You have taken the step to become self-employed and obtained your first contract. You have good relations with your client who is satisfied with the work furnished. This is a first stage, sometimes complicated, brilliantly completed. You will now be able to go to the next stage: invoicing. You are certainly not working for free and it is now time to ask your client to pay for the services rendered. Creating an invoice is not very complicated but it requires that a certain number of rules be followed and in particular ensuring that all mandatory information be included. The use of invoicing software is a definite plus for the creation of invoices as well as for follow-up.
How to invoice for a provision of services?
Before starting to provide your service, you have drawn up an estimate describing the deliverables and the amount requested, which will have been approved and signed by the client. It is on this document that you will rely to create your freelance invoice. The first and simplest rule is that the invoice must match the accepted quote.
The price for each service invoiced will have to correspond to that indicated in the estimate. It is possible to add additional services, provided, of course, that they were previously validated by the customer and carried out in full. The most complex part of the invoicing process then comes from the calculation of VAT (Value Added Tax).
The different VAT rates
We find four VAT rates in France:
- The standard rate of 20%, which applies to most sales of goods and delivery of services,
- The intermediate rate of 10%, which applies to catering, the sale of prepared food products, transportation and building restoration work,
- The reduced rate, which applies to basic necessities, such as food products, energy but also to passenger transportation, shows or certain work for the main residence,
- The special rate, which applies to reimbursable medicines, press publications, etc.
How to know which VAT rate to apply?
The simplest case is that of the micro-entrepreneur (formerly self-entrepreneur). Benefiting from a particular micro-fiscal regime, the micro-entrepreneur benefits from a VAT exemption as long as his/her annual turnover is below a certain threshold. For provision of services (craft, commercial, rental of furnished homes) the ceiling is 70,000 euros. If the turnover of the micro-entrepreneur exceeds the ceiling, he/she can continue his/her activity, but will then be subject to VAT.
In the case of some other company status, the company is subject to VAT. The principle is simple. The entrepreneur charges VAT to the customers, collects it, then pays it to the State. The VAT rate applied depends on the service billed. If an invoice involves several different services, several different rates may apply. The company also pays VAT to its suppliers, but this amount is deductible. This deductible VAT is therefore subtracted from the VAT collected from the customers. If the balance is positive, the company pays the difference to the State. Otherwise, it benefits from a VAT credit that can be refunded or deducted from future excess VAT.
What should be the deadline to issue an invoice?
The invoice corresponding to a rendering of services must be issued and sent to the customer upon completion of the project. Nevertheless, it is not always possible to comply with this rule, because of a delay in administrative management for example. In that case, a delay of two to four weeks is generally allowed.
In case of the rendering of multiple services for a customer during the same month, the company may be exempted from issuing an invoice for each service. In lieu of this, a delivery note may be issued at the conclusion of a service. The summary invoice will however have to be issued at the end of the month.
How to issue a credit on an invoice?
An invoice sent to a customer for payment is called a “final invoice”. A “credit invoice or credit memo” on the other hand, corresponds to the cancellation of all or part of a previous invoice. This may involve an invoicing error that needs to be corrected, a commercial credit or a return of merchandise.
By creating a credit invoice or credit memo, you are actually cancelling a portion of your turnover. The credit is shown in exactly the same way as an invoice. Instead of a sum payable, it indicates that it is a credit memo. It is particularly important to have a very careful tracking of credits, because otherwise you risk declaring a turnover which will not have been actually cashed and consequently get your business in trouble.
What are the mandatory particulars on an invoice?
Certain particulars must appear compulsorily on an invoice for it to be valid. The following tax information must appear on every invoice:
- A unique invoice number,
- The invoice’s date of issue,
- The full name and address of the service provider as well as the client,
- The individual VAT identification number of the service provider,
- The total excluding taxes and the VAT amount,
- The date on which payment must be received,
- Possible discount terms,
- Penalties payable in the event of non-timely payment,
- The reference to the lump sum indemnity for recovery costs in case of late payment.
Each line of the invoice designating a service must contain the following information:
- The date of completion of the service,
- The specific name, quantity, unit price excluding taxes and the applicable VAT rate,
- The rebates, allowances or discounts directly associated with the service.
Certain particular operations require specific references in addition:
- “VAT not applicable, Article 293B of the General Tax Code” for companies subject to the VAT exemption regime (such as micro-entrepreneurs),
- Intra-community VAT numbers of the service provider and the customer and the reference “VAT Exemption, Article 262b, I of the GTC” for intra-community deliveries of goods.
Why use an online invoicing software?
You have several options for generating invoices. You can create them manually, use invoicing software installed on your computer, or opt for online invoicing software.
The advantage of using invoicing software is that it automates a number of repetitive tasks and secures the process. Such software in particular allows the management of a client file, a catalogue of services, the creation of quotes and their conversion into invoices and of course the automatic numbering of invoices. The management and monitoring of invoices is simplified, as well as the recovery process in case of unpaid bills. The software also allows the calculation of taxes and the generation of accounting documents and statistics.
The point of an online invoicing software is that it is not dependent on the operating system you are using – Windows, iOS, or Linux. The software is hosted in the Cloud and is accessible wherever you are, from the moment you have Internet access and a computer, tablet or smartphone.
All your data is secure. Access is restricted and regular backups are made by the host. You no longer risk losing all this critical information as could be the case with local storage.
Freelance invoice template
It’s not always easy to create your own personalized and professional invoice template. In order to simplify this process, it is possible to use an invoice template and customize it to highlight the corporate image of the company.
The Nutcache project management software includes in particular a comprehensive online invoicing feature. This module includes several professional freelance invoice templates that can be customized. It is possible to add a logo, choose colors, etc.
To conclude on freelance invoicing
Within the framework of your activity as a freelance worker, you will necessarily have to create invoices. It is essential to respect all formatting rules and to include the mandatory information in order to remain in compliance with the law. Using an online invoicing tool such as Nutcache allows you to manage the entire process. Don’t hesitate to test the full version for 14 days free of charge.