Invoicing is an integral component of operating a small business. An invoice serves as proof of sale by outlining the products sold or services offered, due dates, and the sum of money exchanged between two parties.
A good example of a business that makes frequent use of invoicing is rental property management — landlords and property managers often rely on invoices to outline rent payment terms and collect monthly rent.
In this article, we'll discuss the essential elements that should be included in a rental invoice and present a quality rent invoice template that you can use in your own rental property business.
How Do Landlords Bill Tenants?
As a landlord, one of your main responsibilities is to ensure your tenants are aware of all the costs associated with renting the property. An invoice removes any ambiguity by outlining all rental costs in a single document. Moreover, invoicing helps you keep track of your cash flow and stay on top of your billing at all times.
A typical rental invoice includes all the recurring costs that tenants incur when occupying a property. This ranges from ubiquitous expenses like the amount of rent and cost of electricity to more specific costs like additional building fees and other utilities that the landlord takes care of. The subtotal of these expenses is generally highlighted on the invoice.
The invoice typically includes a due date to ensure payment deadlines are respected and might also specify the payment method that the tenant will use to pay the bill. In most cases, landlords use invoices in two different ways: before the tenant pays rent and after the tenant pays rent.
In the first scenario, the landlord creates an invoice document that includes all the owed charges and sends it to the tenant. Upon receiving the invoice, the tenant proceeds to make the monthly rental payment before the due date outlined on the document. Sending monthly rent invoices before payment is made is a great way to ensure late fees and other owed expenses are resolved.
The second option is to send the invoice after the rental payment has been made by the tenant. While this might seem confusing at first glance, sending an invoice after a month's rent has been paid is comparable to using a standard business receipt.
Free Rental Invoice Template
As you would expect, using a free invoice template saves you the hassle of having to create one yourself every time you need to bill a renter. There are plenty of software solutions that allow you to generate rental invoice templates with the click of a button; however, few can match Skynova's invoice template in terms of simplicity and overall quality.
By simply filling out a form, landlords can generate professional-looking invoices in a matter of minutes. The invoices are sleekly designed and are available in two invoice formats: printable and digital.
Here are the main elements that are included in a Skynova invoice:
- Your name and address/contact information: This section is reserved for some basic information about the landlord. You might also choose to add your phone number or email address here.
- The tenant's name and their address/contact information: Much like the section above, this part of the invoice should include all relevant information about the tenant.
- Invoice number: Numbering your invoices is extremely important if you want to maintain accurate recordkeeping. When using Skynova's template, an invoice number is generated automatically.
- Due date: Most invoices prominently feature a due date that specifies the day by which the tenant must complete the payment.
- A table of items that outlines all tenant costs: This is a list of all the expenses the tenant must cover. The main items to add here are the monthly rent, utility costs, and shared expenses if the property is a multi-unit one.
- The subtotal: To ensure more clarity and transparency, the Skynova invoice includes a subtotal of all the expenses for which the tenant is charged.
- Notes: In this section, landlords can add whatever piece of information they might find relevant to the transaction. This can be a late fee reminder, details pertaining to a payment method, or a simple thank-you note.
How to Create a Custom Rental Invoice
While highly professional and sleek-looking in itself, you still need to add certain elements to the basic Skynova invoice template if you want to create your own customized template. Here are the customization options that are offered by Skynova:
- Custom logo: A logo is one of the most basic elements of a personalized invoice. If you have your own logo, you can simply add it to the invoice template by selecting "Logo" in the "Show Customization Options" menu and adding an image file from your computer or device folder.
- Sales tax: Adding taxes to your invoices allows you to easily collect any applicable taxes. More importantly, it is an effective way to stay on top of your tax affairs and avoid any filing inaccuracies down the line.
- Purchase order number: Another great customization feature of the Skynova invoice template is the ability to add P.O. numbers to all of your invoice documents. In the "Show Customization Options" menu, you can select "P.O. #" to include a P.O. number in every invoice that you create and send out to your tenants.
Best Practices You Should Adhere to When Sending Rental Invoices
When creating rental invoices, it's always important to remember the intended purpose of the task: getting paid on time. To that end, your invoice should be clear and designed in a way that makes it easy for the tenant to make the payment.
Here are some tips to help you create the ideal rental invoice:
- Keep it simple and concise. There is no need to overcomplicate your invoice by adding a myriad of trivial items and design elements. The sole focus here should be on making sure the tenant understands every expense included in the document.
- Stick to an invoicing schedule. Like every aspect of your business operation, you should ideally have a set schedule for your invoices. Sending out invoices on a specific date allows your tenants to stay on top of their expenses and anticipate costs better, which results in timely payments for you.
- Use reminder invoices. There is no way around it: Late payments are inherent to running a rental property business. The best way to deal with this issue is just to send out reminder invoices that politely remind tenants of their obligations.
- Use a personal tone. Landlord-tenant relationships can be tense at times, especially when it comes to issues regarding payment. To eliminate miscommunication and reduce the possibility of alienating your tenant, avoid formal business language and adopt a more personal tone both in person and in your invoice notes.
- Add detailed payment instructions. As a landlord, the onus is always on you to provide clear instructions regarding the payment method, terms, and conditions. Neglecting to do so will invariably result in inaccuracies or missed payments altogether down the line.
Invoicing Rental Tenants Is Easy With Skynova
While not as time-consuming as some other business ventures, managing rental properties is still a challenging task that requires a decent amount of effort. Online solutions like the Skynova invoice template allow you to focus more on your business by streamlining invoicing and making it a simple task that can be carried out in seconds.
Notice to the Reader
The content within this article is meant to be used as general guidelines and may not apply to your specific situation. Always consult with a professional accountant to ensure you're meeting accounting standards.