Invoices are a tried and true system. Way back before indoor plumbing, paper, or even the alphabet was invented, humans were sending each other invoices to keep track of their accounts.
These ancient cuneiform tablets don’t bear much resemblance to the invoices we have now, with logos and account numbers, but the same information was being conveyed.
What is an Invoice?
An invoice is a bill for an account between a buyer and a seller indicating what was sold, and how much is owed. Five thousand years after the Sumerians invented invoices, we’ve added a couple bells and whistles to make record keeping easy, but that much remains the same.
Invoices are like most bills in that they’re 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 on a monthly or even weekly basis, it makes sense to set up an account to track.
Anatomy of an Invoice
Invoices aren’t standardised. The invoice you get from one contractor might look a bit different from the invoice you get from another.
But all invoices are built of the same building blocks:
Whose Names Are on an Invoice?
To: The buyer’s contact info has two components: one address that the seller invoices, and another that the seller ships to. Most invoice templates have separate places for each one.
From: The seller’s address should include the business name, street address, and phone number and email address.
What’s an Invoice Product Description?
Product descriptions need to be easily understood by both the buyer and seller. That means if you carry a range of similar items, you’ll need to use an identifier like a SKU or product ID number.
What’s a PO?
“PO” stands for purchase order. A purchase order is the contract between buyer and seller agreeing to purchase whatever goods or services are being bought. For example, if a local coffee shop agrees to buy five cases of espresso from their favorite distributor, they might sign a purchase order when they buy the product, and the distributor will issue an invoice upon receipt of the coffee. In general, an invoice is issued by the seller, and a PO is issued by the buyer.
What Does “Net 30” Mean?
Net 30 specifies that the buyer has 30 days to pay the invoice. Depending on the invoice, this can be any amount of time, but standard times are net-30, net-15, and net-10. This means the buyer has a total of that number of days on the invoice to pay the net amount stated.
Do you need to charge extra for Tax? eg: GST
It’s important that your invoice states whether or not it includes GST, VAT…etc. If you charge this tax, you must issue a tax invoice that clearly states the amount of tax it includes. On the other hand, if you’re not charging GST or VAT, you should issue an invoice that clearly states “No GST / VAT has been charged”.
How to Make an Invoice
Making an invoice is much easier now with software than it was pre-digital. Using tools like an invoice template, sellers can quickly input information to keep invoices simple and easy to track.
Here are three easy ways to create an invoice:
1. Use a free invoice generator tool to create and export an invoice.
2. Create your own invoice template.
Create your professional invoice template for free
3. Use QuickBooks to generate invoices and accept payments.
Read more about How to Manage Late Invoice Payments.