How to bill customers: invoicing for new UK businesses

Why billing needs a process

Late or unclear invoices are one of the most common causes of cash-flow problems for new businesses. A simple, consistent billing process means you get paid faster, look professional and keep the records HMRC expects.

What a UK invoice must include

Every invoice should show:

• a unique invoice number (numbers should follow a sequence)
• your company name, address and contact details
• the customer's name and address
• a clear description of what you are charging for
• the date the goods or services were supplied
• the invoice date
• the amount charged for each item
• the VAT amount, if you are VAT-registered
• the total amount owed

For a limited company, use your full company name exactly as it appears on your certificate of incorporation. If you choose to list directors' names on the invoice, you must list all of them. It is good practice to include your company number, registered office address and the part of the UK where the company is registered too.

If you are registered for VAT, your invoices must also meet HMRC's VAT invoice rules, including showing your VAT number. Ask your accountant if you are unsure.

Set payment terms before you start work

Agree payment terms with the customer in writing, ideally in your quote or contract. Decide:

• When payment is due – for example, 14 or 30 days from the invoice date
• How they can pay – bank transfer, card or a payment link
• Whether you need a deposit – common for large jobs or custom work
• What happens if they pay late – mention statutory interest

If you do not agree a payment date with a business customer, payment is generally due 30 days after the later of the invoice date or the date they received the goods or services.

A simple billing workflow

1. Quote clearly. Set out the price, what is included and your payment terms.
2. Confirm the order. Get written acceptance, even a short email.
3. Invoice promptly. Send the invoice as soon as the work is done or on the agreed date – not weeks later.
4. Make paying easy. Put your bank details and a payment reference on every invoice.
5. Track due dates. Use accounting software or a simple spreadsheet.
6. Send a polite reminder a few days before and on the due date.
7. Follow up firmly if the invoice becomes overdue.
8. Record the payment and reconcile it against your bank account.

Use accounting software

Accounting software can create numbered invoices, send reminders automatically, take card payments and match payments to your bank feed. It also helps with Making Tax Digital, which requires VAT-registered businesses to keep digital records and file VAT returns using compatible software.

If a customer pays late

For business-to-business sales, the Late Payment of Commercial Debts (Interest) Act 1998 lets you claim:

• Statutory interest at 8% above the Bank of England base rate, unless your contract sets a different rate
• Fixed compensation per invoice: £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99, and £100 for debts of £10,000 or more
• reasonable debt recovery costs in some cases

These rights do not apply to sales to consumers. Before taking formal action, send a clear final reminder setting out the amount owed and what you will do next. If that fails, you can use a debt collection agency or the small claims process. In Scotland, this is the simple procedure in the sheriff court.

Keep your records

Keep copies of all invoices, receipts and payment records. Limited companies must keep accounting records, generally for at least six years from the end of the financial year they relate to. Good records also make your annual accounts quicker and cheaper.

Common mistakes

• Sending invoices late or forgetting to send them at all.
• Missing information, such as the customer's address or the supply date.
• Charging VAT when you are not registered.
• Mixing business and personal bank accounts.

How Form My Company can help

We set new companies up properly from day one. Our Bookkeeping, VAT and Payroll service can take invoicing, reconciliation and VAT returns off your hands (price on request), and our Fully Inclusive Package includes VAT and PAYE registration when you form your company.

Frequently asked questions