Key takeaways
- Every invoice needs a unique number, the invoice date, your details, the customer’s details, a clear description of the work, the amounts, the total due, and how and when to pay.
- Write a due date, not just “Net 30”. A date leaves no room for argument about when the clock started.
- Add sales tax or VAT only if you are required or registered to collect it, and show it as its own line.
- Send the invoice as soon as the work is done, and keep a copy. The IRS generally expects records to be kept for at least three years.
What an invoice is for
An invoice tells a customer what they owe, for what, and by when. Once it is sent, it is also your record of the sale. You use it to track who has paid, to back up the income on your tax return, and, if it ever comes to it, to show what was agreed when you chase a debt.
A clear invoice gets paid faster. Most late payments are not refusals but delays: the invoice went to the wrong person, the purchase order number was missing, or the customer’s accounts team had a question. Each of the details below removes one of those reasons.
What to include on every invoice
There is no single required format in the US, but the UK government’s list of what an invoice must include is a good checklist anywhere. Add the extras in the second half of the list to make the invoice easy to pay.
- The word “Invoice” at the top, so it is not mistaken for a quote or a receipt.
- A unique invoice number.
- The invoice date and the date you supplied the goods or finished the work.
- Your business name, address and contact details. A UK limited company must show its full registered name.
- The customer’s name or company name and address, and a contact or department if they have one.
- A clear description of each item or service, with quantity, rate and line total.
- Subtotal, any discount, any sales tax or VAT as its own line, and the total due.
- The payment due date and the payment terms.
- How to pay: bank details, a payment link, or the address for checks.
- The customer’s purchase order number, if they gave you one. Many larger companies will not pay an invoice without it.
Step by step: writing the invoice
Start from the agreed quote or contract, so the invoice matches what the customer already accepted. Then work through these steps.
- Give the invoice the next number in your sequence. A simple pattern such as 2026-041 works and is easy to search.
- Enter the customer’s billing details exactly as they want them. Ask who handles invoices if you do not know.
- List each item or block of work on its own line, with the quantity, unit price and line total. Use the same wording as the quote.
- Add any agreed expenses as separate lines, with receipts if the contract says the customer reimburses them.
- Work out the subtotal, apply any discount, then add tax if it applies, and show the total due.
- Write the due date and the payment methods you accept.
- Check the arithmetic, save a copy as a PDF, and send it to the person who approves payment.
Worked example: a freelance design invoice
A freelance designer finishes a website project for a small company. The quote was 18 hours at $75 an hour, plus a $120 stock photo license the client agreed to pay for. Design services are not taxed where the designer works, so there is no sales tax line. The terms offer 2% off for payment within 10 days, with the full amount due in 30 days.
- The early payment discount is $1,470 × 2% = $29.40, so a payment within 10 days is $1,440.60.
- If the client pays the full $1,470 by card at 2.9% + $0.30, the processing fee is $42.93 and the designer receives $1,427.07. Factor that in when choosing which payment methods to offer.
| Description | Quantity | Rate | Amount |
|---|---|---|---|
| Website design and build | 18 hours | $75.00 | $1,350.00 |
| Stock photo license (reimbursable) | 1 | $120.00 | $120.00 |
| Subtotal | $1,470.00 | ||
| Total due by December 4, 2026 | $1,470.00 | ||
| If paid by November 14, 2026 (2% off) | $1,440.60 |
Payment terms that get you paid
Payment terms tell the customer when to pay. Common ones are “Due on receipt”, “Net 15” and “Net 30”, meaning payment is due 15 or 30 days after the invoice date. “2/10 Net 30” offers 2% off for payment within 10 days, with the full amount due in 30.
Shorter terms help cash flow, but only if the customer agrees to them. Put your terms in the quote or contract before the work starts, then repeat them on the invoice. A customer who signed up to Net 15 has a hard time arguing for Net 60.
Always print the actual due date as well as the terms. It removes any doubt about whether the 30 days started when you sent the invoice or when they opened it.
Late fees and interest
If you plan to charge for late payment, say so in your contract and on the invoice before the work is done. A late fee added after the fact is hard to enforce.
In the US, the limits on late fees and interest come from state law and from your contract, so check the rules in your state before choosing a rate. A fee of 1.5% a month on the $1,470 invoice above would add $22.05 for each month it is overdue.
In the UK, businesses can claim statutory interest on late payments from other businesses at 8% plus the Bank of England base rate, unless the contract sets a different rate.
Free toolLate payment fee calculatorTax, numbering and record keeping
Charge sales tax only where you are required to collect it, and VAT or GST only if you are registered. Show the tax on its own line with the rate, so the customer can see what they paid and, if they are a business, claim it back where the rules allow. A VAT invoice in the UK or EU has extra required details covered in our VAT invoice guide.
Keep invoice numbers in one unbroken sequence. Do not reuse a number, even for a cancelled invoice. If you need to correct an invoice after sending it, issue a credit note against it and a new invoice, so your records always add up.
Keep a copy of every invoice you send. The IRS says to keep records that support income on your return until the period of limitations for that return runs out, which is generally three years, and longer in some cases.
