In collaboration with Bokio
In many companies, the invoice is an important pillar for success. Without getting paid for their hard work, there are no companies going around. As an entrepreneur there can be a lot to consider, in this guide we cover everything you need to know about invoices and invoicing.
What is an invoice?
Let's start with the most basic: what exactly is an invoice? It can be said that an invoice is a document that is created by a seller and sent to a buyer. Once an invoice is paid, it acts as a written proof that the payment has taken place. When doing business with other companies, a full invoice should always be drawn up.
Exactly how an invoice looks may differ slightly from time to time and between companies, there are also slightly different types of invoices that affect its appearance but above all its function.
As an entrepreneur, invoicing is one of the most common ways to charge, having a good handle on how to handle invoices, both how you send them and how you pay them is important for the success of your business. If your business handles a lot of invoices, an effective invoicing program can make it easier and save a lot of time.
What is the difference between invoice and bill?
In everyday speech, the words invoice and bill are often used interchangeably to describe the same thing. In fact, it's just the same thing: a written demand for payment.
As a private individual, the concept of counting is often used, while invoices are often used from company to company. But invoice and invoice refer to the same thing.
What does an invoice look like?
An invoice may look a bit different, depending on industry standards and your preferences. But there are certain things that an invoice must contain:
● Name, address and contact details of the seller and buyer.
● Invoice number and invoice date.
● A description of the goods or services that have been delivered, including quantity and price.
● VAT-registration numbers of the seller and buyer.
● The total amount payable, including VAT and any other fees or rebates.
● The payment terms, including due dates and accepted payment methods.
● Any additional information that may be relevant, such as delivery details, contract number or order number.
If you are billing customers from other countries, there may be additional things to include. It is common for invoices to differ from each other both in terms of style and form.
How to pay invoices?
How to pay an invoice may vary from case to case depending on the type of invoice it is and the solution that you pay with. Most often, the invoice indicates how the payment is supposed to be made.
A common way to pay invoices is by means of a direct bank transfer. Exactly how you go about this can vary between banks, and often there are several ways to pay an invoice.
In recent years, more modern payment methods have emerged, such as Swish and Klarna. Many companies offer the customer different options for paying the invoice, where the customer himself gets to decide what is best suited.
In the vast majority of cases, it is relatively self-explanatory how you go about paying an invoice.
Dispute invoices
Sometimes a customer may dispute an invoice, which means that the customer does not approve the invoice. There may be various reasons for disputing an invoice. It could be that the amount of the invoice does not correspond to the amount agreed. In any other case, it may be because the service did not deliver the kind of quality agreed upon by you. In a third case, the price may be correct but that the wrong type of service or goods has been specified.
As long as the disputed invoice has a relevant basis, it is usually easy to reach a solution by discussing what has gone wrong with the customer in question. Most of the time it is just to credit the old invoice and send a credit invoice to the customer/company.
If a customer disputes an invoice, it is a good idea to keep the information about the invoices in force and the communication so that you can substantiate your arguments in case the dispute should involve the assistance of a third party.
How to invoice?
Sending invoices is an important part of running a business, therefore it is important to know how to bill your customers. Exactly how you go about sending an invoice varies slightly depending on whether you send an invoice through a self-employment company, through your own company “manually” or from an invoicing program.
Below is a general guide on how to proceed with invoicing:
● Create an invoice
Use an invoice template or billing program to create an invoice. Double-check that all necessary information is included on the invoice.
● Send the invoice to the customer
Once you have created an invoice, the next step is to send it to the customer. Nowadays, sending invoices online is the most common, as it requires less administrative work and is more time efficient.
● Follow up on payment
Register when the time to pay the invoice expires. If the customer does not have
paid before its due date and you should send a reminder. If the customer does not pay anyway, you will have to look at possible measures to recover the money, however, this is a very rare situation.
● Register the payment
Once you have received the payment, it is time to register it in your accounts and file the invoice. If you use Bokio Business Account, the payment is matched to the invoice by itself and posted automatically.
Invoice template
For someone who has never sent an invoice before, it can be very helpful to get a ready-made template to start from. Then you get a lot of help along the way and don't have to create the invoice from scratch.
Having a ready-made invoice template not only does not make you feel unsure if you have included all the contents of the invoice, it can also save you a lot of time by simply changing the details every time you send a new invoice.
There are a variety of invoice templates available on the internet, so before using any, it is important to ensure that it is a credible company behind it and that the invoice template contains everything you need to invoice your customers.
All companies are obliged to record their business events, which means that you must have an accounting program to your company. Many accounting systems have integrated billing functions, which means that you do not need to have a single system for invoicing and accounting. Another advantage of invoicing from your accounting program is that your invoices are integrated directly into your accounting.
Is it possible to invoice without a company?
Yes, you don't have to start your own business to send invoices. Nowadays, there are a variety of so-called self-employment companies on the market, whose business model is that you send invoices through them in exchange for a fee.
Self-employment companies simply act as an intermediary for you and the customer to whom you are invoicing. In connection with invoicing, self-employment companies pay taxes and social security contributions on your behalf.
However, it should be mentioned that if you plan to invoice on a regular basis, it is much more advantageous to start your own business and invoice that way instead.
In addition to not having to pay a fee on each invoice, there are many advantages to running a business, such as the ability to deduct equipment and the ability to collect low-tax dividends (if you have a limited company).
Invoice purchase
Invoice purchasing, also known as factoring, is an economic service that involves a third party purchasing a company's invoices. Since the credit period on an invoice is usually 30 days, this means that the company is out of money during this period.
To avoid this, you can sell your invoice through invoice purchase, then you get paid directly at the same time that the company that buys the invoice is responsible for receiving the payment from the customer. This is done in exchange for a fee that often equates to a couple of percent of the invoice amount.
Invoice purchases can be particularly useful for businesses with long payment times or experiencing temporary liquidity problems. It could also be a solution for small and growing businesses that need extra capital to fund expansion.
Terms of payment on invoices
The payment terms on an invoice include the terms and conditions that determine how and when a customer will pay the invoice. It is up to the seller to decide which these are, based on the legal framework that exists. It is important that the terms of payment are clearly communicated on the invoice.
Common payment terms include:
Payment methods
Different companies accept different payment methods. Bank transfer, Swish or card payment with Visa or Mastercard are common payment methods.
Delay interest
It is important that it is clearly stated what happens if the recipient does not pay the invoice within the specified time frame. The payment terms you choose to have for your business can have an impact on how your customers experience doing business with you.
If you have a long credit period, it can be something that is attractive to the customer, while at the same time posing a greater financial risk to you. On the contrary, a short credit period is good for your liquidity, but it can feel stressful for the client.
Expiration date
The due date on an invoice is the date on which the payment should be received by the seller. This means that if you have paid an invoice on the due date with a payment solution that takes one business day, the payment will be delayed.
The due date is usually high on the invoice and can be formulated in slightly different ways, for example: “payment to us” or “due date”.
The number of days the customer has to pay the invoice may vary. The most common is that the customer has 30 days to pay from the moment he or she has ordered a good or service. However, just 30 days is not required by law and there may be both shorter and longer credit periods (the time between the time of billing and the time of payment).
Different types of invoices
In this guide we have so far only talked about invoices in general, but the fact is that there are many different types of invoices. All of them have in common that they aim to collect a payment from a customer, but that is where the similarities end. Below we go through the different types of invoices.
A Conto Invoice
An a conto invoice is a type of invoice that is split over the course of a project. It can be seen as a kind of installment payment in advance, and can be beneficial for projects that run over a long period of time or involve large sums of money.
Proforma invoice
A proforma invoice is a relatively uncommon type of invoice and unlike standard invoices, the purpose of a proforma invoice is not to get paid. A proforma invoice is used as a formal document to state what the contents of a package are in the context of export.
For example, if you send a gift or a customer sample to a customer abroad, a proforma invoice serves as a basis for what the package contains, which can help in customs matters. However, the pro forma invoice is thus not legally binding to request a payment.
Credit invoice
A credit invoice is used to correct an incorrect previously sent invoice. This may be necessary if, for example, the customer has paid an invoice and then realizes that there was something wrong with the product or service. For example, that the price was incorrect, that the service was delivered incorrectly or that the service did not correspond to the agreed terms.
A credit invoice is sometimes referred to as a reverse invoice, minus invoice, or credit note.
Rout/Root Invoice
If you perform services that fall under the RUT or ROT framework, you must reduce the amount on the invoice, and then have the last part of the work income paid by the Swedish Tax Agency. Bokio supports sending invoices with RUT and ROT deductions.
E-invoice
An e-invoice is an electronic invoice that is integrated directly into various business systems, including accounting software. If you normally send invoices by PDF, you need to do manual work to administer the invoice, but an e-invoice is handled entirely electronically and registered directly in your recipient's financial system or bank.
Self-invoice
Normally, it is the seller who creates and sends an invoice to the customer. A self-invoice, on the other hand, means the opposite — namely that the customer draws up an invoice for himself in the name of the seller. A self-invoice is also called a reverse invoice.
This can be a good solution if you are a consultant who regularly invoices the same client, because you yourself have good control over the time reporting and thus invoice the correct number of hours.
Although it is the customer who creates the invoices, it is always the seller who has the ultimate responsibility over them.
Simplified invoice
A simplified invoice is an invoice that does not have as extensive requirements as to what it should contain as a regular invoice. However, information about when the invoice was issued, who the seller is, what goods or services have been sold and the VAT due must always be included, even on a simplified invoice.
Invoice with Bokio
Billing can be a bit cumbersome, but with Bokio it becomes easy. When invoicing at the same place you post, you don't have to keep track of which invoices have been paid or not manually. Bokio keeps track of you, and posts the payment automatically as soon as an invoice has been paid.
Read more about billing in Bokio
