Whether you are a running a business or operating as a freelancer, you may have wondered what an invoice is. Have you ever sent a bill or document to someone or an organisation that owes you money for services or goods delivered? That document is what is referred to as an invoice. Below, you’ll find a primer on . For further reading, check out invoices explained.

A document sent to a customer or client, detailing the goods sold or services provided and the prices. Sellers use this document to speed up any pending payments while buyers use it to determine precisely what it is they are paying for.

Uses

Invoices are used when requesting any pending payments from the buyer after products have been supplied or services have been rendered. They are also used for tracking sales, facilitating service and goods delivery, and controlling inventory. They also come in handy in tracking any revenues expected in the future. For sellers who want to maintain good relationships with buyers, invoices can help them achieve that. For instance, better payment terms like discounts on early payments or an extended payment period can be offered through invoices.

What It Contains

The first thing that an invoice shows is the date it was created, which is actually essential because both parties must know when the payment will be due. The second essential thing on this document are the names and addresses of both the buyer and the seller. For those who use accounting software to create invoices, the customer’s email address may be all that is needed. However, including the customer’s physical address is essential, especially if you’re sending a hard copy. Another must-inclusion are the contact names of both the sender and the receiver. It is also necessary to write the names correctly for good customer relations.

An invoice also contains the terms of payment. For instance, the sender may specify, “net 14 days,” to mean that the pending payment should be settled in whole within 14 days. And then there is the description of items or services delivered. This section will specify the type of products or services provided, the quantity, and the prices. Typically, inventory numbers and standard descriptions are used in this section of the invoice, but it is important to be precise here. The buyer must understand what they are paying you for.

In its footer, an invoice may contain payment instructions, if such instructions are deemed to be necessary. Information like where the money should be sent, late payment penalties, and early payment discounts are included here.