If you are using a limited company as your payment structure you will need to send invoices to your clients for the services you have provided, normally on a monthly basis, and sometimes weekly.
This guide explains exactly how to prepare an invoice with an example, together with links to our free and fully editable invoice templates in both Microsoft Word and Microsoft Excel format.
Once you've then sent the invoice you will then have to wait normally up to 30 days to get paid. And if you don't get paid then you will need to chase payment. If the client or agency refuses to pay then you have to follow the correct late invoice payment process to collect your debts and the money owed to you.
How your accountant can help you
Whilst we have provided you with templates in Word and Excel below, the accounting system you use should do all of this automatically for you. Gone are the days when you need to use spreadsheets or type invoices out in Word.
Most contractors will choose an accounting firm who specialises in the contracting industry - see our 10 tips for choosing an accountant. Your chosen accountant will be able to guide you through our 10 easy steps to setting up your company and getting started. One of these steps will be to set up your accounts online using one of the popular cloud based systems like FreeAgent or Xero.
If you are just starting out and haven't yet chosen your accountant them please consider our chosen accounting partner who we recommend for providing specialist accounting services for contractors and small business.
What details to include on an invoice
Here is a list of the legal requirements for invoices in the UK. These are all included on our invoice templates at the bottom of this page.
The following information should be included on all your invoices:
- Company name
- Company address
- Company telephone number and email address.
- Company number
- VAT registration number (if VAT registered)
Each of your invoices should have a unique invoice number. Although is called a number it can include letters. A common method is to prefix invoices with letters that indicate the client.
For example: If you provided services for IBM and the BBC, for IBM you could use IBM001 and IBM002, etc. For the BBC you could use BBC001 and BBC002.
Using three placements for the numbers will ensure they sort in date order.
You should include the following dates:
- Date: the date the invoice was raised.
- Due date: the date by which payment should be made. Normally 30 days after the invoice date.
The name of the agency, or client if contracting directly.
This section requires the following:
- A description of the services provided
- The gross amount due.
- The VAT amount, if you are VAT registered.
- The total amount due.
|20 Days @ £500 per day
Specify how you would like to receive the money. For example:
Payment should be made within 30 days by cheque or money transfer.
Cheques should be made payable to ‘My Company Ltd’.
Money transfers should be sent to:
The Contractors Bank
Reference: Use invoice number
Most agencies and clients do not pay via cheque and choose money transfer. Cheques can be inconvenient. If you wish to only be paid by money transfer then use the following:
Payment should be made within 30 days by money transfer only to the following account:
The Contractors Bank
Reference: Use invoice number
Email the invoice, or post it?
Your agency or client will specify how they would like to receive the invoice. Some will request a paper copy.
If you are permitted to submit your invoice via email then it is useful to convert the invoice into PDF format so that it cannot be altered. There is a free PDF creator which you can use at PrimoPDF. This creates a PDF file from any application which can then be emailed to the client.
What about timesheets?
Most agencies and clients require a timesheet to be signed and a copy included with the invoice. Ensure you take a copy of the timesheet before sending it in!
Issues with late or non-payment
If you do not get paid by the due date and invoices remain unpaid for more than 30 days then you have the legal right to charge interest on the money for Late Payment. Make sure you address any late payment concerns early, because they can often signal that the client is having cash flow problems, which could lead to non-payment, which is far more expensive to you than just being paid late!
It is important to follow the correct late payment process if invoices have not been paid. Do not simply down tools and march off the client site demanding payment. This could result in the client claiming a breach of contract. The first step is to speak to the client, before then following up with more formal and legal action. This will involve a formal warning, Letter Before Action, debt collection agency, and finally litigation via the courts.
50 Software Drive
London E1 3FR
Tel: 0208 555 555
|20 December 2004
|20 January 2005
|20 days @ £600 per day
|VAT @ 20%
|Payment within 30 days.
Money transfer to the account below:
Wicked Solutions Ltd
Sort Code: 20-21-22
Account No: 12345678