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Invoicing for small businesses: complex guidelines explained in simple terms

02.10.2023
Invoicing for small businesses: complex guidelines explained in simple terms

If you are a small business owner in Germany or are planning to become one, you have probably come across the term “Rechnung Kleinunternehmer”. This concept can be confusing, especially when it comes to preparing invoices that meet all legal requirements. In this comprehensive guide, we’ll cover all aspects of the topic in detail – from the basic concept to specific requirements and best practices.

Invoicing as a small business owner: what does it really mean?

As a small business owner, you are not obliged to collect and remit VAT according to Article 19 of the UStG, so you avoid a lot of red tape. However, this does not mean that you do not have to worry about proper invoicing. In order to be legitimate, each invoice must contain certain information.

Why is it so important to invoice correctly?

Correct invoicing is not only important for you but also for your customer. Inaccuracies can lead to unpaid taxes, fines and even legal problems. Correct invoicing builds trust between you and your customers and lays the foundations for a successful business relationship.

What should an invoice for small businesses contain?

An invoice for small businesses differs from a standard invoice in several ways. It should contain the following information

  • The name and address of the invoice writer and recipient
  • Unique invoice number
  • Date of invoice
  • Date of delivery or service
  • An exact description of the goods or services supplied
  • Invoice amount
  • Reference to the Small Business Ordinance in accordance with Article 19 of the UStG

Invoicing as a natural person: is it possible?

This is where it gets interesting: as a small business you can invoice as a natural person. However, in this case, the invoice must meet certain requirements to be considered valid. If you are invoicing as a natural person, make sure that the above requirements are still valid. Invoicing as a natural person and invoicing a small business are very similar in principle, although the tax aspects are usually less complex for a natural person.

Invoice template for a natural person: a useful tool

If you do not have much experience in invoicing, templates can be very useful. The invoice template for an individual contains all the necessary fields to be filled in, so you can be sure that you will not forget any important information. However, please remember that the invoice template for an individual must be based on the latest legal standards.

One invoice for a natural person

A single invoice for a natural person is often issued when you sell a specific service or product to a natural person without establishing an ongoing business relationship. Even if it is a one-off transaction, the invoice must comply with certain legal requirements. These include the name and address of the invoice writer and the recipient, a detailed description of the service or product sold, the invoice amount and, if applicable, an indication that no VAT is charged. Make sure that all relevant information is accurately documented to avoid ambiguities or subsequent legal problems. For private individuals, the preparation of private invoices requires, in particular, a good knowledge of the legal framework, which is why it is advisable to seek the assistance of an accounting firm.

Individual invoicing: a step-by-step guide

Before delving into the detailed requirements for small business owners, it is worth touching on an often overlooked topic: can you invoice as a sole trader? If so, what guidelines and rules do you need to follow? In the next section, we will discuss these questions in more detail so that you have a clear understanding of how you can correctly and legally invoice as a sole trader:

  • Gathering information: you should gather all the information you need before you issue an invoice. This includes the contact details of the invoice recipient and a list of services rendered or products delivered.
  • Invoice number and date: each invoice should have a unique number and date of issue.
  • Description of the service: A detailed description of the service or product must be provided.
  • Invoice amount and payment terms: Indicate the total amount of the invoice and the method and date of payment.
  • Note for small enterprises: Please add a note that you are a small enterprise within the meaning of Article 19 of the UStG and therefore do not charge VAT.
  • Signature: A signature is not necessary, but it may add to the authenticity.
  • Sending the invoice: Send the invoice by email or post, depending on the customer’s preference.

Avoiding errors and common mistakes

  • Providing incorrect information: Incomplete or incorrect information can cause problems. Make sure that all information is entered correctly.
  • Lack of notification to small businesses: Failure to provide the mandatory notification to small businesses invalidates the invoice.
  • Late invoicing: Make sure you issue and send invoices on time to avoid late payment penalties or other legal consequences.

Invoicing as an individual: Is there a different regime for small business owners?

In short, not at all. The requirements are essentially the same, the only difference is that tax issues may be less complex when you invoice as an individual. The most important thing is that the invoice is complete, correct and contains all the necessary information.

We hope that by looking at the complex issue of invoicing small businesses from a number of different perspectives, it has become clear that correct invoicing is more than just a formality. It is an essential part of a company’s operations and failure to comply with it can have financial and legal consequences. In this guide, we have tried to cover all aspects of invoicing for small business owners and individuals, from the basic requirements to the most common mistakes and how to avoid them. You will now be better equipped to issue accurate, compliant invoices that will increase customer confidence and boost business.

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