Sustainable business is exciting. You are engaged in a beautiful, meaningful mission. It is varied. And every morning you get up with new opportunities ahead. Well almost every day then. Because you can't escape doing your administration. And that's not necessarily the most exciting job. The only solution: become very handy at it so it takes you less time or outsource it. This time, together with accountant Marcel Huting, we share everything about invoicing so that every entrepreneur, sustainable or not (yet), can quickly get the hang of it.
First aid for invoicing
In cooperation with Huting Tax Advice & Administration
Together with Marcel, we have dealt with many accounting issues, but we haven't yet stopped at something as basic as proper invoicing. After all, how do you prepare an invoice correctly? What should you do if there is a dispute or if the payment term has expired and you haven't been paid? Or what about invoicing foreign companies which also happens regularly? In this article, we will go through everything with you so that you can get on with it flawlessly and super-fast, leaving more time for your green entrepreneurial dream. Because the world needs you and your good ideas! So invoicing can be learned. And that course starts now!
What is an invoice?
An invoice is an official document sent by a seller to a buyer, specifying the goods or services provided and the amounts to be paid. It contains important information such as the date, a unique invoice number, the contact details of both parties, a description of the products or services provided, the quantity, the unit price, and the total amount including any VAT. An invoice serves as proof of the transaction and is essential for both the seller's and buyer's accounts.
Penalty due to error on invoice?
Did you know that an incorrectly prepared invoice can cost you dearly? In the worst case, you risk a fine of up to EUR 5,514 per defect per invoice. VAT deduction can also be refused or your invoice simply not paid at all. Well, you're pretty much done with that. Want to know whether your invoice (template) meets all the requirements? On the website of the tax authorities you can find a handy checklist. It is therefore particularly important to check the following points carefully, because this is where Marcel sometimes sees things go wrong:
- Is the (company) name correct on the invoice?
- Do not use a PO Box number on a digital invoice. This is only allowed if you also include the visiting address on the invoice.
- Is the correct VAT rate stated on the invoice?
- When sending an invoice to a foreign customer, check that the VAT number is correct on it!
- Provide a good description of the goods or services provided.
Sending invoices abroad
Cooperation with foreign parties is not a problem. With thegreenlist.nl I regularly work with sustainable companies abroad who want to raise their brand awareness here. Only you need to know a few things. Marcel: ‘If you send an invoice to a foreign customer, you are not allowed to charge Dutch VAT. You shift the VAT to the customer. Suppose you send an invoice to a German customer. You state on your invoice VAT transferred to... And on the dots is the VAT number of this German company. This is because your customer must pay the reverse-charged VAT in Germany and can then also offset all VAT if he is fully liable for VAT. You (in the Netherlands) report the turnover each quarter* under Supply and Services within the EU and you must submit an ICP declaration (ICP stands for (intra-Community performance). Then the system is closed again. Within the whole of Europe, this is how things are done and monitored. The reverse charge was created to prevent VAT fraud. Otherwise, there is no difference between an invoice within the Netherlands and an invoice within Europe.
*If you have a quarterly turnover higher than fifty thousand euros, you should do this monthly.
Invoice but not paid
It sometimes happens that a company is very late in making a payment. What to do now? Marcel has a step-by-step plan for this too: ‘If the payment term has passed, send a payment reminder immediately. Usually there is nothing wrong. The e-mail may not have arrived or be in the spam box landed. And it might be weird to say, but some companies don't pay until they receive a payment reminder. If they still don't pay after this, my advice is to send a reminder in which you already become a little less nice. And if they then fail to pay again, it's time to send the final reminder threatening to hand over the claim and that all costs and interest will be borne by the customer. For this, you can hire a lawyer or a collection agency.’
Tip: If you don't like it to go that far, you can make another and softer attempt. Marcel: ‘What I personally find a great solution is to call the customer if they still haven't paid after the payment reminder and then ask if they are not satisfied with your service. You can often reach agreement with a good conversation. If that works, make sure you confirm the verbal agreements by e-mail.’ This method is very suitable if you have an ongoing working relationship with the company in question and wish to continue this relationship.
What is a normal payment term?
Marcel: ‘There is a legal payment term for companies. The legal payment term is sixty days. There are a few exceptions, but the most common payment term is still thirty days. Always put your payment term clearly on the invoice.’
Help! What to do in case of a dispute?
It is no fun, but it can happen that a company does not want to pay, for instance because they are not satisfied with the goods or services provided. What then? Marcel: ‘An annoying situation and therefore all the more important to make good agreements beforehand. Having general terms and conditions helps with this, so you have an agreement on what you deliver and how you operate. Don't forget to share these general terms and conditions by e-mail, for example, prior to the collaboration, so that companies can take note of them. If you have not communicated the terms and conditions to your customer in any way beforehand, the terms and conditions will have no effect. Want to know more about this? Then check out our legal tips here.
Send credit note
Of course, it could happen that your customer is not satisfied with your work, that you made a mistake on the invoice or that there is some other reason you want to accommodate him or her by giving a discount. In that case, you need to create a credit invoice. You go to your accounting programme and then you make a credit invoice. You actually make the same invoice again, only then it doesn't say FACTURE but CREDITFACTURE. And there is often a minus sign in front of the amounts. Marcel: ‘Make sure you include the invoice number and the invoice date of the original invoice, as well as the reason why a credit invoice is issued.’
Barter partnerships (barter)
Bartering is a regular occurrence between businesses. But what many entrepreneurs don't know is that even in barter, you are obliged to invoice. Again, a service or product is provided in exchange for something other than money. Those nice and handy things you can fix with barter have a fair market value and VAT must be paid on them and later income tax. If you don't do this and the tax authorities find out, you risk a hefty fine, which can thus amount to €5,514. This fine obviously applies to the party that does not declare it to the tax authorities. You can read all about charter partnerships here!
Need more accounting tips and help?
Maybe you have been doing business for a while, or maybe your initiative is still in its infancy. Either way, with the guide for starting entrepreneurs, we would like to help you on your way with the administrative side, so you can do what you do best: make your idea a success! Because say it yourself, it's a nice idea when the administrative basics are all in order. With the help of this guide, you will have everything you need to organise your company's bookkeeping properly, learn good habits and, as a bonus, we will also share with you how you can do business a little more consciously. We got you!
For 13.50 euros, you have this lifesaver directly to your inbox and so on your tablet or mobile phone! Order the guide for start-ups in our webshop!
About Marcel Huting
Marcel does administration and bookkeeping for a variety of companies and individuals throughout the Netherlands. He can help you get started or take over the entire bookkeeping process from you. Find out more about Huting Tax Advice & Administration.
Photo credits: George Milton (Pexels).
