owed to you by clients, and in the unfortunate case of a client not paying you, record bad debts that are written-off.

An invoice is a legal document. If you issue an incorrect invoice to a client, it should be cancelled and a new invoice issued with the correct information. You should not simply delete the incorrect invoice from your records as this could create accounting problems later.

What is an invoice used for?

Invoices are used as a source document for business accounting. They are useful in keeping a complete record of the sales transactions your business makes with your clients. The functions served by invoices include:

How to Create an Invoice

Creating an invoice is simple and straightforward. With online software such as this invoice generator, it becomes even easier. In the following section we explain the essential elements you should include in your invoices.

Title

The invoice should be labelled as such: the title of the invoice template should say “Invoice” (in some jurisdictions, you must say “Tax Invoice”).

Contact Information

The invoice should clearly state who it is from (you, the seller), and who it is for (your customer). In the From field in our free invoice generator, include your name or business name and the address, and any other contact information, such as the phone number, email and website URL. In the To field, mention those details of your customer.

Invoice Number

The invoice number is sometimes referred to as the Invoice ID. The invoice ID is an essential element in your invoice, as it allows you (and your clients) to easily identify and refer to individual transactions without ambiguity.

Thus, every invoice you send should have a unique number, and duplicate numbers should be avoided. The simplest way to do this is to have a single invoice numbering format, and increment the number per each invoice you create. The easiest approach is to simply start with one (1) and work up from there. However, it is common to have a prefix (e.g.: INV-001) or a bigger starting number (e.g.: 1001).

In some jurisdictions a sequential invoice number is required by law. In others, like in the U.S., you can have any invoice ID as long as its unique. The following are some non-sequential ways you can number your invoices:

Project-Based: if you work with your clients on a project-basis, it is possible to give a unique ID to each project and use that as a prefix for your invoices. For example, if you are creating an invoice related to the project 2550, the first invoice for the project can be 2550-001, the second 2550-002 and so on.

Customer-Based: you can give each of your customers a unique ID, and then have separate invoice number sequences for each of them. For example, the invoice sent to customer 2550 can have invoice numbers as 2550-001, 2550-002, . . .

Chronological: your invoice numbers can use the date of creation as its prefix. Any date format can be used, and if you use the ISO standard, it will be in the form of YYYY-MM-DD. For example, you were to create an invoice on the 1st of July, 2021, it could be numbered as: 20210-07-01-001.

Dates

Don’t forget to include the date (as seen in the top middle of our invoice template) and make sure it specifies when it was created and sent to your customer.. It should also have a due date, which is when it becomes payable. If you expect to be paid immediately, you can choose the “Due upon receipt” option. For most small businesses we have worked with, a due date of 14 days or less has shown to provide the best results.

Line Items

The invoice should include a sufficiently detailed listing of the products or services you are billing the client for. These details are organized as line items, specifying the product/service, amount, rate (per item) and the total amount to be paid for that particular item.

There are four types of line items to choose from in this free invoice generator. The most common is the Item type, where you mention the goods or services, their quantities and the rate. The amount will then be automatically calculated for you.

The Expense line item type can be used when it is a straightforward expense where you do not need to mention the quantity or rate: simply type in the description and amount.

With the Mileage line item type, you can set a per mile or kilometer rate (you can specify the unit—miles or km—by entering it in the Unit field. The invoice generator will then calculate the amount based on the distance and rate.

Use the Time line item type to bill for your time: mention the task in the description field, enter the time you have spent on this task in HH:MM format in the quantity field, and set an hourly rate.

For all these line item types in the invoice template, you can include a date (e.g.: the date you delivered a service or worked on a task), and links (e.g.: a web URL where the work is available for view). You can also attach files and add labels for easier referencing—sign up for Hiveage for these and many other powerful invoicing and billing features that are not present in the free invoice generator.

Set Taxes, Discounts and Shipping Fees

You can add taxes, discounts and shipping fees to the invoice sub total using the free invoice generator. The discounts will be applied first. The taxes will be applied after discounts. The shipping fees will be applied at the end. The total will be calculated by deducting the discounts from the sub total, and adding the taxes and shipping fees.

Invoice Notes

The Invoice notes field in the free invoice generator can be used to add further details about your service, such as terms and conditions, payment instructions, return policy on goods, and how many days the client has to make the payment before incurring a late fee. You’ll also want to thank your client and appreciate their business.

How to Send an Invoice

You can send the invoice to your client via post or digitally using email, online messaging software, or through a client portal that you manage. It is important to have a clear understanding between you and the customer on what communication channels will be used for billing.

Email is a common way for businesses to send invoices. The invoice itself can be attached to the email, or made available online and linked to in the body of the email. Your message should have:

When emailing clients you can use a template like the following, used in our online invoicing software:

Hi [Client’s name],

A new invoice has been generated for you by [company name]. Here’s a quick summary:

Invoice details: [invoice-number] - [a brief summary of invoice contents]

Total payable: [Amount]

Due date: [Date]

You can view the invoice or download a PDF copy of it from the following link:

[Link to online invoice]

Best regards,
[Your name and email signature]

How to Send a Payment Reminder

In an ideal world, you will send your invoice and the client will make the payment without further prompting. However, you are likely to have a few clients that would need an additional reminder or two, perhaps because they missed the original invoice notification, forgot about it, or lack proper organization.

In such instances, you would want to remind the client about the payment that is due. Many freelancers and entrepreneurs find this rather uncomfortable, but it is an important part of doing business. You would want to send payment reminders that are polite yet firm, which do not negatively affect the customer relationship but get the job done.

Invoicing software like Hiveage has to option to automate payment reminders, which makes it hassle-free and easy for small businesses. If you want to send a manual payment reminder via email, you can use an email like the following general reminder template available in Hiveage:

Hi [Client’s name],

Just a quick reminder that a payment was due on invoice [invoice number] by [due date].

Please make arrangements to settle the outstanding amount of [total due amount] at your earliest convenience.

You can view the invoice or download a PDF copy of it from the following link:

[Link to online invoice]

Best regards,
[Your name and email signature]

How to Send a Payment Receipt

When a client makes a payment, you can send them a payment receipt to acknowledge their payment. While a payment receipt looks somewhat similar to an invoice, the main difference between them is that an invoice is issued prior to a payment being made and a receipt is issued after a payment is processed.

Payment receipts typically include the following information about the transaction:

As you can see from the list above, the layout of a payment receipt will be similar to an invoice. You can easily generate and send payment receipts using our online invoicing software. The following is the standard notification email sent by Hiveage when a payment receipt is sent manually or automatically:

Hi [Client’s name],

Thank you for the payment of [payment amount] you made on [date] for the invoice [invoice number].

You can view the payment receipt or download a PDF copy of it from the following link:

[Link to online receipt]

Best regards,
[Your name and email signature]

How to manage invoicing with Hiveage

Whether you’re a freelancer or small business owner, the best thing you can do to ensure success is to keep the business end of your enterprise simple in order to keep the focus on actual work.

The problem with sending invoices randomly—either using our free invoice generator, an invoice template or a regular word processor—is that you don’t have a convenient way of recording what was owed, who was billed, when they were billed, when payments were expected, and if payments were received. It is easy for something to fall through the cracks. This is where having a proper tool to manage your invoicing comes handy.

Hiveage offers a simple, elegant and powerful platform for small business owners to send elegant estimates and professional online invoices, have evidence of when it was sent, and know when it has been paid. Hiveage also make it easier to files taxes at the end of the year because all your billing and income information is collected in one place.

For freelancers and entrepreneurs who are just starting up their businesses, we even have a free plan that supports up to 5 clients (with no limits on the number of invoices). It also comes with many additional features such as estimates, time-, expense- and mileage-tracking, and support for online payments. Please see our pricing plans for more details. All Hiveage accounts come with a free, full-featured trial of 14 days (no credit card required).