Invoice Basics for Home Businesses

If you are thinking about opening a small business in your home and are wondering what kind of bookkeeping is involved, one of the most basic tasks is to develop a method for billing your customers. For most small home businesses, one of the easiest methods of billing a customer is by using an invoice.

You've probably seen invoices whenever you've ordered something on line or have had a repairman come to your home. Invoices are detailed bills issued by the seller (or provider) to the buyer at the end of the transaction. These invoices are two part forms which records all the specifics of the transaction such as the amount of the service call, the cost of the parts or the quantity of the merchandise ordered, the hours worked, and so on. Once the transaction has been completed, the provider tears off a copy which doubles as a receipt of the work done. Prepared in this method, the invoice becomes a legal document which establishes an obligation on behalf of the buyer to pay the debt.

Most small businesses require that the customer pay the bill at the completion of the project. For companies who carry accounts, the invoice acts as receipt and the customer is billed later using a form known as a "statement."

So how do you prepare an invoice? One easy method is to purchase a pad of generic invoice slips from your local office supply store. Another option is to download a free invoice template which can be customized for your business. Free invoices can be found at Graytex.com.

To prepare an invoice, you must include the following information:

--Names, addresses, and contact numbers of both your company and that of the buyer.
--Date of the transaction.
--A detailed description of the goods or service provided along with the price, which you and the customer agreed upon prior to the job.
--Terms of the payment, that is, when you expect payment. Leaving this blank could lead to collection problems; "Due with 10 days of service" or "Due within 30 days of service" are typical terms of sale.
--Signature line for both the seller and the buyer.

In addition to establishing a contractual agreement to pay for services or goods between you and your customer, invoices are one of the supporting documents you'll need to determine your income. These important documents should be stored in a safe and secure location so they'll be easy to find when its time to prepare your tax returns.

More from this contributor:
Can I start a business in my garage?
5 small business training classes and workshops.
The pros and cons of leveraging your home for business cash.