Invoicing Best Practices for South African SMEs
Create professional invoices that get you paid faster. Learn SARS requirements, VAT compliance, payment terms, and strategies to reduce late payments.
Introduction
Professional invoicing is critical for cash flow, tax compliance, and business credibility. A well-structured invoice gets you paid faster, reduces disputes, and keeps SARS happy. This guide covers everything from legal requirements to practical tips for getting paid on time.
Legal Requirements
South African law requires specific information on invoices. Missing elements can make invoices invalid for tax purposes.
Mandatory Invoice Elements
Your registered business name or trading name
Your business address (not just PO Box)
Unique sequential number for tracking
Date the invoice is issued
Name and address of the recipient
Clear description of what was supplied
Itemised quantities and prices
Total amount due including VAT (if applicable)
Additional Requirements for VAT Vendors
- VAT registration number
- VAT amount shown separately
- Words 'Tax Invoice' clearly displayed
- Customer's VAT number (for invoices over R5,000)
- Rate of VAT applied (15%)
Small Value Invoices (Under R5,000)
Simplified requirements apply to invoices under R5,000:
- Supplier name, address, VAT number
- Invoice date
- Description of goods/services
- Total amount including VAT
- Customer name and VAT number not required
Invoice Best Practices
Invoice Immediately
The longer you wait to invoice, the longer you wait to get paid.
- Invoice on the same day you deliver/complete work
- For ongoing services, invoice on a fixed date monthly
- For projects, invoice at milestones (not just at the end)
- Set up recurring invoices for retainer clients
Clear Payment Terms
Ambiguity causes delays. Be explicit about payment expectations.
- State due date explicitly: 'Due: 15 February 2026'
- Include payment terms: 'Net 14', 'Net 30', 'Due on Receipt'
- Shorter terms = faster payment (Net 14 beats Net 30)
- Consider 'Due on Receipt' for new clients
- Add late payment terms: 'Interest at 2% per month after due date'
Make Payment Easy
- Include full bank details on every invoice
- Offer multiple payment methods (EFT, card, SnapScan)
- Add a payment link for online/card payments
- Include reference instructions (invoice number as reference)
- Make bank details stand out visually
Professional Presentation
- Use your logo and brand colours consistently
- Clean, readable layout with clear sections
- Professional email with invoice attached as PDF
- Personalised message in the email body
- Mobile-friendly format (many view on phones)
Invoice Numbering Systems
A good numbering system helps with tracking, filing, and SARS compliance.
Recommended Formats
- Sequential: INV-001, INV-002, INV-003
- Date-based: INV-2026-001, INV-2026-002
- Client-coded: ABC-001 (for client ABC)
- Project-based: PROJ123-INV-001
Getting Paid Faster
Before You Invoice
- Confirm client details and billing contact
- Agree on payment terms before starting work
- Get purchase order numbers if required
- Confirm delivery/completion with client
- Check if client has specific invoice formats
When You Invoice
- Send to the correct person (accounts payable, not your contact)
- Include all required information first time
- Attach supporting documents (delivery notes, timesheets)
- Follow up with a call to confirm receipt
- Send via email with read receipt if possible
Incentives for Fast Payment
- Early payment discount: '2% discount if paid within 7 days'
- Highlight the discount prominently on the invoice
- Calculate and show the discounted amount
- This typically improves payment times by 50%+
Following Up on Unpaid Invoices
Send a friendly reminder on the due date. 'Hi [Name], just a reminder that invoice #123 is due today. Please let me know if you have any questions.'
Phone call to accounts payable. Confirm they received the invoice and ask when payment is scheduled. Document the conversation.
Formal email stating the invoice is overdue. Reference your conversation. Request immediate payment or a specific date.
Formal letter/email: 'Final Notice before legal action'. State the amount, invoice number, and deadline. Mention that further non-payment will result in collection action.
Hand over to collection agency or attorney. Consider the Small Claims Court for amounts under R20,000. Legal letters often prompt immediate payment.
Common Invoice Mistakes
Mistakes That Delay Payment
- Wrong billing contact or email address
- Missing purchase order number
- Incorrect amounts or calculations
- Missing VAT details (for VAT vendors)
- Unclear descriptions of work
- Missing payment details or wrong bank account
- No clear due date
Legal/Tax Mistakes
- Missing mandatory information for tax invoices
- Incorrect VAT calculations
- Backdating invoices (can be fraud)
- Duplicate invoice numbers
- Not keeping copies of all invoices
Invoicing Software Options
The right software saves time, reduces errors, and improves cash flow through automation.
Free Options
- Wave: Full accounting + invoicing (completely free)
- Invoice Ninja: Open source, professional invoicing
- Zoho Invoice: 5 customers free tier
- Google Docs/Sheets: Template-based (manual process)
Paid Options (SA-Focused)
- Sage Business Cloud: R200-R800/month, SA tax compliant
- Xero: R350-R1,200/month, strong integration
- QuickBooks: R200-R600/month, user-friendly
- Pastel: R400+/month, established SA software
Features to Look For
- Automatic invoice numbering
- Payment reminders and follow-up automation
- Online payment integration (PayFast, Yoco)
- Quote to invoice conversion
- Multi-currency support (if you have foreign clients)
- VAT handling and SARS-compliant reports
- Bank feed reconciliation
Handling Special Situations
International Clients
- Invoice in their currency or USD/EUR for clarity
- State which party bears exchange rate risk
- VAT is zero-rated for exports (still needs tax invoice)
- Consider PayPal/Payoneer for receiving payments
- Factor in transfer fees when pricing
Credit Notes
Issue credit notes when you need to reduce or cancel an invoice:
- Use for returns, corrections, or cancellations
- Reference the original invoice number
- Show negative amounts or clearly state 'Credit Note'
- Include reason for the credit
- Apply against future invoices or refund
Deposits and Progress Billing
- Invoice deposits as 'Deposit Invoice' clearly marked
- Progress invoices: 'Invoice 1 of 3' or 'Milestone 2 Invoice'
- Show cumulative amounts and balance due
- Final invoice should show all payments received and balance
Record Keeping Requirements
SARS requires you to keep invoice records for specific periods.
- Keep copies of all invoices issued for 5 years minimum
- VAT invoices: 5 years from end of tax period
- Supporting documents (delivery notes, contracts): 5 years
- Electronic storage is acceptable (backup required)
- Organise by date or invoice number for easy retrieval
VAT Invoicing Checklist
Clearly displayed at top of invoice
10-digit VAT registration number
Unique, sequential numbering
Date invoice is issued
Name and physical address
Name and address (VAT number if >R5,000)
Clear description of goods/services
Per item breakdown
15% VAT shown separately
Final amount due
Next Steps
- Review your current invoice template against the checklist above
- Implement or update invoicing software
- Create a standard process for invoicing (same day as delivery)
- Set up payment reminders and follow-up procedures
- Add early payment discounts to improve cash flow
- Train anyone who does invoicing on the correct process
- Set up proper filing/storage for invoice records