Starting a new business or becoming self-employed in the UK

Starting a new business or becoming self-employed involves a multitude of tasks, and among the most important is managing invoices. Invoices are essential documents both for sound financial management of your business and for maintaining compliance with tax legislation. In this article, we will give you practical advice on how to properly manage your invoices and avoid common mistakes when creating a business in the UK.

Why is managing invoices so important?

Invoicing is a fundamental task for any business. It not only allows you to document your sales but is also used to monitor the profitability of your business, comply with HMRC regulations, and ensure good cash flow management. When you issue an invoice, you must follow several specific rules: include mandatory information, respect payment deadlines, and manage unpaid invoices. Effective invoice management allows you to keep an overview of your finances and to focus on growing your business.

1. Essential information to include in an invoice

An invoice is a legally binding document. Whether you are self-employed or manage a larger business, you must follow certain rules for each invoice issued. Here is the information that you should definitely include in each bill:

• Your business details: as a service or product supplier, you must clearly indicate your company name, address, VAT number (if registered), and company registration number.
• Customer details: you must provide the full contact details of your customer (name, address, etc.).
• Invoice number: each invoice must have a unique number. You must absolutely respect chronological order to avoid confusion and to comply with tax standards. Use separate bill numbers for each month or year to keep things organised.
• Issue date and due date: the date of the invoice is important to define the payment term (generally 30 days, unless agreed in advance). The due date also allows you to manage payments on time.
• Details of products or services: Indicate precisely the products or services provided, with the quantity, the unit price, the applicable VAT rate (if VAT-registered), and the total amount.
• Total amount to be paid: Clearly indicate the total amount, including VAT if applicable.
• Payment terms: specify the terms of payment (bank transfer, cheque, online payment, etc.), the payment deadline, and any late fees.

This information is not only crucial for your company's accounting but is also required by HMRC. In the event of an inspection, you should be able to provide these documents clearly and accurately.

2. Numbering your invoices correctly: an important step for your accounting

It is imperative to number your invoices logically and chronologically. The invoice number is a unique identifier that allows you to track your accounting documents and facilitate their management. To avoid problems, never use the same number twice and make sure the numbers follow a sequential order. For example, start with 001 and go to 002, 003, etc. You can also choose to number by month or by year (for example, 2024-001, 2024-002, etc.).

Good management of invoice numbers is essential to avoid mistakes, facilitate research in your accounting software, and remain in compliance with the law.

3. Choosing the right tool to edit and send your invoices

There are several ways to create and send invoices. In the past, many entrepreneurs used Excel spreadsheets to write their invoices. Although it may seem simple, it is not the most reliable solution in the long term, especially for managing a large number of invoices.

Professional invoicing software will not only allow you to create invoices quickly but also to track them, send them by email, and manage your payments more efficiently.

4. Managing unpaid invoices: how to react?

Unfortunately, not all invoices are paid on time. Unpaid invoices are part of every entrepreneur's daily life. To manage these situations, here are a few steps you can take:

• Friendly reminders: Start by sending an initial reminder a few days before the invoice is due, then follow up with your customer once the deadline has passed. Communication is crucial to maintaining a good business relationship.
• Cash flow management: make sure you know the exact amount of unpaid invoices in order to better manage your cash flow. Use an invoice management tool that will allow you to see all invoices issued and unpaid.
• Legal procedure: if the payment is too late, you can consider an amicable recovery procedure, or even legal action in the most serious cases. But before you get there, try to maintain open communication with your customers.

Tip: When sending your invoices, you can recommend payment through online banking apps. This way, your customer can simply scan your bill and pay it in seconds.

5. Electronic invoicing: a modern and efficient solution

With the increasing digitisation of transactions, electronic invoicing has emerged as an essential solution for many entrepreneurs. In addition to being faster, electronic invoicing is also more ecological and secure. In particular, it allows:

• To issue invoices directly by email to your customers, which reduces the costs and management time associated with printing and mailing.
• To follow the evolution of payments in real-time, which helps you better manage your cash flow.
• To comply with UK law: electronic invoicing is perfectly legal provided that certain record-keeping and security criteria are met.

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