Invoicing a client

This topic is a linked part of a larger work: “Edgeryders OÜ Company Manual

Content

1. Introduction

2. Setup

3. Writing the invoice

4. Accounting for the invoice


1. Introduction

This process is about issuing invoices by Edgeryders OÜ to its clients. If you want to send an invoice to Edgeryders OÜ to be paid by us, go here instead: Invoice payment process.

2. Setup

For the purposes of this manual, an invoice is a document that accounts for revenue received by Edgeryders, against the provision of goods and services (in our case it will always be services). There are two cases:

  1. A client has purchased goods or services from Edgeryders. Example: a European capital of culture buys training for their community managers.
  2. A funder issues a grant to a project that Edgeryders delivers. Example: the European Commission pays for research projects.

In both cases we issue similar documents, using the Invoice tab of FreeAgent. In accounting terms, however, they are different: Case 1 requires proper invoices, and the associated revenue falls under Sales. Case 2 produces documents we will call “pseudo-invoices”, and the associated revenue falls under Grant income. Please be clear about which case you are dealing with before you start.

3. Writing the invoice

Issuing an invoice against a sale

  • Get the client’s VAT number. This is very important.
  • Open FreeAgent, then choose Work => Invoicing => Add new invoice.
  • Fill the form. Don’t forget to assign the invoice to a project. If this is the first invoice for a brand new project you might have to create one (Work => projects). Click on Create invoice. If the client is not already recorded in FreeAgent, it will not show up in the drop-down menu under Contact. In that case, choose Contacts => Add new contact and fill the information, including the VAT number. Under Charge VAT choose Always.
  • In the second screen create invoicing items, and make sure that the VAT rate is chosen appropriately. The appropriate VAT rate is always 0%, unless the client is incorporated in Estonia. In this case, it is 20%. However, if the client does not have a VAT number, then the appropriate VAT rate is always 20%.
  • Click Save, then Mark as sent. This tells FreeAgent that your invoice is no longer a draft, and should go into Profit and loss. At this point you can download the invoice and send it to the client.

Issuing a pseudo-invoice against a grant

The procedure is the same as above. VAT does not apply to grants, and grant makers normally have their own language to justify it (EU treaties, UN treaties etc.). Grant makers typically do not ask for our pseudo invoices: we generate them for our own internal accounting.

This also means that, if you are dealing with a new grant maker and are creating their contact information, you should set the Charge VAT field to Never.

4. Accounting for the invoice

“Proper” invoices against a sale do not require any additional accounting moves. Pseudo-invoices against grants do. Refer to the Company manual, section “Accounting for grant income”.