How to Invoice a Customer

Co-authored by Gina D'Amore

Last Updated: November 1, 2022 References

Need to create an invoice but not sure how to do it? Sending out good invoices can mean your company gets paid by more customers, so invoicing is very important for small businesses or people offering services. Create a professional invoice to improve receivables.

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Part 1

Part 1 of 3:

Creating a Thorough Invoice Form

1
Make it look professional. When sending a customer an invoice, it’s important you include key pieces of information, rather than just scribbling the amount owed on a piece of paper.
- Use the word “invoice.” Don’t assume the customer will know the invoice is an invoice if you don’t use that word.^{[1]
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- Give the invoice a number. You will want to keep track of the invoice. To do this more easily, you should include a unique identification number on the invoice.^{[2]
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- Some businesses will customarily add a tax identification number (known as a TIN) on invoices. Check with an accountant about whether you have one or need to do so. For example, non profit organizations and child-care agencies are some organizations that will customarily include tax identification numbers on invoices.
2
Number the invoice. Numbering the invoices you send out should enable you to keep better track of them, especially since you should retain a copy of each invoice.
- This way, the invoices should be in order by number based on the date they are sent. You can either buy invoices that are already numbered, use software that creates them for you, or create your own and number them.
- Include the purchasing number the invoice corresponds to if there is one. This will help you employ better accounting methods at your company.
- Customize the invoice by asking on the front end if customers need any special information, such as an employer identification number or a purchase order. Ask who the invoice should be directed to if you are dealing with a customer.
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3
Date the invoice. If you want to get paid in a timely fashion, you should date the invoice but also note the terms of payment that you expect the customer to follow. These terms should be spelled out at the time of purchase, as well.
- For example, the invoice should bear the date that the invoice itself was issued, as well as the date of purchase of the goods or services.
- When listing the terms of payment, make it clear to the consumer how soon the customer is expected to pay. For example, perhaps the payment is due within 30 days.
- Some companies choose to offer discounts. If you do, also spell them out clearly on the invoice. For example, you might offer a 1 percent discount if the customer pays the invoice within 30 days.
4
Retain a copy of all invoices. Small businesses should retain records of all invoices sent for at least six years. This is important for tax purposes and just good business accounting.
- An accountant can help you figure out the rules and regulations on record-keeping.
- It’s possible to keep electronic records. However, if you do so, retain a back-up copy. Post cash receipts promptly so you can track with accounts remain outstanding, which customers have sent in some money, and which are not sending any at all.
- Invoiced payments are essentially you extending credit to a customer and the law considers this an unsecured loan, meaning it was not secured by collateral, making it harder to recover the money from a customer if they don’t have the money to pay.^{[3]
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5
Keep invoices to a minimum. In the beginning, there can be less margin of error for a small business when it comes to revenue, so every payment can matter.
- Try to keep invoicing to a minimum when starting out and get payment up front in cash whenever possible.
- For many small businesses, it’s not uncommon for a third of your receivables to be delinquent.^{[4]
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- Consider whether it's worth offering services for an upfront flat rate rather than a more costly hourly rate since you might not recoup what you're owed with the latter.
6
Use an electronic invoice service. Such services, although they cost money, can help you track and organize your invoices, and make them look more professional.^{[5]
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- Some services allow you to create and send invoices by email, for example. You are able to view which invoices have been paid and send out reminders to those who are not. There are also apps that will send out invoices by phone.^{[6]
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- Some of the services include a complete history of the customer’s account. This can help you keep track of customers, as well as payments.
- Some of the services allow you to add your company logo to the invoice and simply require you to fill in online boxes to update the amount. There are many of these services offered through the Internet.

Part 2

Part 2 of 3:

Including the Right Content

1
Describe the service clearly. You need to make it explicitly clear which service was provided for the requested money on the invoice itself. Be specific, not vague.
- A good invoice should make it very clear what the customer ordered. Itemize any additional costs, such as tax, handling charges or other add ons. At the bottom of the invoice, present the total amount owed.
- In addition to describing in detail what the customer is being charged for, you should include the quantity of goods or services purchased. In some cases, this might be hours billed.
- Include the per-unit price, in addition to the overall price. Sometimes, customers are charged a flat rate for many hours or units, and sometimes they only buy one unit of something.
2
Include your contact information. One of the most important pieces of information you must include on an invoice is how your company can be contacted and where the customer should send the money.
- Don’t assume the customer knows what the invoice is for. Make sure your company’s name is clear on it, as well as your address and telephone number. The customer may want to call the company with questions about the bill, so include a customer service number if possible too.
- Include the customer’s information. It’s very important to make it explicitly clear who purchased the goods and services and is being requested to pay up. So make sure you include the customer’s information too, and get good information from the customer on the front end, so you don't have to look it up.
- It can also be a good idea to legitimize the order by including the name of the individual contact who actually placed it or authorized the purchase in the event you are dealing with a company. You could also add the name of the contact person at your company who took the order.
3
Consider adding a personal note. Ultimately, you want the customer to come back to purchase more goods and services, so you might consider personalizing the invoice.
- Some businesses add message boxes on their invoices where they can thank customers for their patronage. One study found that adding “please” or “thank you” to an invoice increases the chances it’s paid by 5 percent.^{[7]
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- A simple, thank you for your business or we appreciate the chance to help you can go a long way to building strong connections with customers.
- Sometimes companies use an invoice message box to note important information about a customer’s account or to include promotional details.
4
Put the time frame for payment on the invoice. Preferably, include this in bold font or offset lettering so it’s hard to miss. Usually payment windows are 30, 60 or 90 days.
- Make it clear how the customer should make the payment, where to send it, and to whom the customer should send it. You want to include all details that a customer would use as an excuse for not paying.
- Try to avoid using the words “upon receipt” when requesting payment in a certain time frame. Some customers may claim they didn’t receive the invoice. Provide the date the goods or service were provided. Date the invoice with the date it was sent out.
- Include something like “payment due within 30 days.” Agree to payment terms on the front end before you deliver the product or service.

Part 3

Part 3 of 3:

Increasing the Chances Customers Pay the Invoice

1
Consider electronic delivery. It’s possible these days to deliver invoices electronically as well as hard copy. Some customers prefer it, and it can lead to more payments.
- Some studies have found that businesses receive payment faster if they send out online invoices. Electronic payments can also save you money by reducing paper costs and they help eliminate fraud that can be associated with paper-based checks.
- Some companies allow customers to choose. Electronic payments will not work for some customers, such as those with poor eyesight or who don’t know how to use computers, so give customers options.
- Electronic payments are also convenient for some customers, who may not have the time to purchase stamps, go to the post office, or otherwise deal with paper invoices. It’s also harder for them to argue that they never received the invoice.
2
Consider charging late fees or interest. If you aren’t already doing so, one way you can compel customers to pay up is to charge interest on late payments or to charge late fees.
- Customers may prioritize the invoices that charge interest and late fees over the ones that do not, sending your invoice to the top of their payment pile.
- Be extremely clear on the invoice (and on the front end at the time of purchase) how much you will charge in interest or in late fees and when.
- For example, you could inform the customer that he or she will be charged 2 percent interest fee per month on late payments. Check with laws and regulations in your area on charging interest.
3
Offer incentives. It’s possible to motivate customers to pay their invoices by using negative reinforcement (such as interest charges or late fees), but it’s also possible to encourage them to do so by using positive reinforcement.
- For example, the invoice could include a 1 or 2 percent discount on the overall payment if the customer pays early (specify the time frame very clearly). Offer such things as gift certificates, merchandise, credits or future discounts on products if the customer pays by a certain time frame.
- Positive incentives help build brand loyalty and positive feelings in customers. Keep in mind that no one enjoys receiving a bill in the mail and, ultimately, you want the customer to purchase from you again.
- Sometimes businesses offer customers early settlements to take care of the amount as it can be better than getting nothing. Make sure the customer has actually received the invoice by checking on the customer’s address.
4
Determine the customer’s risk of non-payment. Before providing goods and services to a customer in advance, determine whether the customer is likely to pay.
- Demand cash up front from people who are at risk of non-payment. Some factors to consider are whether the customer has a long-standing pattern of paying invoices in a timely manner.
- How big is the customer? This can work both ways. If the company you’re dealing with is very large, they might be more likely to pay its bills. However, the risk of loss to you is greater if the company does not pay up.
- Determine how much risk you can afford to take and whether you’re in a position to take gamble on a riskier customer. Consider whether you’re cultivating the customer on a long-term basis or if this is likely to be a one-time sale.

Expert Q&A

Question

Why is timely invoicing important?

Gina D'Amore
Financial Accountant
Gina D'Amore is a Financial Accountant and the Founder of Love's Accounting. With 12 years of experience, Gina specializes in working with smaller companies in every area of accounting, including economics and human resources. She holds a Bachelor's Degree in Economics from Manhattanville College and a Bookkeeping Certificate from MiraCosta College.

Gina D'Amore

Financial Accountant

Expert Answer

You need to invoice promptly, or people will forget the details and start questioning your invoice. The longer you wait, the more details you will need to put on an invoice.
Question

How do you word an invoice if you want it paid immediately?

Community Answer

You should simply say that you want the invoice paid immediately. However, it can be more effective to provide the consumer with some window, even if it's "please pay the invoice within 5 days." Consider charging interest or late fees for non-payment.
Question

Which copy of the invoice goes to customers?

Community Answer

Give the customer the original, and you keep the (often yellow or pink) copy. Some invoices include a third colored sheet that you give to your accountant.