The Invoicing 101: The ultimate guide for start-ups, side hustlers and sole traders

Setting out as a freelancer, launching a side hustle or simply monetising a creative project comes with complications when it comes to taking payments online. From HMRC registration to working out how much tax you might owe, launching a freelance project can be taxing when it comes down to all the admin.

A good place to start once you’ve established your new venture is looking into your online payment methods, and establishing a robust invoicing and payments plan from day one.

Making invoicing interesting is a bold claim, but we can help you to make it a little easier with our ultimate guide to invoicing.

What is an invoice?

An invoice is the document exchanged between you (the seller) and your client or customer (the buyer) and it’s essentially a formal bill for you to itemise and request payment for the agreed commercial products or work you mutually agreed on. Importantly, the invoice is a time-stamped document that outlines what the client or customer owes you and by when. Essentially, as a freelancer or small business owner, your invoice documents dictate how and when you get paid, so while putting them together can be admin-heavy and a little mundane, don’t overlook the importance of your invoices and their contents.

How to structure your invoices

Before we even start with structuring your invoice, you’ll need to establish how to put a value on your work and what pricing model to adopt when taking payment online. If you have a product-based business, take a look at competitive product prices and take into account the value of your time. If you run a service-based freelance business, you’ll want to look at different ways you might charge. For example, if you’re a writer you might need to choose whether you want to charge on a per word, per hour or per day. Likewise, for a designer, you may want to charge per project or on an hourly basis. Be mindful to choose carefully to make sure every hour of work you provide will be accounted for and, one piece of candid advice from one freelancer to another: do not undervalue your own time.

The contents of your invoice will depend on the nature of the work you provide and may also be dictated by your clients (they may have stipulations of what they need you to include in your invoices). Here are a few essentials you will need to include in your invoice:

1. The word ‘invoice’ right at the top in bold (it seems blindingly obvious, but it can be surprisingly easy to forget if you craft your invoices manually)
2. An invoice reference number. For your first invoice, something like ‘0001’ might be advisable
3. The date you are sending this invoice
4. The date payment will be due (depending on your agreed payment terms)
5. Your name, address and email address
6. The name and company address of your client or customer
7. An itemised outline (and price) of the service/product provided to the client
8. A more detailed description of those items or services
9. The total amount due (don’t forget tax if you’re VAT registered)
10. Your payment details (outlining how they can make the payment)

Free Invoicing templates

The good news is, you don’t necessarily have to manually put together your own invoice template in Microsoft Word, or fiddle about with tables and structures to design your printable UK invoice. There are a number of ways you can benefit from a pre-designed UK invoice template online, often compatible with Word, which you can then customise to outline the relevant inclusions for your self-employed invoices moving forward.

The simple task of just choosing the right UK invoice template can be a little overwhelming with the scale of ‘free invoice template’ options available online. If you’re looking for an easy, customisable invoice template for free, make sure ‘free’ really means ‘free’. Some platforms allow you to customise your invoice and then, frustratingly, charge you for the pleasure, right at the end when you have your invoice exactly right.

To make it super easy, we’ve put together a comprehensive invoicing solution which is baked into our easy-to-use Coupay dashboard. That means you can compile, edit and send invoices from one easy to use platform without having to trawl the internet to find the best free-to-download invoice template to help you get started.

What’s more, we’re offering a hot-off-the-press early Christmas gift of free lifetime access to the first 100 signups, so get there quick to claim your user friendly, unlimited free invoicing service!

How to deal with late invoice payments

An all-time favourite for us freelancers: late payments.

It’s true, part of the fun of freelance life is learning how to deal with customers paying late. While it’s tempting to avoid conflict or simply accept this as part of humble freelance life, don’t take it lying down.  There are a few ways to react to customers who pay late

Send invoice reminders

For habitually late payers, it might be wise to consider dropping your client a polite note before your invoice is due. For the most part, invoices are innocently paid late because your customer might simply have forgotten, so gently reminding them ahead of time can be a good strategy especially if you know they are late payment culprits.

Send follow-up emails

If you don’t see the money land on the day your invoice is due, it’s worth sending a follow up the day after. More often than not, you’ll find they’re just a little behind or are working through a backlog of payments. However, if payment is really late, keep sending polite nudges and consider what you’re entitled to charge as a late payment penalty.

Charge late payment penalties

Don’t forget you have rights when it comes to late payments. If your payment is significantly late, of if you’re trying to find ways to cope with a frequently late paying customer, it might be wise to research the late commercial payments act and consider charging late penalty fees. For a debt of under £1000, freelancers can charge a late payment penalty of £40, and for debts of between £1000-9,999, it is a £70 penalty. Interest can also be payable at 8 per cent over the bank of England base rate, so make it clear to your client that you may charge these fees in the event of payment being late (you might add this into the ‘notes’ section of your invoice, within the body of the email, or both). Late payment penalties give you a little compensation for the inconvenience of late payment and can act as a future deterrent, to make sure your clients pay more promptly moving forward.  

Choose a more streamlined online payment method

Consider what you might be able to do to help make the payment process easier and more friction-free for all your customers. Could you offer card a card payment option or perhaps allow customers to pay via paypal? While these may seem intuitive options and might help to make you payment process more efficient, be sure to do your research when it comes to the commission charges. Sometimes the costs of the commission make these options less viable, especially if you’re just starting out.

Where traditional bank transfers are a standard fixture on most invoices, don’t forget there are other options. While we’re perhaps a little biased, we believe manual data input and time-consuming payment methods will soon be a thing of the past. With open banking now shaping the landscape of personal and business banking, online payment and budgeting apps, there are alternatives (such as Coupay’s Smart Bank Transfer) to the traditional bank transfer requests we frequently use on our invoices.

So there you have it, your invoicing 101 to debunk one of the first hurdles in your side hustle or freelancer journey.

For further advice or support with your Coupay invoicing, get in touch today or take a tour to discover more about Coupay’s Smart Bank Transfer.

In the meantime, watch this pace for future guidance on our blog, and best of luck in your new venture!