Buyers communicate their request for an item or service through a purchase order. When the seller accepts such order, he or she must deliver the goods or render the services. Upon completing the delivery, the seller, in turn, would communicate his or her request or demand for payment from the customer for the goods or services.
How then will the seller communicate his or her request for payment? This is through an invoice. Generally, an invoice contains an itemized list of the products sold or services provided which acts as a bill for the buyer to pay for an amount due specified in the document. More on invoice templates and examples are contained in this article.
Elements of an Excellent Invoice
Every business entity is in need of its own invoice template to be sent to their customers to request payment for certain goods or services. The buyer can also confirm or certify his or her order through an invoice. What then comprises an invoice? Here are the important elements of a basic invoice that you must know.
1. Complete information of the seller: An invoice must contain the seller’s information such as the business name, address, and contact details including the phone number, email, or website. Typically, these information are placed as a header in an invoice.
2. Complete information of the buyer: While the information of the seller is necessary in order for the customer to know more about or communicate with the seller, the information of the buyer is also important in order to make communication easier and for legal purposes in case there will be issues regarding the payment. The buyer’s information may include the name of the customer or the customer’s contact person who handles the transaction and contact details. You may also see business invoice examples.
3. Date: It is important that the date of the issuance of the invoice must also be included in cases when the date of the transaction is needed for discount or warranty purposes as well as for legal purposes.
4. Invoice number: Every invoice must have a unique invoice number distinct from all other invoice numbers for easy tracking and accounting. In accounting records, it would be easier to document and trace the transaction when the invoice number is recorded and clearly specified.
5. List and description of the goods or services delivered: Similar to a sales receipt, an invoice must itemize the products purchased or services availed of by the customer. Also include a brief description, quantity, and price of each of the items on the list so that the customer can easily recognize such item. You may also specify the weight, item number, and volume of the goods, if any.
6. Totals: The totals of the items must also be clearly indicated on the invoice. This includes the subtotal and the grand total. The subtotal refers to the sum of the amount of all the items on the list. On the other hand, the grand total refers to the final amount to be paid by the buyer which is the subtotal plus taxes, charges, and fees less discounts.
7. Taxes, charges, fees, and discounts: Taxes, charges, and fees are additional payments related to the transaction other than the price of the item which is to be paid by the buyer. Meanwhile, discounts are deductions from the subtotal which may arise because the customer avails certain promos or would pay within the discount period.
8. Method of payment: Another important information that must be present in your invoice is the method of payment. There are several methods of payment including cash, check, credit or debit card, or money transfer. You may specify whether you are not accepting any methods of payment for the awareness of the customer.
9. Terms and conditions: The terms and conditions in your invoice may include the payment due date as well as the charges or fine for late payments. Because an invoice acts as a request for payment, this will also serve as a reminder or a notice to the client of the amount due and interests.
10. Notes: If you have enough space, it is suggested that you include a notes section or a message box in your invoice which you can use to post important account information, promotion details, or a thank-you message to your customer for patronizing your business.
11. Signature and date: Lastly, the selling company or the sales representative or the salesperson handling the transaction must affix her or her signature and date certifying that the invoice was indeed made by the selling party. This would also add credibility to the invoice. You may also see self employed invoice examples.
It is the need for every company to have a sales invoice in case they need to issue an invoice immediately. Hence, it is vital that they create an invoice and customize it as their own. Creating an invoice is pretty simple. Here, we will present the three common computer applications that can be used to easily create an invoice.
1. Using Google Docs: Among the user-friendly applications that are typically used to create sales documents is the Google Docs. You can easily create an invoice following these simple steps:
Open Google Drive and log in on your account.
Open a new document and choose from templates.
Choose your best pick from the available options of invoice templates. Select a design that you think best represents the personality of your business. You may also see plumbing invoice examples
Edit the template and fill out the template with the necessary elements such as those stated above—complete information of the seller and buyer, date, invoice number, list and description of the goods or services delivered, totals, taxes, charges, fees, and discounts, method of payment, terms and conditions, notes, and signature and date.
Ensure that the information you input is correct and complete.
Save your document and send your customer a soft or printed copy.
2. Using Microsoft Word: Another application where you can easily create an invoice is the Microsoft Word. You can easily edit and customize your invoice through these few simple steps:
Open MS Word in your computer.
Create a new file, and from the drop-down menu, select templates. You will then given options for different styles and formats of invoice templates.
Choose an invoice template that you think is best for your company. Consider the nature of your business as well as the characteristics of your company. You may also see self-employed invoice examples
Edit the template by incorporating the important elements such as the complete information of the seller and buyer, date, invoice number, list and description of the goods or services delivered, totals, taxes, charges, fees, and discounts, method of payment, terms and conditions, notes, and signature and date. You may drag the elements around and experiment on different layouts until you get satisfied with the design.
Check for typographical errors and ensure that you did not miss any important information in your invoice.
Finalize your document and save a copy.
3. Using Microsoft Excel: Thirdly, Microsoft Excel will also provide you with a quality invoice if you only know how to use the application. Creating an invoice in MS Excel is also easy just like when you are creating an invoice using the previous two applications being discussed. Here are the steps that you can follow:
Open MS Excel on your computer.
Click “File” and create a new workbook.
From the drop-down menu, choose the Invoice icon.
From the given options, choose a format or layout for your invoice.
After choosing the format that you think is best for your company, edit the template and incorporate the essential elements such as complete information of the seller and buyer, date, invoice number, list and description of the goods or services delivered, etc.
Edit the font type and size accordingly, and experiment on different styles and format until you get satisfied with your design. You may also see sales invoice examples
Double-check all the information that you include in your invoice and see to it that there are no errors or typos.
Finally, save a copy of your document.
Types of Invoice
An invoice plays a significant in every business transaction since it communicates the seller’s request for payment to the buyer. A business invoice also serves as notice or reminder to the customer for an amount due. Hence, it is important that companies prepare their own invoices. There are different types of invoice that an entity can prepare. The following types of invoice are the ones commonly prepared by companies.
Normal invoice: Also known as generic invoice, this invoice can be used for different kinds of business transactions whether it may be as a goods invoice or service invoice. Just like any invoice, it contains the details of the products or services sold to the customer, the terms and conditions of the transactions, as well as the invoice number, issuance date, and due date.
Commercial invoice: Commercial invoice is specific to foreign trade transactions. Foreign trade transactions refer to the transactions involving goods that are shipped from one country to another. This invoice also acts as a proof of transaction for custom authorities and other legal purposes.
Utility invoice: This can be used for sending a request for payment for the utilities availed of by the customer. Examples of utilities such as water, electricity, and internet. It presents the amount payable by the customer to the service provider for the services rendered for a particular period as well as the specific utility consumption of the customer.
Time-billing invoice: This invoice is commonly used by service providers who are paid at an hourly or daily rate. Hence, this invoice shows the hourly rate, the nature of the service provided, as well as the hours worked by the service provider.
Milestone-based invoice: As the name suggests, this type of invoice is issued based on the milestone achieved on a certain project, stating the percentage of completion for the work. The billing for the project is done based on the terms and conditions agreed upon by both parties before the commencement of the project.
Pending invoice: A pending invoice shows the amount that is yet to be paid by the client. This type of invoice is usually sent to a customer who only pays a portion of the due amount. It is issued by the seller in order to remind the payment from the customer for a payment due from goods or services.
Recurring billing invoice: For transactions involving monthly retainers or subscriptions, a recurring billing invoice is issued. An example of this transaction is house rental in which the payments are typically due monthly. You may also see construction invoice examples.
Credit invoice: In cases of last-minute discounts or when goods are returned by the customer, a credit invoice is issued by the seller for the adjustment of pricing.
Debit invoice: In contrast with the credit invoice, a debit invoice is issued by the customer while returning certain goods to the seller. However, the return of the goods must be agreed upon by both parties or stipulated in the terms and conditions of the invoice.