How to write an invoice

For any business owner, knowing how to write an invoice is an essential skill. A clear, well prepared invoice helps you get paid faster, keeps your cash flow steady, and reinforces a professional image with your customers. In this article, we’ll guide you through everything you need to know, from what to include and the different types of invoices available, to setting payment terms, choosing payment methods, and managing overdue invoices with confidence.

How to draft an invoice

An invoice is a formal document that tells your customer what they owe, why they owe it, and how to pay it. It acts as both a payment request and a record for your accounts. Writing an invoice isn’t complicated, but it does need to follow a few key rules.

Start by choosing a clear layout. You can use accounting software like Xero, QuickBooks or FreeAgent, a spreadsheet, a downloadable template or a document. Every invoice should include essential information about your business, the goods or services supplied, and your payment details. You'll need to ensures that the document is always easy to read and looks professional.

If you’re VAT registered, your invoice must also comply with HMRC’s VAT requirements. This means you need to include your VAT number, show VAT rates applied, and clearly display the total VAT amount.

Different types of invoice templates

The type of invoice you use depends on your business and the kind of work you do. Some of the most common templates include:

• Standard invoice: Used by most businesses to bill customers for goods or services provided.

• Proforma invoice: Sent before a sale is finalised to give the customer an idea of costs. These are often used for quotes or export sales.

• Recurring invoice: Used for ongoing contracts or subscription services, where the same amount is billed regularly, such as for marketing retainers or IT support.

• Credit note: Issued when you need to correct or cancel part of a previous invoice, for example if you’ve overcharged or a product was returned.

• Commercial invoice: Used for international trade, especially when goods are shipped overseas, as it provides customs information.

Invoice types by business sector

Different industries tend to use invoices in different ways. For example:

• Freelancers and creative professionals (designers, writers, photographers) often use simple service based invoices that list hourly rates, project milestones or deliverables.

• Construction and trades businesses use progress invoices that bill clients in stages as the work is completed.

• Retailers and wholesalers tend to issue invoices in bulk, with itemised product lists and purchase order numbers.

• Professional services firms, such as accountants or solicitors, might use detailed time based invoices showing hours worked and hourly fees.

• Hospitality and events businesses sometimes use deposit invoices and final balance invoices to manage advance payments.

Choosing the right template helps make your invoices consistent, accurate and suitable for your type of work.

What to include in your invoice 

Every invoice you issue needs to contain certain key pieces of information. Here’s what you should include:

1. Include your business name, address, email, and phone number. If you’re a limited company, include your registered address and company number.

2. Add the customer’s name, company name (if applicable), and address.

3. Each invoice must have a unique invoicenumber for record keeping. This helps both you and your client track payments and ensures compliance with HMRC requirements.

4. The date the invoice is issued.

5. Clearly state when payment is expected, e.g. “Payment due within 30 days.”

6. Provide a clear, itemised breakdown of what you’re charging for, including quantities, hours worked, or specific deliverables.

7. Show individual prices, any discounts applied, VAT (if applicable), and the final total amount due.

8. Include your payment details, including bank name, account number, sort code, or any online payment links.

9. Include your VAT number, rates used, and total VAT amount, of relevant to your business.

10. If you trade under a name, make sure your legal business name is also included.

Having all this information on every invoice reduces confusion and helps ensure smooth transactions. To make the process simpler, you can use our free downloadable invoice template.

What payment terms should you include in an invoice?

Payment terms tell your customers how long they have to pay you and what will happen if payment is late. Setting clear terms helps avoid misunderstandings and gives you more control over your cash flow. Some common payment terms include:

• Immediate payment or due on receipt: Used when you expect instant payment, often for smaller jobs or new customers.

• 7-day or 14-day terms: Common for freelancers or service-based businesses.

• 30-day terms: Standard for most UK business-to-business transactions.

• End of month terms: Payment due at the end of the month the invoice is issued, or 30 days after month-end.

You can also include late payment clauses. Under the Late Payment of Commercial Debts (Interest) Act 1998, businesses can charge statutory interest of 8% plus the Bank of England base rate on overdue invoices, as well as a fixed late fee. Including this information on your invoices can encourage prompt payment and give you legal backing if you need to pursue the debt later.

Invoice payment methods 

Offering multiple payment options makes it easier for your customers to pay you on time. The most common methods in the UK include:

• Bank transfer (BACS or Faster Payments): A secure, direct way to receive funds straight into your business account.

• Debit or credit card payments: Many accounting systems and online platforms let customers pay by card.

• Direct debit: Ideal for repeat customers or monthly subscriptions.

• Online payment gateways: Tools like PayPal, Stripe, or GoCardless make it simple for clients to pay immediately.

• Cheque: Less common now, but still used in some sectors, especially for large corporate payments.

Whichever method you use, always confirm that your bank details are up to date and that payment references are easy to match to your invoices.

Sending your invoice

Once your invoice is ready, you'll need to send it promptly. The faster your customer receives it, the sooner they can process payment. Most businesses now send invoices by email as a PDF attachment, or directly through their accounting software, which can track when the invoice was opened. If your customer prefers a hard copy, you can still send invoices by post, just make sure they’re clearly printed and securely packaged. Make sure to keep a copy of every invoice for your own records. UK businesses must keep invoices for at least six years for tax and accounting purposes.

How to draft an invoice letter or email

If you are sending invoices by email, it should be polite, professional and to the point. It’s also an opportunity to remind your customer of payment terms and thank them for their business.

Here’s a template you can adapt:

Subject: Invoice [Invoice Number] – [Your Business Name]

Dear [Client Name],

I hope you’re well. Please find attached invoice [Invoice Number] for [product/service] provided on [date].

The total amount due is £[amount], with payment due by [due date]. You can make payment via [payment method].

If you have any questions, please don’t hesitate to get in touch.

Thank you very much for your business and prompt payment.

Kind regards,[Your Name][Your Business Name][Contact details]

Being polite but clear helps maintain good relationships and improves the chances of timely payment.

What to do with overdue invoices

Even with well written invoices and clear terms, some payments will still arrive late. Managing overdue invoices effectively is important to protect your cash flow. You can start by sending a friendly reminder a few days after the due date. Often, the delay is simply an administrative oversight. If there’s still no response, follow up with a firmer email or phone call after one to two weeks.

If payment remains outstanding, you can apply statutory interest and late fees under the Late Payment of Commercial Debts (Interest) Act 1998. This is your legal right, and it often encourages customers to settle their debts.

For ongoing business relationships, it’s a good idea to credit check your customers before offering payment terms. This can help you identify businesses that frequently pay late or have poor credit histories. At Capitalise, we make it easy to check your customers’ business credit scores and monitor their financial health, so you can make informed decisions about who to trade with.

If an invoice remains unpaid for a long period, you may want to escalate to a debt collection service or small claims process. Keeping accurate records of your invoices and communication will make this process smoother if you ever need to take that step. For more tips, read our article on how to get paid on time. 

Writing clear and complete invoices plays an important role in keeping your business finances on track. They help ensure you’re paid promptly, stay compliant, and maintain positive relationships with your customers. Alongside good invoicing practices, keeping an eye on your own credit position and understanding your customers’ credit health can further strengthen your financial stability. You can start by reviewing your business credit profile and the companies you work with when you sign up for a Capitalise account.