How To Create an Invoice

Knowing how to create an invoice is a vital skill when running a small business. The good news is it’s pretty easy, particularly when there are plenty of tools out there to help you streamline the process.

In this practical guide, we outline what you need to include in your invoice depending on the nature of your business, and offer practical tips on how to make an invoice in the simplest way possible.

What is an invoice?

An invoice is a document outlining the items or services a business has provided to a customer, the cost of those items and services, and a request for payment.

In the UK, if both you and your customer are VAT registered, you must issue an invoice, even if the customer has already paid. For non-VAT registered businesses, invoices are not mandated but are recommended as standard practice, especially for high-value projects (e.g. business-to-business (B2B) work) or if you’re a contractor), since they offer clarity on cost calculations and terms and conditions of payment.

There are many ways to generate and issue invoices, including sending digitally as a manually-generated PDF attached to an email, or using accounting software. 

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Components of an invoice

There’s no ‘official’ template for invoices in the UK. However, HMRC requirements state that invoices must include the following elements:

Here’s a breakdown of everything your invoice must include:

• A unique invoice identification number 
• Your company name, address, and contact information
• The company name and address of the customer you’re invoicing
• A clear description of products or services being charged for along with the amount for payment and the due date.
• The date(s) the products or services were provided 
• The date the invoice was issued
• The total amount owed
  • If your business isn’t VAT-registered, this is the sum cost of products or services provided
  • If your business is VAT registered, the total must be broken down into:
    • Total cost of products or services provided before VAT
    • VAT amount (and VAT number) 
    • Total cost including VAT

If you’re a sole trader, you should include your own name in the invoice and your business name if you have one — according to HMRC, sole traders are only legally mandated to include an address if they trade under a business name, but it is standard practice to do so. 

If you are invoicing from a limited company, you must display your full company name (as it appears on your letters of incorporation) and your company address. 

Types of Invoices

While all UK invoices must contain the same basic components, there are a number of invoice types that serve different business purposes. 

VAT invoice

If you’re a VAT-registered business (which generally applies if you have taxable earnings over £90,000, although exceptions do apply), you must provide a VAT invoice. 

If the products or services you’re charging for are ‘zero-rated’ (this includes essential products or services such as basic food items, children’s clothing and sanitary products), you must still include a VAT charge of 0% on your invoice . 

Proforma invoice

A proforma invoice is a preliminary estimate of costs provided once a customer has committed to a purchase, but before goods or services have been supplied. It’s more like a quote than a true invoice, but represents a commitment on the part of the seller to deliver products or services to the buyer for a specific price, so might be used to secure financing needed to fulfil an order.

Because proforma invoices aren’t strictly invoices, they don’t carry the same legal requirements as other invoices (it’s not necessary for them to include VAT calculations, for example), and they shouldn’t be considered a binding agreement or be used for accounting purposes. 

Commercial invoice

A commercial invoice is a document required for international sales. Three copies are typically required: one inside the shipment for the customer, and two attached externally for customs authorities in both the origin and destination countries. It contains details including the value and origin of goods being exported and who is bearing the cost, taxes and associated risk. 

A UK commercial invoice must also include a Harmonised System (HS) code, which classifies the goods according to a standardised global system, and an Economic Operators Registration and Identification (EORI) number. All of this information allows customs authorities to process the shipment and calculate applicable duties and taxes. 

Recurring invoice

A recurring invoice would be issued for long-term or subscription services. Ongoing maintenance services, software subscriptions, and equipment hires are all examples. Recurring invoices are usually automatically generated and sent from your accounting software. 

Interim and final invoices

An interim invoice is a request for partial payment of a project’s total cost. They are most commonly used for high-value or long-term projects – for example in the construction or legal sectors – as they allow customers to spread costs, and suppliers to maintain cash flow throughout the fulfilment process. There are no fixed rules for issuing interim invoices, but many businesses issue them at fixed time intervals or according to project milestones.  

A final invoice is issued upon completion of the project or service and details the remaining balance owed.

How to create an invoice 

There are numerous ways to create invoices, from customising a free invoice template to send directly to customers to using invoicing software programs that combine creation, tracking and payment. Whatever method you choose, there are a number of core steps to consider. 

1. Use an invoice numbering system

Clearly numbering invoices not only ensures that income is properly documented for tax and accounting purposes, but makes it easier for businesses to track payments. HMRC requirements state that VAT invoices must include a sequential number, based on one or more series, that uniquely identifies the document.

While there are no specific requirements for invoice numbers for non-VAT registered businesses, having a structured invoice numbering system is still recommended to support effective record-keeping. Choose a system that works for you e.g. a combination of issue date, job number, and customer initials.

2. Add a logo to your invoice

Adding your logo and branding to your invoice not only makes it look more professional, it reinforces your brand, providing cohesion across your sales and marketing process.

3. Include a professional header

As well as your logo, include the name, address and contact details of your business in your invoice header. You should also include your customer details, such as business name, address and contact information. If you’re a limited company and/ or VAT registered you should add your registration numbers too.

4. Include dates

Add the date that the invoice is being issued, the dates that goods or services were provided, and the date (or time period) when payment is due.

5. Description of goods and services

Provide a detailed description of goods and services and, if applicable, an itemised breakdown. Include the price of each unit, the quantity purchased, the sub-total, grand total and VAT if applicable. 

When invoicing for services, you should include the time spent on each service, the cost per service or hourly charge, depending on how you calculate fees.

6. Tax and payment details to include

You should provide VAT calculation if applicable. Include the total amount excluding VAT, the VAT percentage applied and the final total inclusive of VAT.

Include all of the following tax and payment details:

• Date of invoice issue
• Date payment due
• Payment methods accepted e.g., bank transfer, online payment links, cheque, cash etc.
• Late payment terms and fees
• Currencies accepted
• Payment terms if the invoice is issued on account or if it is split into staged payments
• Any other conditions, such as early repayment discounts

7. Explanatory notes

Use this section to add any additional details about the invoice such as clarifications of charges, or any terms, e.g. payment period or conditions for exchange or return.

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How to make invoicing easier

When it comes to creating an invoice, there are a number of options to keep things simple. If you’re new to invoicing, you could start by using a basic invoice template.

If you’re looking to upgrade your process, there are invoicing software programs that can make invoicing your customers simple and painless. Square Invoices, for example, with its top-rated invoicing app features, lets you create and send professional invoices from your computer or phone, allow customers convenient ways to pay, and easily track your cash flow. 

Five ways to create an invoice

Need some help getting started with invoicing? Here are five of the most popular ways to create an invoice.

1. How to create an invoice in Google Docs

Google Docs provides an easy-to-share option for creating an invoice. With easily downloadable templates you can quickly generate an invoice, or start from scratch and create your own. 

1. Log in to your Google account and go to 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. This includes custom entry fields with things like company name, address, phone number, email, logo, payment terms, and official payee name for receiving payments.

2. 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 invoice samples. 

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. Enter your email address in the pop-up and the template will open in a new tab. If you don’t see the template pop up immediately, check your pop-up blocker settings for the Square website.
3. Add in the entry fields for your business name, customer name, sent and due dates, the items, and the amounts.
4. Download your invoice and send it to your customer as an attachment.

3. 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 most familiar with the software. You can then download it as a PDF and send via email. 

1. Choose from Word’s invoice template under New in the File menu.
2. Look for the invoice icon in the dialogue 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. Put in the client’s information (usually underneath and on the opposite side from your company’s contact info). Be sure to include the name of the business, mailing address, phone number, and email.
5. Include the unique invoice number, date the invoice was prepared, and a payment due date.
6. Indicate the payment method to set clear expectations.
7. Break down products or services into line item descriptions, along with charges associated with each. Calculate the total, including any applicable sales tax, delivery fees, etc. It’s helpful to put the grand total in bold font so that it clearly stands out.
8. Download your invoice as a PDF and send it as an email attachment to your client. 

4. How to create an invoice in Microsoft Excel

Excel offers a variety of clean, easy-to-use invoice templates, depending on your needs. Excel is a good option for smaller businesses that don’t send high volumes of invoices and want a simple record-keeping solution. 

1. Open a new workbook from the File menu and then look for the Invoice icon in the dialogue 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 things like company name, address, phone number, email, logo, customer ID (if applicable), payment terms, and official payee name for receiving payments.
4. Be sure to include a unique invoice number, a description of products or services, and the client’s information.

5. How to create an invoice online with Square Invoices

Square invoice software has professional, ready-to-go invoice templates that you can use to stay organised and save time. All the invoices are organised in your Square Dashboard and can be sent directly from the Dashboard or your mobile device, so it’s easy to keep track of what’s been paid and what’s outstanding.

Square online invoices are also customisable, which means you can do things like apply discounts (without having to do the maths 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 allows you to send unlimited invoices, estimates, contracts and more for free. Payments can be accepted 24/7: customers can pay invoices online, in person or from their phone with a credit or debit card, Apple Pay, Google Pay or gift card. They can also buy now and pay later using Clearpay.

Square Invoices has clear processing fees: 2.5% for online card payments, 1.75% for in-person card payments and 6% + 30p for card payments with Clearpay.

Creating a Square invoice on desktop

1. Sign up for your free Square account.
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.
7. When your clients receive the invoice in their email, they can pay you securely online. The money is usually transferred in your bank account in one or two business days.

Creating a Square invoice on the invoicing app

1. Download the Square Point of Sale 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.
8. When your clients receive the invoice in their email, they can pay you securely online. The money is usually transferred in your bank account in one or two business days.

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How to create an invoice FAQs

What information must be included in an invoice?

An invoice should include the names and addresses of the buyer and seller, an invoice number, descriptions of goods and services, a cost breakdown, payment terms, and a VAT calculation if applicable. 

Do I need software to create an invoice?

You don’t need software to create an invoice, but, a solution like Square free invoicing tool can be very helpful. It gives you access to professional templates and one-click delivery. 

How do I number invoices correctly?

A unique identification number is for your own record keeping. The key point to keep in mind is that all numbers should be unique. 

Can I email invoices to customers?

Yes. Emailing invoices as a PDF is the most common method of delivery. 

Do I need to charge VAT on my invoices?

Only if your business is VAT registered. If this is the case, include a VAT calculation and add VAT to the final amount.