How to create a valid invoice in Australia

If you have a business in Australia, you need to know how to create valid invoices for your customers.

Yep – not all invoices are created equal. Let’s talk about what you need to put in your invoices, what kinds of invoices there are and how to create and send your invoices the right way.

What is an invoice?

When you sell something, you need to give your customer an invoice. It has all the details of the sale, like what you sold, how much it cost, when and how they should pay you, and who you and your customer are. An invoice is also a legal paper that can prove if someone owes you money.

Who can send invoices?

A legitimate business with a registered and current ABN. your ABN must be recorded on all invoices. If it isn’t, the legislation requires the recipient on the invoice to withhold 47% of the total amount and remit it to the ATO.

What kinds of invoices are there?

There are two main kinds of invoices in Australia: normal invoices and tax invoices. The kind of invoice you need to use depends on whether your business has to pay goods and services tax (GST) or not.

  • A normal invoice is used by businesses that don’t have to pay GST. It doesn’t have any GST amount or information. A normal invoice should not say ‘tax invoice’ or have the words ‘tax invoice’.
  • A tax invoice is used by businesses that have to pay GST. It shows the GST amount and information for each thing you sold, as well as the total GST amount for the whole invoice. A tax invoice must say ‘Tax Invoice’ and have your Australian Business Number (ABN) or Australian Company Number (ACN).

What information do you need to put in an invoice?

No matter what kind of invoice you use, you need to make sure your invoices have all the required information specified by the Australian Taxation Office (ATO) as well as the info your customers need.

According to the ATO and business.gov.au, your invoices should have these details:

  • Your business details, like your business name (and trading name, if you have one), address, website, email and phone number.
  • Your ABN or ACN, if you have one. This is a must for tax invoices.
  • Your customer details e.g. like their name and address.
  • The date you’re sending the invoice.
  • A unique invoice number to help you find and track the invoice. You can use any system to make invoice numbers, like numbers in order, dates or letters.
  • A job reference or purchase order (PO) number, if there is one. This can help you match the invoice with the order or contract from your customer.
  • A description of each item or service you sold, including quantity, price, GST amount (if there is one) and total amount.
  • The total amount due for the invoice, including any discounts, fees or taxes.
  • The payment terms, like when and how they should pay you, what ways they can pay you, and what happens if they pay late.
  • If there is tax, say ‘Tax Invoice’ on the invoice.

How to make an invoice

I’m not sure if many people still write their own invoices – you could if you wanted to but we’d recommend using programs like Word or Excel or your accounting software. This means you can create a template and use it again and again.

Here are some tips to design your invoice:

  • Use a clear and simple layout that makes it easy to read and understand.
  • Use the same font size and style throughout the invoice.
  • Put your logo and business name at the top of the invoice.
  • Use colours that match your logo
  • Use headings, subheadings, tables and lists to organise the information
  • Highlight the important stuff, like the invoice number, date, total amount and payment terms.
  • Include a thank you at the end of the invoice.

Tips for sending your invoices

We recommend making sure you use a system that keeps a record of your sent invoices, and one that makes sure the invoice reaches your customer.

Here are some other tips to incorporate:

  • Send your invoices as soon as you can after finishing the sale or service. This can help you get paid sooner and avoid problems or delays – or forgetting (we’ve all been there!).
  • Ask your customer who the best person to send the invoice to is. They might have an accounts department or admin team that processes payments
  • Send your invoices in a format that works with your customer’s system. For example, if you send an electronic invoice, make sure it is in a common file format like PDF or Word.
  • If you can, schedule a reminder before payment and follow-up messages if they don’t pay by the due date.
  • You could also offer incentives for early payments or consider a penalty for late payments by tracking how much time it takes of non billable work to finalise these.

How to keep records of invoices?

You need to keep records of all your invoices for at least five years for tax purposes. You also need to keep records of any payments you got or debts owed from your customers. Keeping accurate and consistent records can help you manage your money, see how well your sales are going and do your taxes right – as well as have a clear view of your cash flow.

Here are some tips on invoice record keeping

  • Use a filing system that lets you sort and find your invoices by date, number, customer or status.
  • Backup to protect your invoices from being lost or damaged because of fire, theft or computer failure.
  • Use an accounting software or app that can help you record and watch your invoices automatically.

To sum up

Making valid invoices is an important skill for any business owner in Australia. Invoices can help you get paid on time, manage your cash flow, keep good relationships with your customers and do your taxes right. By following these steps and tips, you can make and send invoices that are clear, correct and professional.

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