What is an Invoice?


Do you know what an invoice is? An invoice is a bill for an account between a buyer and a seller indicating what was sold and owed. Five thousand years after the Sumerians invented invoices, we’ve added a couple of bells and whistles to make record-keeping easy, but that much remains the same.

Invoices are, like most bills, issued from a vendor to a customer for something they’ve already received. But invoices, unlike a restaurant bill, aren’t due immediately upon receiving them. They’re used for account-based transactions between vendors and sellers who work with each other on a regular basis.

Your local takeaway restaurant isn’t likely to set up a credit-based account with you (even if you are a regular customer). But if you’re selling to the same person monthly or even weekly, it makes sense to set up an account to track.


What Should an Invoice Include?

Usually, an invoice will include the following points of information in order to be considered legal invoices:

  • The word ‘Invoice.’
  • A unique reference number: the invoice number
  • The date the product was sent or delivered (or the date the service was rendered)
  • The date the invoice was sent
  • The contact information and name of the seller
  • The name and contact details of the buyer
  • The terms of payment (that explain the means of payment, when the sum should be received, any cash discount details for early payment, late payment fees, etc.)
  • A line detailing the product/service
  • The cost per unit of the product (if this applies)
  • The total amount that is owed

Why is invoicing important?

An invoice is a pillar of the sales process. The main document serves as a bill for your business’s services or products. An adequately created invoice is a legal document that provides a binding agreement.

Invoices are essential not only for keeping track of sales and payments, from balances to stock levels but they can also be used if a payment is overdue or missing and followed up with more formal actions. 

What is an invoice address?

An invoice address is the legal address of the buyer or the address where they receive correspondence. It is differentiated from the shipping address (or delivery address), which is the address where goods or services are to be delivered. In some cases, these addresses may be different, and they may be the same in some cases.

What is an invoice due date?

An invoice due date is a date upon which full payment of the invoice total is due. The invoice is considered overdue if this date passes and the full amount hasn’t been paid.

What Is an Invoice ID?

An invoice ID, also called an invoice number, is a unique number assigned to each invoice a business generates. The invoice number is crucial because it allows a business to identify and refer to individual transactions with clients easily.

An invoice ID can include both numbers and letters. While invoices don’t necessarily need to be numbered sequentially, you’ll need to establish a consistent invoice ID system and ensure you don’t assign an invoice number more than once.

How Do I Invoice Clients?

You should create and send an invoice to invoice your clients as soon as you’ve completed work on a project. That way, the work details will be fresh in your mind, and you should receive payment as quickly as possible. Ensure your invoice includes all the details your clients will need to pay you, including your business name, the invoice due date, and the total amount due.

What is an E-Invoicing?

Since the advent of the computer era, people and businesses have found it easier to rely on electronic invoicing as an alternative to paper documents. Electronic invoicing, or e-invoicing, is a form of electronic billing to generate, store and monitor transaction-related documents between parties and ensure the terms of their agreements are fulfilled.

These e-documents may include invoices and receipts, purchase orders, debit and credit notes, payment terms and instructions, and remittance slips. Digital invoices are normally sent via email, web page, or app. Advantages include the following: 

  • Permanence and resistance to physical damage
  • Ease of searching and sorting for specific names, terms, or dates
  • Increased auditability
  • The ability to print or reproduce on demand
  • The ability for data collection and business intelligence
  • Reduction of paper use

E-invoicing includes several technologies and entry options and is used as a general term to describe any method by which an invoice is electronically presented to a customer for payment. Several e-invoicing standards, such as EDIFACT and UBL, have been developed around the world to facilitate adoption and efficiency.

Sales vs. purchase invoice

An invoice shows the payment that a buyer owes to a seller. From a seller’s point of view, an invoice for the sale of goods and/or services is referred to as a sales invoice.

From a buyer’s point of view, an invoice for the cost of goods and/or services rendered is referred to as a purchase invoice.

For more useful information, browse the resources guide today!

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