How To Create an Invoice: Guide for Businesses

If you’re a small business owner, you need to know how to create an invoice. The good news is that it’s easy, especially if you use the right tools to streamline the process.

When it comes to creating an invoice, you have options. If you’re new to invoicing, there are plenty of services that provide basic invoice templates. If you’ve been invoicing for a while and are looking to upgrade your process, there are also invoicing software programs that can make invoicing your customers simple and painless.

Here’s how to create an invoice in Canada, from the key elements that should be in every invoice to the best practices to adopt and mistakes to avoid. 

What is an invoice?

An invoice is a business document issued to a buyer by a seller. It includes an itemized list of the products and services provided, along with the amounts due for them. 

It serves a few purposes: 

• Requesting payment, usually based on specific payment terms, like a payment due upon receipt or a payment due 30 days from the date of the invoice. 
• Providing a record of the transaction for accounting and financial tracking. 
• Staying compliant with Canada Revenue Agency (CRA) requirements.  

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Key elements of an invoice 

While different invoice types and templates apply to different scenarios, there are a few elements that should be included in every invoice in Canada.  

Business contact information 

Your business contact information — company name, address, phone number and email —  should be in the header of your invoice. Include the name, email and phone number of the specific sender too. 

Adding your logo is a good idea from a branding standpoint and looks more professional. With Square Invoices, you can add your logo and customize invoice colours to match your brand. 

Customer contact information 

The customer’s contact information is usually right below the header. It includes the full name, address, phone number and email of your customer. 

Customer details can be collected at checkout during online transactions or requested during onboarding if you provide services like beauty treatments. 

GST/HST number 

In Canada, you have to register for and start charging the GST/HST sales tax once you exceed the small supplier threshold ($30,000 in a single quarter or over four consecutive quarters — you can learn more on the CRA website). Once registered, you are legally required to include this number on your invoices. 

Invoice number 

The invoice number is a unique identifier. Naming conventions vary and can include both letters and numbers. Having a system behind the way you name and number invoices means you can easily track them.  

Invoice date 

The invoice date is simply the date the invoice was created. It’s important because it creates a dated record and also impacts the payment or refund terms. 

For example, a payment might be due 14 days after the invoice date, or a customer might have seven days after the invoice is issued to return a product and request a refund. 

Being able to reference this date also matters if you need to write a payment reminder message to a customer following a late or missed payment. 

Due date/payment terms 

The due date states when you expect the customer to pay an invoice. Common accounting payment terms are sometimes specified along with the due date to outline the conditions of the payment. 

For example, “Net 30” means that the payment is due 30 days after the invoice date. “Due upon receipt” means that you expect the payment as soon as your customer receives and opens the invoice. 

Your payment terms should also include any late fees or penalties incurred when an invoice is not processed by the due date. 

Itemized list with quantities and prices 

Break down the products and services provided along with quantities and prices. For example, one column of your invoice might have the name of a product, one column may state its price and one column may state the quantity purchased. You would then create a new row for a different product and fill out the same columns. 

Subtotal 

This is where you add the price of all products and services on your invoice, before taxes. 

Taxes 

Invoices in Canada must include a clear breakdown of the GST/HST (or PST in British Columbia and QST in Quebec). The federal and provincial taxes should be identified and calculated separately for your customer to know exactly what they’re paying in sales tax and why. 

Keep in mind that you’re charging the sales tax based on the place of supply, which is where your customer is based. A tool like Square Invoices can automatically apply the right tax based on the customer’s location. 

There are also exceptions to be aware of, like zero-rated supplies, where the GST/HST rate is 0%. Some items, like books, are subject to point-of-sale rebates, which means that you only apply the federal part of the HST to them. In that case, you have a few options on your invoice, per the CRA’s guidelines. You can show: 

• The total amount of the HST payable (or the total HST rate) with the amount of the rebate shown separately.
• The total HST payable as an amount net of the rebate amount paid or credited.
• The total price of the qualifying item that includes HST at a net rate of 5%.

Read more about qualifying items on the CRA website.  

Total 

Add the total due at the bottom of your invoice, after the itemized list of products/services, the subtotal and the tax breakdown. This straightforward number shows the customer the final amount owing. 

Payment methods 

You should also let customers know how they can pay you on your invoice. Ideally, you would give them a few different ways to pay, from Interac e-transfer to credit cards, which enhances their experience and also increases the likelihood you’ll get paid on time. 

Square Invoices lets you easily offer multiple payment options and helps you access your funds as soon as the next day — and you can even give customers the option to add a tip. 

Different types of invoices and when to use them  

There are scenarios in which you’d want to use a more specific type of invoice. For example, when a client purchases a subscription and pays monthly, you can streamline the process by setting up a recurring invoice. 

Here are different types of invoices and when to use them. 

• Standard invoice: Most of the invoices you come across are likely standard invoices, which include all the elements discussed above and apply to a variety of business types and situations. 
• Pro forma invoice: If your offerings are personalized for each client, like if you’re a wedding florist, you can use a pro forma invoice, which is technically more like a quote than a formal invoice and lets customers know what to expect before the work is performed. 
• Recurring invoice: Maybe you run a lash studio and clients purchase memberships to get refills at a discount, or you offer web design services on a monthly retainer. Instead of billing clients every time, you can set up recurring invoices in advance based on your preferred schedule. It reduces manual work and the likelihood of mistakes. 
• Credit invoice: When you have to issue a refund or adjust a charge after a purchase, you can send a credit invoice, which looks exactly like a standard one except the total shows as a negative number. 
• Debit memo: A debit memo is like sending a note to tell a customer that you need to adjust the amount of a previously sent invoice. It’s useful if you undercharge a customer by accident, for example. 
• Past due invoice: In an ideal world, customers would always pay invoices on time, but that’s just not realistic, even if you lay out the invoice due date and the payment terms. A past due invoice serves as a friendly reminder to pay. It restates the amount owed and adds any late fees or penalties incurred. 

Square Invoices helps you streamline invoicing workflows with a variety of templates and layouts, which you can edit and customize based on the situation and invoice type. You can save your templates and quickly reuse them in the future, and you can also automate processes like recurring invoices and automatic reminders for past due invoices. 

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How to create an invoice 

Now that you understand what an invoice is, what it entails and what kind of invoices you can use in different settings, here’s a simple step-by-step checklist for how to create an invoice: 

1. Choose your invoice template. Add your business contact information and logo. 
2. Enter your customer’s details, including their full name, address, email and phone number.  
3. Assign a unique number to your invoice (this is automatically generated with a tool like Square Invoices).   
4. Add the invoice date and due date.
5. Specify your payment terms e.g., due upon receipt, as well as any late fees or penalties. 
6. List all products or services with quantities and prices.  
7. Calculate the subtotal before tax (or let your invoicing software do the math). 
8. Add the applicable sales tax based on the place of supply (your customer’s location). 
9. Display the total amount due after tax.  
10. Include accepted payment methods with a convenient payment link that gives customers the option to pay right away using their method of choice. 

Need additional guidance? Below we break down how to create an invoice with popular tools.

How to create an invoice in Google Docs

Google Docs provide an easy-to-share option for creating an invoice document. With easily downloadable templates you can quickly generate an invoice, or start from scratch and create your own. To use a Google Docs invoice template:

1. Log in to your Google account and go to your Google Drive.
2. Click the ‘+ New’ button and scroll down to Google Docs in the drop-down menu. Click the arrow next to it and select ‘From a template.’ This brings you to the templates page.
3. Type “invoice” in the search bar on the templates page. A selection of invoice templates should appear in the results. Review the choices and select the best invoice template for your business.
4. Fill out the new page with the template you selected.

How to create an invoice with a free invoice generator

If you’re not using any of the above programs or their templates, you can use a free invoice generator. Square and a handful of accounting software services, like QuickBooks, offer professional invoicing templates. To use a free invoice template from Square, follow these steps:

1. On the Square invoice template page, select the colour and file format for the invoice you want to create.
2. Click on ‘Download Invoice‘ and save the file to your computer.
3. Add in the entry fields for your business name, customer name, sent and due dates, the items and the amounts.
4. Save your invoice and send it to your customer as an attachment.

How to create an invoice in Microsoft Word

There are a variety of easy, professional-looking templates in Word. Creating invoices this way can work well, especially if you are familiar with the software. However, it can also be a bit cumbersome. This is especially true when it comes to getting paid. Printing and sending paper invoices via snail mail can have a long turnaround time.

If you’re sending a Word file via email, you have to figure out the best method for customers to pay you. Usually this involves using a third-party system (like an online payments app) or having them send along a physical cheque. If you still prefer to create invoices in Word, here’s how you do it:

1. Choose from Word’s invoice template under ‘New’ in the ‘File’ menu.
2. Look for the ‘Invoice’ icon in the dialog box (usually on the left-hand side), and select the invoice type that best fits your needs.
3. Set a professional header that contains your business’s contact information: business name, mailing address, phone number, email, and business logo.
4. Fill out the custom entry fields with all the information required from our checklist above.
5. Download the invoice and send to your customer as an attachment.

How to create an invoice in Microsoft Excel

Excel offers a variety of clean, easy-to-use invoice templates, depending on your needs. However, you may run into the same logistical challenges as sending invoices via Word.

1. Open a new workbook from the ‘File’ menu and then look for the ‘Invoice’ icon in the dialog box (usually on the left-hand side).
2. Choose the invoice type that best fits your needs — from a basic product invoice to invoices for specific types of services.
3. Fill out the custom entry fields with all the information required from our checklist above.
4. Download the invoice and send to your customer as an attachment. 

How to create an invoice online with Square Invoices

Square Invoices, which is free with the Square point-of-sale (POS) system, lets you create and send professional invoices from your computer and phone. 

It has professional, ready-to-go invoice templates that you can use to stay organized and save time. All the invoices are organized in one place (your Square Dashboard), so it’s easy to keep track of what’s been paid and what’s outstanding. Square’s invoices are customizable, which means you can do things like apply discounts (without having to do the math on your end) and add a custom tip field (in case customers are inclined to leave you a little bonus). You can even enable invoice scheduling or recurring payments to give yourself greater flexibility when it comes to sending invoices.

Square Invoices has clear pricing — it’s only 2.8% plus 30 cents per paid invoice. If your client pays with a credit or debit card (co-branded Visa or Mastercard debit card) stored on file it’s 3.3% plus 15 cents. And invoices are easy to send — you can shoot them out directly from your mobile device or your Square Dashboard.

Creating a Square invoice on desktop

1. Sign up for your free account here.
2. Go to Invoices in your online Square Dashboard.
3. Click ‘Create Invoice’.
4. Select a customer from your Customer Directory, or enter a new name and email address. You can enter up to nine recipients.
5. Add the invoice details and any applicable discounts.
6. Click ‘Send’.

Creating an invoice on the Square POS app

1. Download the Square POS app on your iOS or Android device.
2. Create your free Square account or sign in with your existing Square account.
3. Tap the ‘+’ sign on the navigation bar and select ‘Invoice’.
4. Tap ‘Add Customer’ and either select an existing customer from your Directory or tap ‘Create Customer’ to enter your customer’s name and email address.
5. Tap ‘Add Item’ to add an item from your Item Library or add a custom amount.
6. Add a custom message, set automatic reminders, or request a deposit if needed.
7. Tap ‘Send’.

When your customers receive the invoice in their email from either your online Square Dashboard or the Square POS app, they can pay you securely online. The money is usually transferred in your bank account in one or two business days.

Invoicing best practices 

Regardless of the method you use to create an invoice, here are a few universal best practices to prioritize. 

• Send invoices promptly: Waiting too long after you deliver a product or service to send an invoice can not only catch customers off-guard, but it can also delay payments. 
• Use a professional layout: Your invoice is a reflection of your brand. Using a template takes the guesswork out of creating a professional layout, and with a tool like Square Invoices, you can easily add your logo for a polished touch. 
• Be clear and concise: Help customers digest important information quickly, like how much they owe you and when and how to pay. 
• Have a consistent invoice numbering system: Whether you include project names or numbers in your invoices, have a consistent system so that each invoice is unique and easy to locate if you need to reference it later. 
• Lay out payment terms and due dates: Specify when a payment is due — or what the payment schedule is if you’re breaking up a purchase in several installments —  and what happens if a payment is late to encourage customers to pay on time. 
• Apply and break down sales taxes: Stay compliant with the CRA’s requirement by registering for the GST/HST when required, adding your GST/HST number to your invoice template and applying the correct sales tax on your invoices, making sure to separate the federal and provincial tax amounts.  
• Offer multiple payment options: Canadians desire payment options that make their lives easier, according to a recent Payments Canada report. From accepting major credit cards like Visa, Mastercard and Amex to offering a Buy Now, Pay Later (BNPL) option, give customers as much flexibility as possible. 
• Follow up politely as needed: Don’t wait months after an invoice is overdue to send a reminder. Follow up with courteous payment reminders as soon as a payment is late (or, even better, set automatic reminders).  
• Keep records: You never know when you’ll need to pull up an old invoice. Always keep records in the event of a customer dispute or a CRA audit. 

Invoicing mistake to avoid 

Common invoicing mistakes can create friction and even cash flow issues. Here are a few things to avoid when creating invoices: 

• Omitting to clarify payment terms: Ambiguity is the enemy of smooth invoicing. Lay out payment terms from the get-go to avoid misunderstandings and surprises. 
• Applying the wrong GST/HST sales tax: Knowing when and how to apply the right GST/HST sales tax can be tricky. A tool like Square Invoices calculates it and breaks it down automatically for you.
• Disorganized numbering conventions: You won’t be able to locate invoices without a consistent numbering system. 
• Not following up on late payments: Following up on a late payment can feel uncomfortable, but sometimes customers genuinely forget about an invoice and appreciate the reminder. 
• Overcomplicating the language and design: Customers should easily be able to understand the details of your invoice, so it’s important to stick to a clean design and straightforward language. 

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How to create an invoice FAQs 

What is an invoice used for?

An invoice is used to request a payment when a product or service is sold. It lets the buyer know when and how much to pay, gives a formal record of the transaction to both the buyer and seller and helps with accounting and tax filing requirements. 

What’s the difference between an invoice and a receipt?

An invoice is a formal payment request, while a receipt confirms that a payment was made and the transaction is complete. You may send an invoice when a payment or service is rendered, and your POS will then issue a receipt after your customer makes a payment. 

How can I make my own invoice?

You can make an invoice from scratch, but it’s much easier to use a template or invoicing software as a starting point. It keeps your layout looking professional and also helps you include important details, like your GST/HST number and the appropriate breakdown of taxes. 

Can I create an invoice for free? 

Yes, you can create an invoice for free with Square Invoices, which comes with Square POS and features a variety of templates and opportunities to streamline invoicing-related processes. 

Is an invoice legally binding?

Unpaid invoices are one of the most common disputes filed with the Business Disputes Register. An invoice itself isn’t legally binding, but the circumstances that led you to send an invoice might be. For example, if you and a client agreed on the scope, price and timing of a project, even over email, it can be enough to be considered an enforceable contract, according to Delta Law.