One of the most common mistakes new business owners can make is sending out incorrect invoices. Sending out the wrong invoice can have serious consequences for your business and can interrupt your cash flow and possibly financial loss.
You need to be aware that you have to distinguish between the two types of invoices. The first invoice type is a “tax invoice” and is issued by businesses registered for Goods and Services Tax (GST). The second type is a “general invoice” and is used by non registered GST business, those who do not charge GST.
For both of these invoices you need to add the date of issue, the number of the invoice, state your business name and Australian Business Number (ABN).
For tax invoices you specifically need to not only include your business name but also the business or customer name of the receiver of the invoice and state which products in the invoices contain GST.
Ensuring these simple rules are followed can help you avoid a number of problems such as if your invoice is incorrect your customer is not obliged to pay it. Neither are they obliged to contact you with an explanation until you ask them why the payment is late. For example if you don’t include your ABN on your invoice your customer by law should withhold a part or the entire marginal tax rate from your payment. This is referred to as “no ABN withholding” and can be 46.5% of the invoice total.
With the problems that can occur if you use a wrong invoice type and not have the correct information on your invoice, it is imperative that you spend some time designing a correct invoice. This will protect your business from delayed payments and interruption to your cash flow.
For advice on organising your invoices correctly contact Jaleana at Bookkeeping Fairy Perth on 0400 102 358 and she will have you on the right track in no time. Check out her website www.bookeepingfairyperth.com.au for further details.