The importance of invoices
As a business owner, you already know if you are required to issue invoices, but you may not understand why, or the benefits of doing so. Invoicing is important not only as a tax obligation but also for control over your cash flow and finances.
Therefore, you shouldn’t choose an invoicing software based solely on the fact that you’re required to issue invoices. You should also consider the other benefits that the software can provide for your business.
This article explains the importance of invoices as a fiscal and tax obligation, but also for business control over your taxes, cash flow and management decisions.Start invoicing for free
In the UK, it's only mandatory to issue invoices if both you and your customer are registered for VAT. However, it's common practice to issue invoices for all B2B sales regardless of whether you're VAT registered.
Most small businesses and freelancers who issue invoices choose to do so because it’s required by HMRC to keep a thorough record of your income and sales.
Therefore, both self-employed workers and companies can use their invoices to declare their income to the tax authorities.
If you run a business, you'll also need to manage your billing to be able to control your taxes, payments and purchases.
Invoicing software can help you keep track of how much VAT you'll need to pay. Most invoicing software includes a VAT Report which outlines the VAT accrued from sales and the input VAT from purchases. From this report, you can find the difference in the two amounts to see how much you'll owe to HMRC, or how much will be refunded to you.
This is important to keep track of throughout your VAT reporting period to make sure that you are not handed an extortionate VAT bill.
In addition, if you are a registered company, there are benefits to invoicing for keeping track of corporation tax. Invoicing software will make it easier for you to find the information needed for your company tax return and calculate your tax bill.
Another benefit of invoicing for business management is the ability to control collections and payments. Regardless of your business structure, keeping an eye on your incoming and outgoing cash can keep your business in a healthy financial state.
Therefore, you should always be able to check which invoices have been paid, and which are overdue and require further attention. Invoicing software can make sure that none of these details are missed.
Invoicing software, like SumUp Invoices, can help you download a customer account statement, which includes the amount invoiced, the amount paid and the remaining balance. This can help your customer settle any outstanding balance quickly, without having to rummage through old emails to find an invoice.
This way, you can easily collect payments on overdue invoices. You can also use these findings to determine which clients are good payers and which are not. For the latter, you may consider stricter payment terms.
Invoicing can also help a business make important decisions about its future activities. If your business is engaged in several different activities, invoicing can help you determine which activity you invoice the most and which activities are not making a lot of money.
Using this data, you can determine which areas you should focus more on, and spend more time and money improving. Alternatively, you can also make decisions about which activities to drop.
SumUp Invoices is software that can help your business issue professional invoices and manage your business finances.
All of your invoices are automatically saved in the cloud so you'll never lose data and can access your numbers when it’s time to complete your tax return. You can also export your data to print for your records or send to your accountant.
With our simple and intuitive software, you can create and issue an invoice in less than 1 minute, so you can focus on other aspects of your business.Start invoicing for free