Invoice Calculator

Fifteen lines that add themselves up

An invoice is arithmetic that has to be right. Quantities times prices, less discounts, plus delivery, plus tax. None of it is difficult and all of it is easy to get slightly wrong, and a slightly wrong invoice either costs you money or costs you a conversation with a customer.

This lays out fifteen rows, totals each one as you type, and builds the invoice total underneath: items subtotal, delivery, subtotal, VAT and the final figure.

Two things about it are worth explaining properly, and both are places where invoicing tools commonly disagree with each other. One is the Per column, which handles pricing per hundred or per thousand. The other is what the VAT is applied to, which is not just the goods.

Filling in a row

Each of the fifteen rows has five fields you fill and one it calculates.

1. Desc. What the line is for. Text, and it does not affect the arithmetic.
2. Qty. How many.
3. Price. The unit price, as quoted.
4. Per. The number of units that price covers. Leave it blank or set it to 1 for ordinary per-unit pricing.
5. Discount. A percentage off that line. Blank means none.
6. Total. Calculated for you.

Underneath, two more fields: a delivery charge and a VAT rate as a percentage.

Blank rows are treated as zero and contribute nothing, so you can use three rows or all fifteen without tidying up.

The Per column, which most invoice tools do not have

This is the field people skip past, and it earns its place in several trades.

Plenty of goods are priced in bulk units rather than singles. Printing is quoted per thousand. Fasteners and small components are quoted per hundred. Cable and fabric are quoted per metre while sold in longer runs.

Without a Per field you have to do division in your head before typing, and that is where the errors come from.

Line total = (quantity × price) ÷ per, then the discount comes off.

Some examples:

The second row is the point. You quoted 4.50 per thousand and the customer wants 2,500. Typing those numbers as they were quoted gives the right answer without you working out that the unit price is 0.0045.

Leaving Per blank defaults it to 1, so ordinary per-unit lines need nothing.

Four lines, worked through

A small job invoiced across four rows, with a 20 percent VAT rate and 50 of delivery.

Then the totals build in order:

Check the brackets line if you want to see both features at once. 200 × 65 is 13,000, divided by 100 gives 130.00, less 10 percent gives 117.00.

Where the discount applies

The discount is a percentage and it applies to that line only, after the quantity and Per calculation.

So the sequence is: work out the line value, then take the percentage off it. On the brackets above, 10 percent came off 130.00 rather than off the 65.00 unit price, though in this case both routes give the same answer because the discount is proportional.

What it does not do is apply across the whole invoice. There is no invoice-level discount field, so a blanket 10 percent off everything means entering 10 in the discount column of every line you want it on.

That is arguably better than a single field, because in practice discounts are rarely uniform. A trade customer might get 15 percent on materials and nothing on labour, which is exactly what per-line discounting handles cleanly.

One thing worth knowing about how the discounted figure interacts with your margin. A 10 percent discount does not cost you 10 percent of your profit, it costs considerably more, because your cost does not fall with the price. The markdown calculator quantifies that, and the short version is that a discount equal to your margin percentage wipes the profit out entirely.

Why VAT lands on the delivery charge too

Look at the order of the totals. Items sub-total, then delivery, then sub-total, and the VAT is calculated on that sub-total.

Which means the delivery charge is taxed along with the goods. That is not an oversight, it is how the rules work in the ordinary case, and it is the thing most often got wrong on hand-built invoices.

Under HMRC's guidance, where goods are delivered to a customer and the price includes an amount for that service, it is a supply of delivered goods. In that situation the delivery charge takes the same VAT treatment as the goods themselves. Standard-rated goods, standard-rated delivery.

On our invoice the difference is straightforward to see:

• VAT on the sub-total including delivery: 20 percent of 1,067.00 = 213.40
• VAT on the items alone: 20 percent of 1,017.00 = 203.40

Ten of difference on a small invoice, and it scales with every job you send out.

Two situations where the treatment differs, and both are worth knowing.

If you are selling zero-rated goods as delivered goods, the delivery follows them and is also zero-rated. Books and children's clothing are the usual examples.

But where delivery is not part of the contract to supply the goods, and you agree to deliver and make a separate charge for it, the liability of that charge is not affected by the goods and is always standard-rated. So a separate delivery charge on zero-rated goods can still carry VAT.

Since this tool applies one rate to everything, an invoice mixing rates needs care. If you are billing zero-rated goods with a standard-rated separate delivery, set the VAT rate to zero and enter the delivery VAT as its own line item instead.

The order of the totals

Five lines, and the sequence is the thing to check when a figure looks wrong.

1. Items sub-total. Every line total added together, discounts already applied.
2. Delivery charge. Added as entered.
3. Sub-total. Items plus delivery.
4. VAT. The rate applied to that sub-total.
5. Invoice total. Sub-total plus VAT.

Two consequences fall out of that order.

The VAT is added on top of your prices, so the figures in the Price column should be your prices excluding tax. Enter tax-inclusive prices and the total will carry VAT twice. If you normally quote inclusive prices, the net to gross calculator will strip the tax out first, and it also explains why taking 20 percent off a VAT-inclusive figure does not get you back to the net amount.

And discounts come off before tax, which is correct. VAT is charged on what the customer actually pays, so a discounted line is taxed at its discounted value.

This produces a total for an invoice you are preparing. It is not a substitute for proper invoicing software or for advice on your own tax position, and nothing here is tax advice.

Questions people ask

What is the Per column for?

Prices quoted in bulk units. If leaflets are 4.50 per thousand and you are billing 2,500, enter quantity 2500, price 4.50 and Per 1000. Leave it blank or set 1 for ordinary per-unit pricing.

How is a line total worked out?

Quantity times price, divided by Per, then less the discount percentage. So 200 brackets at 65 per hundred with 10 percent off comes to 117.00.

Is VAT charged on delivery?

In the ordinary case yes. Where goods are supplied as delivered goods, the delivery charge takes the same VAT treatment as the goods. This tool applies the rate to the sub-total including delivery, which reflects that.

What if my goods are zero-rated?

Delivered goods that are zero-rated carry zero-rated delivery. But a delivery charge made outside the contract to supply the goods is always standard-rated regardless of the goods, so mixed cases need a separate line.

Should prices include VAT?

No. Enter prices excluding tax, since the VAT rate is applied on top. Entering inclusive prices charges the tax twice.

Can I apply a discount to the whole invoice?

Not in one field. Enter the percentage on each line you want discounted, which also lets you discount materials without discounting labour.

What if I need more than fifteen lines?

Group related items into a single line with a combined description, or produce two invoices. Blank rows contribute nothing, so using fewer is fine.

How much does a discount actually cost me?

More than the percentage suggests, because your costs do not fall with the price. A discount equal to your margin percentage removes the profit on that line entirely.

References

The treatment of delivery charges for VAT, under which a supply of delivered goods carries the same liability on the delivery charge as on the goods themselves, and under which a separate delivery charge made outside a contract to supply goods is always standard-rated, comes from HM Revenue and Customs VAT Notice 700/24. The convention of applying a tax rate to a net figure and adding it to reach a gross total, and the distinction between that and a rate withheld from a gross amount, is covered in the same body of guidance and in the Internal Revenue Service's employer guidance for the withholding case. The effect of a discount on profit, where cost does not fall with price, follows the treatment of gross profit as receipts less cost of goods sold in IRS Publication 334.

1. HM Revenue and Customs, Postage, Delivery and Direct Marketing (VAT Notice 700/24). https://www.gov.uk/guidance/vat-on-postage-delivery-and-direct-marketing-notice-70024
2. Internal Revenue Service, Publication 334: Tax Guide for Small Business. https://www.irs.gov/publications/p334
3. Internal Revenue Service, Publication 538: Accounting Periods and Methods. https://www.irs.gov/publications/p538