How to issue an invoice?
The invoice is one of the basic accounting documents - sooner or later every entrepreneur will come across it. Learn how to issue it correctly to keep your books in order.
What is an invoice?
An invoice is a commercial document - it is an accounting document for the sale of goods or provision of services. However, an invoice as such is not a proof of payment; this must be issued separately if necessary.
An invoice also serves as a tax document for VAT payers. However, other documents such as a simplified tax document (or receipt/receipt) and a corrective tax document (credit note) are also tax documents.
The mandatory information on the invoice varies depending on the legal form of your business, the specific performance and whether you are a VAT payer. In general, the following must appear on every invoice:
- invoice number,
- the date of issue (or, if different, the date of the accounting event),
- the name of your company (name and surname for self-employed persons) and the address of your registered office,
- your registration number,
- details of the customer (name, registered office, VAT number, possibly VAT number),
- invoice items,
- the amount of money, the price per unit of measure if applicable, and the quantity,
- method of payment.
According to the law, as a self-employed person, you also indicate on the invoice that you are registered in the trade register. Companies for change list their registration information including the relevant section and insert.
We recommend that you also include the due date on the invoice (the maximum due date is 30 days by law). If the customer will pay you by bank transfer, do not forget to mention your payment details on the invoice.
What does a non-VAT invoice contain?
As a non-VAT payer, your administration is easier. You just need to include the general information from the list above. We recommend that you also add a footnote on the invoice stating "I am not a VAT payer". This will make it clear to your customers how to deal with it.
To avoid confusion, make sure that the header of the document does not read "Invoice - tax document". This could confuse your accountants. Also, delete any mention of the VAT rate or the date of the taxable transaction from the invoice template - they don't apply to you.
Attention! Make sure that your turnover for 12 consecutive months does not exceed CZK 2,000,000. If this happens, you will automatically become a VAT payer. Some entrepreneurs also apply for the tax voluntarily. Find out who pays VAT.
What does a VAT invoice contain?
As a VAT payer, you are subject to the VAT Act, so you issue invoices in the form of tax documents - regardless of whether your customer also pays VAT. We also recommend that you indicate "Invoice - tax document" in the header of the document.
In addition to the general details, you must add the following to the invoice:
- the registration number of the tax document (invoice number),
- Tax ID number of both parties,
- the taxable amount (amount excluding tax),
- the VAT rate (or a statement that the transaction is exempt from VAT, with reference to the law),
- the calculated amount of VAT,
- the date on which the taxable supply took place (VAT).
In the case of some transactions, information is also added to the invoice stating that the transaction is under the reverse charge regime or a special regime.
What is the purpose of the advance invoice and what are its details?
An advance invoice (sometimes also proforma invoice) is not an accounting or tax document. It serves essentially as a call for payment. Therefore, you do not account for the issue of the advance invoice - it is only accounted for when the advance payment is received.
The proforma invoice does not have the prescribed requirements. However, be sure to include the supplier and customer details, the items charged or the amount of money. Of course, payment details are also important.
How to issue an invoice abroad?
Invoicing to other countries has its own specifics. Firstly, it is advisable to issue the invoice in a language that the customer will understand. International payment details, especially IBAN and SWIFT, must not be missing. The name of your bank may also be useful.
When trading with foreign countries, it is also a good idea to make sure that the VAT is correctly accounted for. The VAT regime for a particular transaction will affect, among other things, the other details of the invoice. The country you are invoicing to also plays a role.
In addition, you will probably be invoicing in a foreign currency, so you need to keep an eye on the current exchange rate (usually the CNB rate is used). As a VAT payer, you are interested in the exchange rate on the date of the taxable transaction, as a non-taxpayer on the date of the invoice.
Attention! If you trade with foreign countries as a non-VAT payer, in some cases you become an identified person. Read what obligations an identified person has.
How to create an invoice?
You have several options on how to write an invoice. The most practical is to use accounting software or an online portal that will generate a document for you based on a few details. A handy program can also help you set up the correct details of the invoice.
Some business owners use Word or Excel office programs for invoicing. However, regular Excel is not recommended for these purposes. Creating invoices in Excel is unnecessarily tedious because it lacks the useful features of accounting software (such as auto-populating data by tax ID). It's also harder to keep track of a large number of documents.
The mPohoda program, which we also provide to our clients, has worked best for us. However, there are other tools available on the market, among the most popular are Fakturoid and iDoklad.
Do you have an accounting agenda that is over your head? We will be happy to help you with your bookkeeping. We will post your invoices, process payroll, taxes and cash books. Contact us to discuss the details.