Invoice and receipts are constantly used interchangeably when dealing with business matters. However, the two differ greatly in their function in the sales transaction. While the receipt is issued after the completion of the transaction and when both parties have done performing their respective obligations as a seller and buyer, the invoice is issued by the seller to the buyer demanding or requesting payment for the goods or services.
To know more about invoices, discussed below are the basics that you must know. Additionally, presented in the next section are invoice templates and examples that will surely help you in your business deals.
Technically, there are no legal guidelines for an invoice, but including the elements below will ensure that your invoice is handled properly and paid promptly.
1. Business information: Typically, the business information is placed either at the top or at the bottom of the invoice. This includes the company name, address, and contact information.
2. Header: The header “Invoice” must be present in your document to avoid confusion especially when you are dealing with a pile of indistinguishable documents.
3. Date: This pertains to the date of the issuance of the invoice which is usually placed on top of the sheet.
4. Unique number: Every invoice must have a unique identifier or number to easily track and record the transaction.
5. Goods and services: The goods and services must be specifically stated in the document. The information regarding goods and services that must be included are name, date, rate, and quantity of the goods or services provided. You may also include price modifications, item descriptions, or other information that the customer must know. You may also see purchase invoice examples.
6. Terms of payment: The terms of payment depends on the industry your business is into, the preference of your company, and your relationship with the customer. You must also state the penalties or late fees and other charges in case the terms are not met.
7. Taxes, fees, and other charges: A separate line item must be included in the invoice in case there are any handling fees, taxes, and other charges related to the transaction which need to be levied.
8. Total amount: The grand total of the invoice must be rendered in bold, in larger font size, or in any other ways to make it stand out and easily recognizable.
9. Add-ons: There are add-ons that you can include apart from the elements mentioned above. Among those that are commonly incorporated in a voucher are message field and space for client’s tax identification number (TIN). The message field can be used when you want to include personal notes and thanks to your customer. The client’s TIN is used by some businesses to file their invoices. You may also see sales invoice examples.
Below are the different types of invoices according to their own purpose.
Here are some frequently asked questions regarding an invoice and their answers.
The terms of payment of an invoice must outline how, when, and by what method a customer provides payment to the seller. It must stipulate if an advance payment or deposit is needed, the details of the payment plan, and the list of the accepted payment methods, such as debit card, credit card, check, or cash.
Cash flow is such a pain point in many businesses. Hence, it needs to have a clear workflow for invoices. The first thing that you can do is check if the payments are processed while the deadline is approaching. Another way is to make your payment processes easier for your customers, and build wait times in your invoices. You must consider the credit card processing times as well as holidays and deposit clearance periods. Lastly, you can also send a gentle reminder or follow-up. Hence, it is important that you have a primary point of contact with your customers. You may also see professional invoice examples.
The primary invoice mistake that is very common to businesses is forgetting logical details. Your invoice must contain all the necessary elements presented above. It is important that you give your customers a clear set of instructions to follow in order for them to easily make their payment. Another mistake that you must avoid is under-communicating with your customer’s finance team especially when the person you are dealing with is just a representative of their company. Thirdly, many companies are not automating their finance workflows, making it prone to error and time-consuming. Lastly, not having a backup plan is another mistake that you must avoid. You must have a backup plan in case a customer delays or fails to pay on time in order to keep your business stable.
