The Small Business Owner’s Guide to Invoicing

Proper invoicing helps to protect your business’s cash flow, maintain good records and meet your tax obligations. 

But what is a proper invoice and what do you do if a customer doesn’t pay the invoice on time?

Creating Proper Invoices

A good invoice should include all the information your customer needs to know to pay you on time – and a proper invoice must include certain information for tax purposes.

First things first – what type of invoice should you issue?

The first thing you need to do is identify what type of invoice you should be issuing. If you’re registered for Goods and Services tax (GST) then you need to issue a tax invoice. Any invoice you issue must include the phrase ‘tax invoice’.

If you’re not registered for GST then you don’t include a tax component in your invoice and the document should not include the phrase ‘tax invoice’.

What goes in the invoice?

Mandatory information

All tax invoices must include 6 pieces of information to be valid. It’s good practice to include these items even if you’re not currently registered for GST – after all you may eventually get to a stage where the business must register for GST and having this information set up before then will help you out greatly.

For sales less than AUD$1,000 (including GST) you must include:

• The phrase ‘Tax invoice’ – preferably right at the top of the document
• Your identity as the seller such as your business name or trading name. Including contact details is optional but recommended as it’ll help the buyer get in touch with you should they have any questions.
• Your Australian business number (ABN) or company number (ACN)
• The date you issued the invoice
• A brief list of the items sold, including quantity and price
• The GST amount payable (if any). This can be displayed per item or if the GST amount is exactly 1/11th of the total price, you can use a statement such as ‘Total price includes GST’.

If your invoice is for sales of AUD$1,000 (including GST) or more then the invoice must also include the customer’s identity or ABN. 

Find out more about ATO compliant invoices

Want access to an ATO compliant Google Docs invoice template that you can easily customise for your own business needs? Purchase the full Australian Small Business Owner’s Invoicing Bundle – it includes full written guides on how to create an ATO compliant invoice in Google Workspace; email invoices as PDF documents or Google Drive links and many other resources designed to help small businesses with their invoicing needs. 

Find out more

Include information about the service and payment

Once you’ve included the mandatory information, you need to consider what else goes into your invoice.

The rest of your invoice should include:

• a unique invoice number for your reference – it can help to add code to your invoices that identifies the customer, date or job number
• payment details such as:
  • terms – for example, the number of days before payment is due, the final due date, or a discount for early payment
  • options for payment, such as direct deposit, credit card, EFTPOS and cash. If  you’re accepting money through direct deposit then consider providing a PayID rather than your full banking details for greater security.
• customer details such as:
  • contact details such as postal address, email address and phone number
  • name of the person who placed the order
  • name of the person who will pay the invoice (this can help speed up payment)
  • customer’s purchase order (PO) number or contract agreement dates

Find out more about ATO compliant invoices

What happens once you’ve created the invoice?

Sending the invoice

Invoices can be sent in any number of ways including via email. 

If you’ve created the invoice in Google Docs, then you can download the document as a PDF and attach it as a separate document; or leave it in Google Drive and share a link to the document within your email directly.

You can also create a re-usable template in Gmail to make it easier and quicker to create and send invoicing emails.

Keeping Records

By law you need to keep business records (including all invoices that you’ve sent) for at least 5 years. It’s a good idea to create regular backups of your documents even if you’ve created them in Google Drive to make sure they’re available if the ATO comes looking.

Learn more about record keeping for Australian businesses.

What happens if they don’t pay?

Asking for an invoice to be paid is an uncomfortable but sometimes necessary part of being a small business owner. 

First overdue notice.

When payment first becomes overdue, give your customer a courtesy reminder by phone, email or by posting a letter. They might have forgotten about the bill, or had some minor organisational issue so this first reminder might be enough to get the invoice paid.

Be sure to include invoice details; payment options; and contact information in your reminder to make it easier for the customer to pay you quickly.

Send an overdue payment reminder.

If the customer misses the next agreed payment date or there’s been no response to your first payment reminder, reach out again. Give the customer another call, or send another email or letter reminding them of the money owing and requesting payment.

3. Send the final notice email 

When the customer hasn’t paid as per the terms of payment – and has missed any extended payment dates again – call or email them to discuss the outstanding invoice and request payment.

Want an easy to use, courteous over due reminder email template that you can cut and paste for your own business needs? Purchase the Small Business Owner’s Invoicing Bundle – as well as providing sample email texts it includes full written guides on how to add them to Gmail as reusable templates along with many other resources designed to help small businesses with their invoicing needs.

Find out more

More Small Business Owner Invoicing Tips and Hints

1. It’s easy to underestimate how much time invoicing can take up. You can spend up to 10% of your work time creating, sending and chasing invoices – not good if you’re also doing much of the other income generating work as well. Setting up the most time-efficient systems you can – like re-usable Gmail templates; pre-filled invoices; and good record keeping – is key.

2. Make the invoice clear and easy to understand. List the details of the job in a way that makes sense to the client – any confusion could create a payment lag. It’s also good to personalise your invoice with your business logo or some other custom touch.

3. Invoice as soon as possible. Send your invoice as soon as possible, the sooner a client receives an invoice the sooner they will make payment. It also means they will receive it when the value of your work is still fresh in their mind.

4. Don’t be afraid to chase payment. Don’t wait until an invoice is two weeks late before reminding a client they owe you payment. Put a calendar reminder into your Google Calendar on the day the invoice was due and if it hasn’t been paid follow up immediately with your client.

5. Short payment terms get you paid quicker. Invoices with short payment terms are more likely to go past the due date, but you’ll still get your money sooner than if you give your client three or four weeks to pay. Research by Xero showed:

• 1 week payment terms get settled in about 2 weeks
• 2 week payment terms get settled in 2-3 weeks
• 3 or 4 week payment terms get settled in about a month