When the seller completes his or her obligation to deliver the products or services, he or she will then demand or request for payment from the buyer. On the part of the seller, upon sending an invoice, they can already record the transaction as an accounts receivable. Conversely, upon having the knowledge of the invoice, the buyer will record the transaction on their books as accounts payable.
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An invoice contains a list of all the products or services availed of by the buyer with a detailed information about each of the items on the list as well as the quantity, amount, discounts, additional charges, totals, among others. This would remind the buyer of the amount due that he or she needs to pay. More on examples and templates of invoices are contained in this article.
Elements of an Invoice
Regardless of the type of invoice or the company issuing the invoice, there are important elements that comprise a complete and functional invoice. These elements are the answer to the customer’s questions about the company, the products availed of, the amount due, and any other information relevant to the transaction. Here are the essential elements that must be present in your invoice.
1. Seller’s complete information: The information that must be contained in an invoice are as follows: the entity’s business name, location or address, and contact information such as phone number, email, or website. These information are usually placed as the header.
2. Buyer’s complete information: It is also important that the information of the buyer will also be included in the invoice. This is necessary for communication and to confirm the contact information of the buyer. Moreover, this can also be helpful for legal purposes in case when an issue will arise regarding the payment. The information of the buyer may include the following: the name of the customer or the customer’s contact person or person in charge who handles the transaction and his or her corresponding contact details.
3. Invoice date: An invoice date must also be present in an invoice. This pertains to the date of issuance of the invoice, which might be useful whenever there are discounts or warranties that need the date of issuance of the invoice. This might also be helpful for legal purposes in the future. You may also see free invoice examples.
4. Invoice or transaction number: The number of an invoice must be unique and distinct from all other invoices. This number is used in tracking, monitoring, and accounting for the items listed on the invoice. It would be easier for the issuer to record the invoice if it bears a unique number. Hence, an invoice number must be clearly specified in the invoice.
5. Goods or services delivered: Just like a sales receipt, an invoice lists all the goods or services that must be paid by the customer. The list must contain a brief description of the product, quantity, and amount of each of the items. Additionally, you may also specify the item number, volume, or weight of the items.
6. Totals: Totals pertain to the subtotal and grand total of the goods listed on the invoice. The subtotal is the sum of the price of all the goods or services on the list. Meanwhile, the grand total is the final amount to be paid by the buyer. This is the amount arrived when you include the additional payments and deductions in the subtotal.
7. Additional payment and deductions: Additional payment refers to the taxes, charges, and fees that are related to the transaction other than the amount of the items on the list needed to be paid by the buyer. On the other hand, deductions are discounts and other promos that are availed of by the customer within a certain period.
8. Method of payment: You must also specify the method of payment that you are accepting. It is better that you have agreed with the customer regarding this matter beforehand.
9. Terms and conditions: The terms and conditions are the agreements regarding the transaction which include but is not limited to the payment due date as well as the charges or fine for late payments.
10. Notes: The notes section, also known as the message box, serves as a space where you can write important information for your customer such as account information, details regarding promotion, or even a thank-you message for patronizing your goods or services. You may also see plumbing invoice examples.
11. Signature: A signature must be affixed by the selling entity or the salesperson who is in charge of the transaction. A date must also be written beside the signature. This would certify that the legality and correctness of the invoice.
Knowing how to create an invoice is important especially for small businesses so you won’t need to rely on other parties to create your invoice. Actually, creating an invoice is pretty simple even with the basic knowledge of the following tools or software.
1. Creating an invoice in Google Docs
Log in to your Google account and go to your Google Drive.
Create a new Google document by clicking the “+ New” button.
Scroll down to Google Docs in the drop-down menu and select “From a template.”
Choose an invoice that meets your preference—the one that would reflect the personality of your company.
Fill out the template with the necessary information such as the company name, contact details, list of items purchased, signature, among others.
2. Creating an invoice in Microsoft Word
Open Microsoft Word and create a new document.
Under “New” in the “File” menu, choose invoice templates.
From the choices presented, select a template that best fit your needs.
In the header, incorporate your business information such as the business name, address, logo, and contact details.
Underneath the header, input the customer’s information.
Also include the invoice number, invoice date, payment methods, and terms and agreement.
List the products or services availed of by the customer along with their respective item descriptions, quantity, and amount as well as the charges associated with each line item. Calculate the subtotal, include the additional payments and deductions, and the grand total. You may render the grand total in bold so it would be easier for the seller to recognize the total amount due.
3. Creating an invoice in Microsoft Excel
Open Microsoft Excel and create a new workbook.
In the dialog box, look for the invoice icon and select it.
Choose an invoice style or format that you think would best represent your company.
Fill out the template with the important information such as the company information, customer information, list and details of the goods or services purchased, terms and conditions, date, payment methods and terms, among others.
Do not forget to save your document before you exit.
Simple Tips for Invoice Creation
Here are some useful tips that might help you when you create an invoice.
Keep it simple: While you may try to keep your invoice as simple as possible, sometimes, especially when you are already acquainted to business terms, you may fail to notice that you have already incorporated business jargon in your invoice such as “due upon receipt” or “net 30.” Although many would understand this, there are some people who may fail to interpret your words. Hence, be simple in your language, keeping your words direct and upfront so there would be no misunderstandings especially in the terms and conditions regarding the transaction.
The more payment methods, the better: Different customers have different preferences as to method of payment, so it is better that you offer a wide range of options for the payment method. Among the common methods of payment are cards which can be debit or credit, electronic fund transfer, payment centers, or cryptocurrencies. You may also see business invoice examples.
Send reminders and updates: Even before the due date of the payment, it is important that you keep in touch with your clients and remind them of the amount due using cloud-based invoicing software. This would help your customers be reminded of their account status so they would not get penalized due to a late payment.
Customize your invoice: Make your customers feel that they are special and are prioritized by customizing each of your client’s invoice. Typically, it has been noticed that customers have a negative response if only a generic message is sent to them. Generic messages contain cold and plain tone with little or no details at all. On the other hand, customized invoices would encourage the customer to pay their amount due because they are treated special or VIP.
Types of Invoices
Different industries, products, and services require different type of invoices. Although the elements are typically the same for all types of invoices, there are invoices that are specifically intended for a certain industry, and this is the reason why you must know the different types of invoices.
Normal invoice: A normal invoice is also called a generic invoice which can be used as a goods invoice, service invoice, or any kind of transaction. 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: For foreign trade transactions, acommercial invoice is issued by the seller to the customer. Transactions related to foreign trade usually involve goods that are shipped from one country to another. A commercial invoice is important for this kind of transaction since it serves as a proof for custom authorities.
Utility invoice: As its name suggests, this type of invoice is issued to customers for availing utility services such as water, electricity, and internet. This invoice contains important information for the service transaction such as the type of services rendered, the period or duration of such services, and the specific amount of consumption.
Time-billing invoice: For customers who are paid at an hourly or daily rate, a time-billing invoice is the perfect type of invoice for this kind of transaction. It presents the hourly or daily rate of the service provider, the nature or service provided, and the time spent by the service provider in working for that certain project. A daycare invoice is one good example under this type.
Milestone-based invoice: Before issuing this kind of invoice, it is important that both parties to the transactions have already agreed to the terms and conditions including the issuance of invoice after a certain milestone is achieved. Stated in the milestone-based invoice is the period of time worked by the seller, the percentage of completion of the work, and the amount due needed to be paid by the client.
Pending invoice: When a customer only pays a portion of the total amount due, a pending invoice is sent to the customer prompting or reminding him or her for the pending payment of the goods or services that he or she has availed of.
Recurring billing invoice: This type of invoice is issued in transaction involving recurring billing such as monthly retainers, monthly subscriptions, or monthly rentals.
Credit invoice: This invoice is issued in cases of last-minute discounts or when the goods are returned by the customer.
Debit invoice: This invoice is issued by the customer while returning certain goods to the seller. Note that the return of the goods must be agreed upon beforehand or stipulated in the terms and conditions of the invoice.