An invoice, or bill, serves as a detailed record of the goods and services that have been provided to customers. Having clear invoices can help you keep track of all your transactions and ensure that you get paid on time. In Hong Kong, an invoice must include certain information in order to be valid. This includes the name of both the seller and buyer, as well as detailed descriptions of the goods or services provided and their unit prices. It should also note any applicable taxes and discounts, along with the payment method used and the payment deadline. In this article, let’s explore further about business invoices.
What Is an Invoice?
If your business provides any kind of service, then invoices are an important part of your business. Alternatively, it is called a sales invoice or a bill. An invoice is a document that asks for the payment of any product or service provided by the business. It is also proof of transactions made by the recipient and business.
An invoice is an important part because it decides the status of your payment and records the cash flow of the business. A clear and informative invoice will also positively impact your clients and your working style will look more professional.
Business Invoice Requirements Hong Kong
Now that you know the use of an invoice, it is time to learn the content of an invoice that should be complied with in Hong Kong:
- The date on which the invoice is being issued
- An accurate number of the invoice
- Full name and current address of the individual
- Main content: products or services provided and their quantity and price.
- Full address of the company
- Hong Kong identity card ( HKID) number
- Full bank details including bank name, branch code, Swift code, bank code, and account number.
What Are the Best Ways to Create an Invoice, Manually or Through Software?
Invoices are directly associated with payment-related procedures and hence cannot be compromised at any cost. The invoice is created with two alternatives, one is manual and the other one is with the help of some software.
Here is a quick comparison of creating an invoice both ways so that you will have a better idea of which best fits your business!
Manual invoices are usually created using paper and pen or a spreadsheet. This is best suited for businesses that do not have significant invoice volume and do not require detailed tracking of the payments. It can also be suitable for businesses where customizing an invoice template with a company logo, contact info, etc., is not necessary. Manual invoices involve many steps for issuing them to the customers as they have to add information and entry on the invoice manually. The calculation and information are also performed manually and thus require proper monitoring and tracking of the invoice.
Manual invoices tend to create a delay or error in the documents. This is a major problem with manual invoices. And since the invoice details are being manually entered, it increases the chances of mistakes and inaccuracies. Sometimes these delays and errors can also affect the cash flow and term business of the company.
Using Software to Create an Invoice
New software and technologies are being added every day. Features like payment-enabled invoices provide a convenient source of payment to the customers, and they also have plenty of online payment methods. You can enable reminders and alerts. Tracking and monitoring are also easy in these invoices and you can even send automated invoices to the customers and remind them about their due payments.
Software invoices are created using invoice software such as QuickBooks or Freshbooks. This is ideal for businesses with a high volume of invoicing, as it can help automate much of the process.
Now that you know the advantages of both invoices, you can clearly figure out which one is best for your business and suits your pocket as well.
How to Create an Invoice in Hong Kong?
Thinking about how to create your invoice for your business in Hong Kong? Once you have decided which is the best way of creating an invoice for your business, it is time to learn how to create that invoice.
Before we move to learn what the invoice requirements in Hong Kong are, let’s not ignore the fact that Hong Kong is a tax haven, and you are already enjoying a lot of opportunities there. It is your responsibility —while enjoying such benefits—to always follow all the rules and regulations set by the government of Hong Kong. Though business invoices and legal formalities in Hong Kong are not directly associated with each other, they indirectly do. Invoices are helpful while calculating the transaction of the business at the time of tax filing. Make sure you have added accurate and true information on the invoice.
Contents Within a Business Invoice
An invoice contains transactional information between the buyer and the company. No matter which type of invoice you use, there are certain details that must be present in all invoices. This includes:
- Company name and contact information
- Invoice number
- Issued date
- Customer’s name and address
- Itemized list of products/services provided
- Quantity, the cost per unit and total cost of the goods/services
- Terms of payment including due dates if any
- Tax amount if any
- Ongoing promotions or discounts
These details are important as they help to ensure that customers have a clear understanding of the invoice and its contents. They also provide an audit trail in case of disputes or discrepancies. Therefore, it’s crucial to understand each content of the invoice in detail.
The most important step for creating an invoice is adding your business name to it. It provides validation to your brand and creates a professional image of your business. You can even add your company or brand’s logo to it.
For this aspect, businesses must include their contact details, such as the address, contact number, and email address. This will help your clients to contact you and reach you if necessary.
The date of the invoice is important so that both parties can track when the invoice was issued. If there are any delays in payment, both parties can refer to the date of purchase. It’s also important for accounting and tax purposes.
Likewise, if the company has policies regarding returns, the invoice date is vital to inform both the company and the buyers of their rights to accept the return or reject based on the date of issuance.
Creating an invoice number helps you to keep track of your invoices and makes the accounting process seamless. Incorporating a special numbering system will allow the company to file invoices in a tidy manner and will come in handy.
Outline the Provided Services or Goods
The next step is to outline what services you provided accurately or goods you sold. This should include a detailed description of the products or services, cost per unit and the total amount. It’s important to be as precise as possible in order to avoid any confusion about the invoice contents. Create a separate column to enlist all your services to the client. The following four things are necessary to include:
- A detailed description of provided service or product
- Work quantity
- An aggregate of all the services
Companies may also add more elements to their invoices as they find fit. These include promotional discounts, and QR codes to follow their social media pages, to name a few.
Here are some of the common payment terms which are present in invoices.
Net or N is a term where you can add any number of days and that would be the due date for the full payment of the invoice. For example, N15 means the client has to pay the full amount within 15 days.
Payment in Advance (PIA)
Incorporating a Payment in Advance (PIA) method allows the customer to settle their payment at once before receiving the service in an agreed time frame. The beauty and furniture industries are popular examples that use this payment option.
When such payment is made, the company is responsible for ensuring that this service is provided to the customer. Failure in any part would result in legal complications. Therefore, it is important to clearly outline how much the customer has paid and what they will be receiving in return to avoid any confusion.
End of Month (EOM)
Payment is due at the end of the month when you use the phrase “end of the month”. Companies that employ this typical desire should make payment for their work in the same month their invoices were issued.
However, EOM may signify a very short deadline for your clients, depending on the date the invoice was issued. You should use this payment period if you send out invoices on the same day each month and consider each customer’s capacity to pay within that time frame.
Month Following Invoice (MFI)
Implementing the month-after-invoice (MFI) payment term might be challenging because it heavily depends on the invoice’s date. The upcoming date that payment is due is indicated by the number that comes before “MFI”. Payment is due on the 15th of the month following the invoice date if the payment term is “15 MFI”.
If you offer any type of discount to your clients then do mention them on the invoice.
Value-Added Tax (VAT)
A flat charge, value-added tax (VAT), is imposed on a purchase. It resembles a sales tax in some ways, with the exception that with a sales tax, the consumer pays the entire amount due to the government at the moment of sale. If your business is assigned for VAT, then you have to create a VAT invoice for your standard-rated supplies.
Amount Due and Due Date
Always add the total amount (including all the applicable taxes) and the due date till payment needs to be cleared neatly at the bottom of the invoice. You can also bold or color them so that they can be easily noticeable to clients.
Tools to Create Business Invoice
Below is a list of tools which can help to create an invoice for your business.
Canva is a design app with countless features that allow companies to customize their invoice according to their performance in color, text and so on. There are also easy to use free templates. However, for complex design, you would need to subscribe to their platform.
Adobe Acrobat Pro
Adobe Acrobat is also one of the best design tools since it allows you to create documents with eye-catching designs along with embedding images, graphs, and other elements. It makes your invoices look professional and possibly artistic which will define your brand image further.
QuickBooks is a popular choice for businesses that need to track their invoices and payments. It enables you to easily manage your accounts, create and send invoices, view reports, and more. It will help in keeping track of your business finances without worrying about manual entry errors or losing important documents.
Templates are also one of the basic tools businesses can use to customize their invoices. Nowadays, technology is growing rapidly, with new software being introduced to combat business challenges. There are many other tools that you could use to help build your business invoice the way you prefer.
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