Business Basics Day 2: Invoices, Receipts and Expenses
Welcome to day 2! Now that you have setup and named your business, it’s time to get familiar with how to invoice and determine business expenses. An invoice is a document that you, as a ‘seller’, send to a ‘buyer’ (the person you are charging for your services) that specifies the amount and cost of the services you have provided. Usually an invoice will include the following information:
- Your name or business name and contact details
- Your Australian Business Number (if applicable) or Social Security Number
- The name and contact details of the ‘buyer’
- The word ‘INVOICE’
- An invoice number (a unique reference number you create for you to refer to at a later date if necessary)
- The date you sent the invoice to the ‘buyer’
- The date the service was rendered
- A description of all the services rendered – be as specific as possible including the style and length of the class
- The cost per unit of services rendered
- Your terms of payment (when the payment should be received, payment methods and any late payment fees etc.)
- Total amount owed
Refer to Schedule A for an example of a simple invoice.
It is important to establish with the ‘buyer’ how often and when they would like to be invoiced for your services when you first start teaching. It is also a good idea to check if you need to fill out any paperwork before you can be paid. Make sure that you are comfortable with their terms as these are usually up for negotiation. Another important thing to remember is to invoice for your teaching on time. It is likely you will be working for several different ‘buyers’ who require invoices at different times. Ensure you keep track of when you need to invoice by setting reminders on your phone or by using a diary.
Another common scenario for yoga teachers is to rent a space and teach your own classes. If this is the case, make sure you can at least generate enough income to cover your costs plus the cost of your time. And if it makes you feel more comfortable organise a simple rental agreement. There may also be occasions where your clients will ask you to write them a receipt for your services. The easiest way to issue a receipt is to purchase a receipt book with at least 2 duplicates from your local newsagent or Walmart. Make sure your receipt contains at least the following details:
- Your business name
- The person who you are issuing the receipt to
- Description of the services you have performed
- The word ‘RECEIPT’ and a unique receipt number
- The total amount you have received and anything outstanding
- Refer to Schedule B for an example of a receipt.
As an independent contractor and/or an employee, are you entitled to claim expenses you have incurred to run your business. The legislation is slightly different for Australia compared to the USA but the general principle is the same. If the expense is incurred in the daily running of your business then it may be eligible as a deduction. Some deductible business expenses include:
- Self-education – extra training or workshops that are relevant to your yoga teaching or running a business.
- Travel – car and other travel expenses
- Equipment – mats, props etc.
- Professional association fees – Yoga Australia, Yoga Alliance etc.
- Accounting fees
When in doubt, keep the receipt as you could be surprised as to what your accountant deems relevant as a business expense. For more information on business related expenses in Australia click here and for the USA click here.
Tomorrow we’ll be looking at basic book keeping and some other tips so you can breeze through tax time and reduce expensive accounting costs.