How to Bill Your Customers: Invoicing Basics for Small Business

An invoice is a written request for payment that names who is billing whom, what was provided, how much is owed and when it is due.

A clear invoice helps you get paid sooner and avoids many disputes.  It is also part of your business records, since it shows income and supports your books and your tax return.

You do not need a fancy template.  A simple page that covers the basics, sent promptly, does the job.  What matters most is that every invoice is complete, numbered and saved.

Consistency matters as much as the layout.  Use the same numbering pattern, keep a running list of what has been sent and what has been paid, and record each invoice in your books when it goes out.  Businesses that bill from memory tend to miss jobs, and unbilled work is income that never gets collected or recorded.

Send the invoice as soon as the work is done or the goods are delivered, or on the schedule you agreed on in advance.

The longer you wait, the longer you wait to be paid.  Many owners send the invoice the same day, and some bill in stages for longer jobs.  Whatever your pattern, make it a routine, so no one is billed late by accident.

Also decide your payment terms up front and put them in writing.  Common choices are due on receipt or due within a set number of days.  Setting expectations at the start makes it easier to follow up later, as discussed in collecting late payments from customers.

Every invoice is a record of income, and how you count it depends on whether your business uses the cash or accrual method.

Under the cash method, income is generally counted when you receive payment.  Under the accrual method, it is generally counted when you earn it, which is often when you send the invoice.  Our guide to cash basis or accrual accounting explains the difference.

Keep a copy of every invoice, in order, with the record of when it was paid.  This ties to the rest of your bookkeeping and gives you support if the IRS asks about your income.  Taxes that may apply to a sale, such as sales tax, are a separate subject.  Alabama has its own rules, and we check how they apply.