Whether you have one client a year, or one per day, it is very important to understand how to issue an invoice or you do not get paid. But if you’re creating an invoice, why not get it right from the beginning and create an invoice which is compliant to the Canada Revenue Agency (CRA).
This topic is especially important for businesses and business owners who do not already use QuickBooks, because Quickbooks already creates CRA compliant invoices.
As mentioned, invoices are the final step you take before being paid. If your invoice isn’t effective, you may be left wondering why your payments are late or incorrect. You need to be paid on time in order to keep operating, so you need to know how to create an excellent invoice that helps people make payments easily. Using a proper invoice will also help you manage your books, making tax time much easier.
What is an Invoice?
An invoice is meant to physically establish the obligation on the part of the purchaser. Basically, it’s a written agreement between the buyer and seller requesting payment and outlining terms.
The most important thing to remember is that your invoice needs to be comprehensive, easy to understand and meet the needs of the Canada Revenue Agency. You want to avoid any confusion on your invoices.
What Do You Need to Include?
Creating an invoice can seem daunting, but once you get it right, then it’s good to go. What needs to be included? How should you format it?
There are several key parts of an invoice that you need to include, and these sections are:
Maybe it goes without saying, but make sure to include a header that labels the document as an invoice. Labelling your invoice in clear text helps your customer recognize the document at a glance.
- Date and Invoice Number
Both of these are typically included in the header. They help later on by simplifying filing so you can recognize the document and file it in order.
- Customer Contact Information
Usually this will be at the very top of the invoice or in the header. You’ll add the customer’s name, address, and other contact information in the same way you would address an envelope. This helps you mail the invoice, but do this even if you’re emailing your invoice.
- Your Company’s Contact Information
This includes your company’s legal name, address, phone number and email address or website. You can also include a fax number if it’s applicable. This should be included near the top of the invoice. By including this, you help your client with filing the invoice, as well as giving them the information to contact you if they need.
- List of Goods and/or Services
This section can be as detailed or generic as you feel necessary. Just be sure to make it as easy to understand as possible, as you don’t want any confusion. The most important things to include in this section are:
- The name of the good or service provided
- Date the good or service was provided
- Rate for the good or service provided
- Quantity of the good or service provided
It’s easiest to include each item in its own “line” or subsection, so you can provide more detail where needed. This also helps lay out a complete cost breakdown, which can clear up any questions your client has about individual pricing.
- Fees or Taxes
This section outlines to the customer that you are charging them GST/HST or PST, and what percentage. This tells the customer that you are registered for GST/HST or PST with the government and that you will accept those funds from them and forward them on to the government.
It is very important that your GST/HST number appear on the invoice. As a registrant, it is a requirement from the CRA. Without including that 9-digit number which ends in RT or RT001, you cannot charge GST/HST.
It is helpful for you and for your client if you place the tax figures after the sub-total and before the total, on the invoice. That way when preparing GST/HST returns, that figure is in the same place every time.
- Total Amount Due
This is probably the most obvious part of the invoice. You need to prominently include the total amount the client owes for the goods or services provided, plus taxes and fees. This puts the amount in written form for both you and the client to reference easily. Make this information easy to find so a client can glance at the invoice and know how much is owed.
- Payment Instructions
Be sure to include in the footer of your invoice the details on how your customer can pay you. They need to know where to send a cheque in the mail, which credit cards you accept, or if they can send payment electronically. The invoice should also be clear as to who the cheque must be made out to.
You can also include any late fees, processing fees, or potential payment discounts.
- A Due Date
Ensure your due date is clearly visible on the invoice. This can clear up any potential issues down the road and help ensure you get paid on time.
If you have a regular client who you expect payment from in 30 days, but they take 60 days, you can consider giving them incentive, such as 2% net 30, which means if they pay within 30-days they can deduct 2% off the invoice amount.
How to Send an Invoice
Many business owners are paperless, so you can choose to invoice through a cloud accounting system such as QuickBooks Online. In this case, you’ll be able to choose from a few designs for your invoices and add your information and logos to create a template.
Every time you need to invoice a client, you can simply pull up your template, select from your customers (or add a new customer to the database), and fill in your invoice with line items and pricing.
There are many benefits to using QuickBooks Online, which include:
- Less calculations – all totals and taxes are calculated for you
- Quick glance reports and totals that tell you how much income and revenue you’ve generated from your invoices
- A complete record of invoices and payments, so you know what is outstanding at a single glance
- Tracking for certain goods and services – for example, you’ll be able to see how much revenue you made on one product versus another in any given time period
- CRA Compliant invoices
There are many other benefits to using a cloud system for your bookkeeping and accounting, including the ability to easily track and sort expenses. To learn more, visit QuickBooks Online and take the software for a test drive.