What to Include on Your Self-Employed Invoice

If you’re a small business owner and you’ve registered your company as a sole proprietorship, you fall under the category of sole traders or self-employed businesses.

As a self-employed sole trader, the invoice is one of the most important tax documents as it allows you to: 

• Bill clients;
• Keep accurate records of products and services rendered for tax purposes;
• Track received payments and cash flow.

Unlike in a limited company, to create professional invoices as a sole trader you’ll need to address some key specifics.

In the following sections, we offer a clear breakdown of how to write this legal document. We show you what to include on a self-employed invoice, when and how to send your first invoice, how to handle unpaid invoices, and more. 

How to Create an Invoice if You’re Self-employed

For any self-employed business, handling invoices is both a fundamental process of running a company, yet a challenging endeavour. 

To create the perfect invoice, it’s important to understand that the main aims of this legal document are: 

• To provide a clear description of the products or services you’ve delivered; 
• The total amount due by the customer;
• Detailed instructions on how they can make the payment.

We have compiled a few brief tips that will help you with the initial steps of developing an invoice.

Using Pre-made Templates

An easy first step you can take is to use a self-employed invoice template. There are plenty of available free invoice templates you can take advantage of online. In addition, there are paid versions that allow you to customise the invoice according to your needs and potentially utilise additional features related to invoicing.

In some cases, you may be able to gain access to a free invoice template through popular invoicing software, like QuickBooks and FreshBooks. With templates, you can create invoices quickly and easily thanks to pre-set fields. All you have to do is fill in the required data and send it to your customers.

Adding All the Essential Details 

Regardless of whether you choose to use a self-employed invoice template or build your invoices from scratch, it’s crucial to ensure your invoices contain all of the information required from a legal standpoint. 

Overall, a complete self-employed invoices should include the following:

• Company name: add the company name under which your organisation legally operates. 
• Business address: this is an obligatory component of your business details that must be featured on every invoice you send to clients. Make sure to provide the full company address, including street, number, city, country, and postcode.
• Contact details: provide your business phone number, email address, and website (if you have one).
• Client’s business details: the invoice should additionally contain the customer’s business details, such as business name, company address, and contact details. 
• Unique invoice number: every invoice must contain a unique number to make tracking easier. In the UK, if you’re not VAT registered, you can use any invoice number you’d like. However, if you’re VAT registered, chances are that you’ll need to rely on a sequential invoice number. If you’re uncertain about creating invoice numbers, it’s recommended to schedule a consultation with an accountant who can provide guidance on the process. 
• Invoice date: make sure the invoice contains the date on which it was created. Separately, it should also show the supply date (the date on which the products or services were delivered to the customer). 
• Services provided: outline and explain in detail the services or products that you have provided. Add details such as quantities, hours worked, or units provided, based on your agreement with your customer. 
• Invoice amount: include the invoice amount before applying any taxes.
• Total amount due: unlike the invoice amount, the total amount due is the amount the customer owes, including any sales tax or VAT.
• Payment terms: payment terms can vary from customer to customer. Make sure that you include all the details for every invoice, including the due date, fees for late payments, and others.
• Payment methods: if you have any specific payment methods that you accept, like bank transfers, debit card, or others, make sure to outline them in the invoice. 
• Bank details: don’t forget to add your bank details to the invoice. This will help the customer set up the payment successfully. 

At first, creating a structure that can fit in all of these essential data can seem challenging. However, with a pre-made template or some time spent on building your own invoices, the task will become less time-consuming and easy to complete.

Once you’ve included the must-have information on the invoice, make sure that all taxes are properly calculated.

Tax Calculation

For VAT-registered businesses, it’s vital to make sure that you’ve applied the correct tax rate and that the VAT or sales tax is featured on the invoice. This data will be used for tax purposes, both for your company and your client’s company.

Failing to do this can result in serious legal conflicts, fines, and long-term challenges. 

Before sending invoices to your clients, make sure you’ve double-checked everything. If necessary, make corrections before sending the document.

What Should an Invoice Look Like

When creating your self-employed invoice, you can incorporate your company branding throughout the document, making it unique and easy to diversify from others. Some of the most professional self-employed invoices contain the company’s logo, the brand colours, and possibly shapes and elements that are part of the branding.

Believe it or not, the visual aspects of your invoice (like colours, fonts, and structure) can make it much easier to read, increasing your chances of getting paid quickly. 

Consider using headings and subheadings to divide important information in the invoice and create individual sections. Remember that some of the most important components of the invoice are the invoice amount, due date, and payment terms. Make sure to accentuate these areas, making them prominently displayed.

When and How to Send The Invoice

When sending invoices as a sole trader, it’s also important to consider the “when” and “how”. 

Unlike with limited companies, for self-employed business owners, it’s highly recommended to send invoices immediately after you’ve delivered the products or services to your client. This enables you to manage a consistent and flawless payment process. In addition, it also minimises risks associated with late payments. 

In case you’re involved with long-term projects, like renovation or consulting, it may be best to set up a schedule that will enable you to send out invoices at regular intervals. Depending on your agreement with the client, this could be done weekly, monthly, or even yearly. 

When it comes to the “how”, you can choose between two methods. One of them is email. This is perhaps one of the most popular ways to send invoices to clients to ensure they’re received and read on time. You can attach the self-employed invoice as a PDF to guarantee that it remains unchanged.

Alternatively, you can use invoicing software that automates this process and sends the invoice directly to the customer from the platform. 

How to Ensure Your Invoice Is Compliant

Compliance with legal and tax requirements is essential for all businesses, but is of paramount importance for VAT-registered businesses. In order to prevent legal conflicts, make sure that your self-employed invoice contains the sections that we covered earlier in this article.

Some of the most critical things to include are the company details, unique invoice number, VAT number (and applied tax rate along with the total VAT amount charged), invoice date, and payment terms. 

In addition, make sure that all of your information is regularly updated. A lot of businesses, especially smaller ones that don’t invest in invoicing software and don’t work with professional accountants, can neglect this part of the process. 

Oftentimes, it turns out that invoices are being sent with outdated company addresses, due dates, and other data that has been copied from previous documents sent to other clients. 

What to Do if Your Invoice Is Not Paid on Time

Even when you structure your invoices like a professional, there are no guarantees against late payments and unpaid invoices. This common challenge is on the table for a log of self-employed people. The good news, however, is that it can be tackled via several methods.

If you notice that the due date has passed and you still haven’t received a payment from your customer, you can always send a kind reminder and ask if everything is okay with the invoice. In a lot of cases, clients with busy schedules simply miss the invoice or are struggling with internal processing delays.

In case you don’t receive a response or the customer has addressed the problem but still hasn’t paid the invoice, you can follow up with another reminder. Make sure to mention the new due date and outline any consequences for late payments, like fines or others. 

To stay on the right side of the law in case of late payments, it’s crucial to have a clause in your payment terms that addresses late payments and the associated consequences. 

The final approach you can take to ensure your money is paid is legal action. You can request legal advice from experts, which may require hiring a collections agency. 

Invoicing Software for Small Businesses

Once your sole proprietorship grows and you find yourself in the position of a busy sole trader, chances are that you’ll have less time for administrative tasks. 

Luckily, the otherwise time-consuming and manually-requiring invoicing process can quickly and easily turn into an automated process with the help of accounting or invoicing software. Such digital solutions can help with 

We recommend exploring the invoicing tools on the market, a few of which we have listed below:

• QuickBooks: as one of the most popular invoicing software on the market, QuickBooks gives access to a full suite of accounting software tools that can help any business manage its finances. It’s easy to use, powerful, and offers all of the integration capabilities you’ll need. Enjoy expense tracking and categorisation, real-time payment monitoring, sales tax management, VAT calculated automatically, and more. 
• FreshBooks: FreshBooks is another leader in the space for invoicing software solutions. It’s perfect for service-based companies and is actively used by freelancers and consultants. It comes with time-tracking capabilities, expense management, automated payment reminders, and multiple payment options, meaning you can accept the preferred payment methods of your customers with ease.
• Xero: an ideal invoicing software solution for small businesses and self-employed business owners. It offers customisable invoice templates, automated invoice reminders, payment tracking, and integration with a vast range of payment services. You can also use the software to calculate your taxes and enjoy multi-currency support. 

Ultimately, choosing the right software solution for your business will depend entirely on your specific requirements, the size of your business, your industry, and other factors.

Conclusion

Creating and managing your self-employed invoices doesn’t have to be a nightmare. 

By having access to the right information and being aware of the must-have components in your invoices, you can rest assured that you’re on the right side of the law and that you’re getting paid by your customers on time.

Invoicing templates and automated software can make these tasks less daunting. Just make sure you’ve researched all of the available options in detail before setting up your invoicing process. 

Frequently Asked Questions

Why do I need an invoice as a sole trader?

When self-employed, issuing invoices is a fundamental process of running your business. Invoices are considered legal documents that demonstrate the transactions between you and your customers. They not only allow businesses to get paid but are also a must-have for tax purposes.

Do I have to charge VAT on my invoices?

It depends on whether or not your company is VAT-registered. If you’re VAT registered, you’ll need to charge VAT on your invoices, making sure that the VAT amount, tax rate, and VAT registration number are all clearly visible on the document.

What should I do if I make a mistake on my self-employed invoice but have already sent it to a client?

In case you’ve sent an incorrect invoice to a client, you can issue a credit note to cancel the invoice and create a new, correct one. Don’t forget that the credit note should reference the unique invoice number.