Knowing what to include on your invoice as a sole trader is critical. It'll keep you compliant with tax invoice requirements and demonstrate your professionalism. It can also help get payments in faster, and make your bookkeeping simpler and more accurate. Here's what you need to know.
What is an invoice?
An invoice is a document that records a transaction between you and a customer or client. It should note what goods or services changed hands, for how much, the payment methods and payment terms — that is, what you're owed, and when it's due. Having this record also makes things easier come tax time. Depending on your accounts receivable policies, you can send an invoice before or after you complete the work or deliver the goods.
Why do you need to send an invoice as a sole trader?
You need to send an invoice as a sole trader because it creates a record of work completed or goods delivered and makes it easier for your customers to pay you. This is especially important if you're collecting payments B2B – most businesses won't be able to pay you unless you've sent them an accurate invoice. Invoices are also tax documents so they must comply with ATO invoicing requirements.
Good invoices should help you:
Get paid on time
Confirm what you're owed
Minimise any back-and-forth about billing
Keep track of what's owed and what's been paid
Meet your tax obligations
What should a sole trader include on an invoice?
Here's what you as a sole trader should include on an invoice:
1. The words “tax invoice”
If you're registered for GST, the words “tax invoice” should be clearly visible at the top of the document.
2. Your business logo, details and trading name
Again, make these easy to spot and near the top.
3. Invoice number
Invoice numbers need to be accurate so that you and your customer can keep track of what is owed and what is paid.
4. Invoice date
Your invoice date is the day you issued the invoice.
5. Client details
Make sure you're invoicing the right person or entity – many companies won't pay an invoice unless the client name and details are full and correct.
6. Description and quantity of goods and services
While you can describe goods and services however you prefer, it's a good idea to mimic language from signed quotes and include as much detail as possible. This reduces confusion so you get paid faster.
7. GST inclusion/exclusion
If you're GST registered, you must detail the GST owing and whether it's included in the amount or charged on top.
8. Payment methods
Detail available payment methods for your client and include your bank details. If you've set up credit card processing or other payment methods, include links and instructions for these.
9. Payment terms
Clearly spell out your payment terms, including due dates and any penalties for late payments.
Tip: Solo by MYOB is an app for sole traders.
With Solo, you can create and send compliant invoices, add a Pay Now button so your customers can pay with a click, collect payments on your mobile, track your GST, send payment reminders and keep the money coming in!
How to write an invoice as a sole trader
An invoice is simply a document. You can create an invoice easily on a piece of paper or in a Word document. However, using an online invoicing system will make your finances a lot easier to manage.
Creating an invoice in Microsoft Word
If you're just starting or only expect to send one or two invoices at a time, Microsoft Word or other word-processing software can work. Simply open a document, fill in the necessary details, and then save as a PDF. This last step is crucial — a Word document can be easily changed. To save your document as a PDF, click File, then Save As. From the pop-up box, click on Format, and scroll down to choose PDF.
To make things even simpler, download this free invoice template — it's an editable PDF, which you can fill in and send to each client.
Using an online invoicing system
An online invoicing system is fast, efficient and can help your business grow. You'll look more professional with invoices that always reflect your branding and let you turn quotes into ready-to-send invoices at the click of a button. This will include GST calculations, your customer details and all the other must-haves in an invoice, while payment integrations mean you often get paid faster. Sending invoices this way also makes it simpler to keep track of what you need to invoice and makes financial reporting a breeze.
If your client will be making a recurring payment, you can set the system to send an invoice automatically each week, month or quarter.
Example of a sole trader invoice
Check out Solo to see what a sole trader invoice can look like – you can design it however you like as long as the required information is easy to read.
What bank or payment details are needed on an invoice?
Including bank and other payment details on your invoice makes it easy for your client to pay, so you're likely to see the cash appear in your bank account faster. Here's what to include:
The name and number of your bank account
Instructions for other ways to pay you – for example, this might be a link to where you accept credit card payments
How you would prefer to be paid
Sole trader invoicing FAQs
Do I have to charge GST as a sole trader?
As a sole trader in Australia, you'll need to register for GST if you think your business will earn more than $75,000 in 12 months.
Can you handwrite a sole trader invoice?
You can handwrite a sole trader invoice, and you can still buy booklets of templates to fill out. However, handwriting an invoice can send the message that you're not professional. It can also make it very difficult to track any outstanding payments or keep records for tax purposes.
What is the difference between a sole trader and a company?
A sole trader is a kind of business structure where you are legally responsible for the whole business. A company is another business structure that is legally separate from you. Whatever structure you choose, you will need to apply for an Australian Business Number.
Keep your cash flow flowing
Even if you're just starting as a sole trader, it's important to get your invoicing sorted from the beginning. That is so you get paid on time, minimise any back and forth or over-billing, show you're a professional operator and make short work of tax.
While you can create your invoices on a piece of paper or a Word document, using an app like Solo is the easiest and most convenient method and comes with a raft of other benefits. Solo makes invoicing fast, accurate and easy to track, while also unlocking other features and reporting that will help grow your business – get started today.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.