Invoicing - something every business owner needs to know how to do, but are you getting it right?
As a business owner, you’re required to provide proof of purchase within seven days and a tax invoice within 28 days of it being requested.
Getting your invoicing right will not only save time, but will also help you avoid payment delays as a result of your customers asking for you to reissue a correct invoice. It will also help you create good bookkeeping habits, track your sales, debtors and stock levels.
Here are the key things you need to know about invoicing.
Is it an invoice or tax invoice?
There is often confusion about when an invoice should be called a ‘tax invoice’. How your invoice is labelled comes down to whether you’re registered for GST.
- If your business is registered for GST, the invoice should clearly state ‘tax invoice’ and show the GST amount included.
- If your business is not registered for GST, your invoice should state ‘invoice’ and there should be no reference to GST.
It may seem like a minor detail, but if you incorrectly label an invoice as a ‘tax invoice’ or include GST when you aren’t registered for it, this could cause delays in receiving payment. This is because your customer may require you to reissue a corrected invoice before they can authorise/make payment.
Tip: Use the GST calculator to help you work out that element of your invoice.
What else should your invoice include?
It’s good practice to include:
- your business details, including business name, contact details (postal address, email and phone number) and your Australian Business Number (ABN)
- your customer’s details, including business name, ABN, delivery address and any relevant purchase order numbers
- invoice date
- invoice number
- amount due (if you’re registered for GST, remember to include GST amount and words ‘tax invoice’)
- description of goods and/or services provided
- payment terms (for example, a payment due date or a date you have agreed with your customer)
- payment options (for example, credit card, direct deposit or cash)
- direct banking details, including your BSB, account number, bank account name and the reference to be included with the payment so you can identify it.
- If you’re invoicing another business and your ABN isn’t included, they will be required to withhold the top rate of tax for any payments over $75.
- If you’re issuing a tax invoice for more than $1,000, you’ll also need to include the buyer’s identity or ABN.
The Australian Tax Office has developed voluntary standards relating to the layout of tax invoices and invoices, as well as practical information to help you issue tax invoices correctly.