How to create a legal invoice
Whether you've only done one invoice or a thousand, it never hurts to make sure your invoices are up to scratch. So here's our complete guide to business invoicing – including a free downloadable invoice template.
What are invoices?
Invoices are digital or paper statements that clearly tell customers how much they need to pay and for what.
A tax invoice:
- Shows the GST on the goods and services purchased
- Must be in New Zealand currency
- Must be original
There are different types of invoices, too:
- Invoices for supplies worth more than $1,000 (including GST)
- Invoices for supplies worth between $50 and $1,000 (including GST)
- Invoices for supplies worth $50 or less (including GST)
- Shared tax invoices
Each of these invoices has different types of information that must be included on it, according to the IRD.
Why invoices are important
Invoices are more than just a way for your customers to pay you. They also help manage your cash flow, track your time and understand your tax.
Managing your cash flow
Invoices can show you patterns in your sales so you can see when people are buying certain products, and what products are selling best.
They can also flag financial challenges and help you prepare for them, like when sales drop or when customers aren't paying on time.
Tracking your time
Invoices can help you track your time and set your prices. By including how long it takes to source, build or provide your products and services on your invoices you can keep a track of what you spend your time doing – and then set your prices to reflect that.
Including your time on invoices also helps to set expectations with your customers. So they know how time factors into the cost and what to expect in the future.
Understanding your tax
Invoices can help you to understand your tax obligations and manage your GST.
By storing and organising your invoices – both the ones you send to customers and any that you get from suppliers – you'll get a clearer idea of how much GST you need to pay and if you qualify for any GST refunds.
For more information read our GST guide for small businesses.
What information to include on invoices
Invoices need very specific information to make sure they're a valid and legal document. And the more information you put on your invoices, the happier the IRD will be.
The must-have information:
- The words "tax invoice"
- The name (or trade name) and GST number of the supplier
- The name and address of the recipient of the supply
- The date the invoice was issued
- A description of the goods and/or services supplied
- The quantity or volume of the goods and/or services supplied
This extra information is only needed for invoices worth over $1,000:
- The amount, excluding tax, charged for the supply
- The GST and the total amount payable for the supply, or
- A statement that GST is included in the final price if it has been.
How to create invoices
Using invoice templates
Invoicing templates are a good way for you to create invoices quickly and efficiently while also keeping things stay consistent. They have all the must-have information fields ready for you to fill in – and they take the worry out of making sure your invoices are legal.
You can find invoice templates easily online, but they often vary in quality. So we recommend using our free and customisable template that we've created especially for small businesses.
Using invoicing software
When your business starts to grow, or if you want to cut down the time you spend on invoices you can invest in dedicated software.
You could get invoicing-specific software that will create, store and send your invoices. Or you can go for accounting software that has an invoicing feature included.
We'd recommend using accounting software (of course we would) as you'll also be able to:
- Design professional invoices using your business' brand
- Monitor your invoice payments, so you know when and how you get paid
- See who's opened and printed their invoices – making those awkward late payments conversations easier
- See how your invoices feed into your bank accounts and cash flow
- Create, send and track invoices and quotes from your smartphone
How to brand invoices
Once you've got the hang of how to create, manage and send your invoices you might decide to add a bit of business branding to them too. This doesn't mean you need to be artistic or 'out there'.
By adding a few standout features like a business logo, font and colours you can help customers remember your business when they buy from your in the future.