This topic is a linked part of a larger work: “Edgeryders OÜ Company Manual”
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.
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:
A client has purchased goods or services from Edgeryders. Example: a European capital of culture buys training for their community managers.
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 contactand fill the information, including the VAT number. Under
In the second screen create invoicing items, and make sure that the VAT rate (which relates to Estonian VAT) is chosen appropriately. The appropriate VAT rate is:
- 0% in almost all cases, with the exceptions listed below.
- 20% if the client is incorporated in Estonia.
- 20% if the client has no VAT number.
For the special case where the client is not a VAT-registered business or institutional customer, also check if their country of residence levies VAT on e-services on non-resident providers selling to consumers. If so, you have to somehow include that into the invoice and forward it to the government of that country.
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
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”.