Free Invoice Templates in Word for Small Business Owners

A Quick Guide to Invoices for Small Business Owners

Getting paid is the most exciting part of running a business. But invoicing can also be a major source of frustration. If you submit your invoice in the wrong format, a payment from your client can get delayed. Likewise, not including customer invoices in the proper format can give you trouble with the taxman.

This guide provides several must-know pointers for invoicing like a champ!

Always Spell Out Your Payment Terms

A payment term is an indicator suggesting the conditions for making a payment. Typically, it indicates when you expect your invoice to get paid. The issues arise because payment terms are often assumed, rather than explicitly communicated. As a result, a staggering 58% of British SMBs admit to having money tied up in unpaid late invoices.

To avoid delays due to miscommunication, state your payment terms up front in an email. Then reflect them in your invoice template.

The common invoice payment terms among small businesses are:

• Net-zero (due upon receipt) – payment is due on the same day.
• NET N where n stands for a number of days (7, 14, 30, etc). Thirty days is the most popular invoice payment term among sole traders according to a Tide survey.
• EOM (short for end-of-month) – payment due every 30/31st of the month.

To discourage late payments, you can also include a quick clause on penalties for breaching the payment terms. Law Insider has many examples of late payment clauses for invoices.

Specify Accepted Payment Methods

Another common reason for invoice payment delays is a misunderstanding around payment methods. If you aren’t invoicing your clients via an online payment app like Stripe or PayPal automatically, communicate how they must foot your bill.

For bank transfers, make sure to provide all the required details such as:

• Institution name
• IBAN (or local account number)
• SWIFT (if applicable)
• Account holder name (if different from your business name)

On the other side, if you plan to use direct debit, be sure to collect the following information from your customer. Then follow your local legal guidelines for setting this process such as SEPA Direct Debit Mandate (EU) or Nacha Operating Rules for ACH debits in the US.

Ensure Tax Compliance

Depending on the nature of your business, you may be subject to collecting local sales taxes.

In the US, sales and use tax rates vary at the city-, country-, and state levels. So it’s best to go straight to a local authority to clarify your obligations. As a rule of thumb, you’ll need to obtain a state tax ID (different from your federal tax ID). Then add a respective tax percentage for each type of taxable goods/services delivered.

In Europe, specific tax rates apply to different categories of products at the country level. Though many sales taxes are also unified across the EU member states. Both service providers and merchants will need to apply for a VAT (valued added tax) number when reaching a country-specific annual turnover threshold. VAT tax is due for most products and services.

Follow a Billing Cycle

To stay productive at your end, establish a “rulebook” for invoicing: Standardize when and how you invoice clients.

At a minimum, decide on the standard payment terms for different types of projects you do. Then scale this rule across all your clients.

For example:

• Invoice NET 7 for all one-off tasks.
• Invoice EOM for all retainer clients.

Then schedule yourself a reminder to invoice all outstanding accounts on the last workday of the month. You can go even an extra mile and automatically pre-schedule email dispatches for this date.

Business Invoicing Made Simple

As an entrepreneur, I’ve learned first-hand how daunting invoicing can be, especially when you are offering services and selling some digital products at the same time.

That’s why I’ve designed efficient and attractive invoice templates, covering both options.

Each one has room for:

• Customer details
• Your business details
• Description of items sold
• Payment terms and payment methods
• Payment terms

All that’s left for you is to download your choice — and then customize the invoice template in Word with your company details!