Are Your Invoices Correct?
If you are planning to start, or have already started a new business, you will want everything to be in order – especially from a financial point of view. One of the most common mistakes that many business owners make (even those who have been in the business for quite a long time) is sending out incorrect invoices. At first, this does not sound too serious – you can always reissue a new one, right? However, the matter is not that simple and a wrong invoice may have serious consequences for your business, including interruption of the cash flow and financial losses.
When it comes to invoices, there are some things you need to know in order to get them right. First of all, you need to distinguish between the two types of invoices: a ‘tax invoice’ and a ‘general invoice’. The first one is issued by businesses registered for Goods and Services Tax (GST) and the second one is for non-registered GST businesses. Once you know this, you only need to include the information mentioned below and your invoices will be correct.
No matter whether you are issuing a general invoice or a tax invoice (and don’t forget to distinguish between the two), you need to add the date of issue and the number of the invoice. You will also have to state your business name and Australian Business Number (ABN). Then, if you are not issuing a tax invoice, you will have to state that somewhere in the document – for example, ‘No GST has been charged’.
Specifically for the tax invoices, you will need to include not only your business name, but also the business (or customer) name of the receiver of the invoice. Additionally, you will have to state which products in the invoice contain GST. You don’t have to calculate it on all of them, just put 10% of the total in the end.
Following these simple rules will help you avoid a number of problems. What exactly? For example, if your invoice is incorrect, your customer is not obliged to pay it. They are also not obliged to contact you with an explanation until you ask them why the payment is late. If, for example, you don’t include your ABN in the invoice, your customer should withhold a part or the entire marginal tax rate from your payment.
With all this in mind, we would advise you to spend some time designing a correct invoice that you can use with your customer even before you choose an accounting system or a company. This will ensure a neat and ordered financial start for your business and will protect yourself from delayed payments and problems.
For advice on this confusing process, contact the team at The Accounts Studio. We will make sure your process is correct and have your cash flowing in no time at all.