Invoicing in Canada follows a standard pattern. It is regulated, as such, there are guidelines that ought to be followed when an invoice is being prepared. But regardless of the available guidelines, the procedure involved in the drafting of an invoice, according to the Canadian dictate, is not such a complex procedure, as compared to those of some other countries.
- Invoice Contents Required
- Delayed Invoicing in Canada
- Invoice Return Policy
- Frequently Asked Questions – Invoicing in Canada
This procedure is binding on all transactions made within Canada, and even transactions between a non-Canadian company and a Canadian company.
Invoice Contents Required
- The information about the client you are selling to, which must include the full name of the customer.
- Your own information as the supplier. This must include your full name, the name of the business, the full address of your business, and contact information.
- The GST/HST and or QST registration number of the supplying business. (This is if the tax has been charged at the invoiced price).
- The banking details of the supplying business. This should include IBAN/Swift.
- Any other general information that should be included in an invoice.
- The date when the invoice was issued.
- A concise, but sufficient description of the nature of the goods or services.
- The quantity of the goods that were supplied. And in the case of services, the extent of the quality of the services rendered.
- The several services that the supplying business renders. Either within Canada or outside Canada.
- A statement guaranteeing reimbursements (when an invoice is from a Non-Canadian vendor).
- Payment terms as noted on PO.
- The taxable amount per Goods and Services Tax, or HST.
- The total VAT amount for the number of goods ordered.
- The invoice should indicate which of the goods was taxed at the GST rate and the ones that were taxed at the HST rate. It is important that this is specified.
- The unique identification number of your enterprise.
- The delivery date of the goods or service (the supply date).
- The total amount owed, including tax charges.
Your invoice can be tweaked if you fall under the following category. Although there is not so much difference.
- Sole trader invoices: If you’re a sole trader, the invoice must also include:
- The name of the sole trader alongside the business name that is being used.
- A detailed address where legal documents can be delivered to, in the case that the sole trader is using a business name.
- Limited company invoices: If your company is a limited company, you must include the following
- The full name of the supplying company. Be sure to write it just the way it appears on the company’s certificate of incorporation.
- Including the name of a director in the invoice, will mean the inclusion of the names of all the directors in the company.
- VAT Invoices: Drafting of VAT invoices is necessary if the receiving company is VAT registered. This means that it is compulsory that you use VAT invoices if you and your customers are VAT registered.
Delayed Invoicing in Canada
Can a delay in issuing an invoice lead to no payment? Consider the following example of a delayed invoice and its implications.
Consider a situation in which a business delivers goods and services worth thousands of dollars to a client within Canada. Due to some circumstances and the company’s negligence, they were not able to give their client the invoice right after the delivery of the goods and services. After about four years, out of the blue, the service provider decides to forward the invoice to the client. Is the client under any obligation to pay the service provider for the goods and services that were delivered four years ago?
Like in any country or province, there is a maximum allowable timeframe for a business or an organization to submit an invoice to its clients after providing services and goods. Unfortunately for the service provider, in Canada, in general, the maximum allowable limitation period under which an invoice can be submitted to a client for payment is two years. This regulation is covered in section 4 of the 2002 Limitations Act.
Therefore, in this case, the client is under no obligation to pay any amount of money to the service provider. Even if the service provider decides to submit the invoice or sue the client, Canadian Law is on the client’s side. As such, the client is not obliged to pay the business, and such a case would be dismissed in the court of law.
The provision of the law assumes that the company has forfeited its right to payment for the products and services rendered to the client by not issuing an invoice within the acceptable timeframe. Therefore, the client is under no obligation to pay the contractor. He can only pay the contractor if he decides to be kind to him, but he is not obligated to make any payments.
Invoice Return Policy
When selling returnable goods or products, it is best to include the return policy on the invoice. You can write the return policy below the invoice’s payment terms. It may include the following terms:
- The period within which, you allow customers to return products.
- How the client can initiate a return or refund process.
- The condition of return items the business can accept from customers.
- Who determines that a product qualifies for a replacement or refund.
Frequently Asked Questions – Invoicing in Canada
How does one create and send an Invoice?
You can create invoices using a word processor or spreadsheet, and then convert them to PDF format. You can convert invoices created in different formats, to PDF using PDF.CO converter. After you can convert them to PDF, you can send them to customers.
Alternatively, you can use invoicing software to generate and send invoices. We recommend that for the first invoice, you ask their clients their preferred method of receiving invoices. Once you have established a secure method to invoice them, you should file that information for future use.
Is an invoice a legal document?
On its own, an invoice is not a legally binding document. With the invoice itself, there is no evidence that both parties agree to the terms. There has to be some sort of agreement between both parties like a contract. And an invoice must be matched with a purchase order or receipt of the delivered goods.
What is e-invoicing and is it allowed in Canada?
E-invoicing is a process where you generate, send, and receive invoices electronically. Electronic invoicing is legal in Canada, but it is not compulsory. E-invoicing allows for real-time processing and delivery of invoices. It also allows easy tracking and assures integrity and accuracy.
Can you invoice someone as an individual?
For you to invoice someone you do not need to have an incorporated company. You can send it as an individual or a sole proprietor. All you need is your name and contact information and your client’s information.
How to make invoicing easy and Professional?
Invoicing can be simplified by using invoicing software. The software comes with customizable templates tailored to suit different industries. And it allows invoice customization, such as the use of brand colors and company logos. Invoicing software also makes tracking sales taxes easier.
What is the difference between Invoice number and order number?
An invoice number is a unique code, and it can be numeric or alphanumeric. It is used to identify different invoices and the order in which they were generated. On the other hand, an order number identifies a purchase order, with which a client ordered goods and services.
In conclusion, a business or a service provider should always endeavor to forward its invoice within 30 days of the provision of goods and services to prevent delays or loss of income.