An invoice, sometimes called a sales invoice, is a document that a supplier of a product or service sends to the buyer. The invoice establishes a payment obligation of the buyer and creates a receivables account. In other words, the invoice is a written confirmation of the agreement between the buyer and the seller of the goods or services.
Invoices are an important part of your company’s accounting and billing system because they track sales transactions.
What does an invoice include?
The usual sections of an invoice include:
The date on which the invoice was created. Do not forget that The date of invoice starts with the customer’s clock. If you have a payment deadline, you want to specify the date so that everyone knows when the payment should be made.
Names and addresses of customers and providers. When you create the invoice in the accounting software, you may only need the customer’s e-mail address. However, it is best to capture and specify the physical address if you need to send a letter or an actual document.
Contact the names of the persons in the two companies (or company and person). It is a good rule for the relationship with the customer to make sure he spells the names correctly.
Description of purchased items, either products or services, including prices and quantities. Often you have descriptions of standard articles and stock numbers. Be as accurate and detailed as possible when you create the bill. This avoids confusion and “did not know” problems.
Payment. For example, the provider may indicate “30 net days”, which means that the total amount is due within 30 days.
How do you calculate a customer?
You may be using a commercial accounting software online or using a pre-printed invoice that you will fill out. The process works the same way for both billing processes.
You only bill after you have sent or delivered the product or service to the customer.
Start by identifying the customer. In some cases, you might also want to identify a sub-client or work in that client’s file.
Include a number of past documents related to this sale, including any orders, sales, or offer agreements.
Identify the items sold and delivered. Usually the name of the product or service, the amount (or time of services) and the rate (per item or per hour) are given. If you use online software, the total of each item is calculated. This is the place where you may need to classify an article as “held”.
Each element gets its own line and the sum of all lines is added.
Next, information about customer deposits already made or discounts on that invoice will be displayed.
You may want to offer different payment methods to customers and may offer a discount on cash payments.
Specify the shipping conditions for the products shipped. There are two types: FOB shipping point or FOB destination. (FOB means “free on board”). If the conditions are FOB shipping point, the sender pays (who is the seller) the shipment. If the conditions are FOB destination, the buyer pays for the shipment. It is also a good idea to check if the customer collects the item or items if there are questions about the item received.
Include the terms of sale. That is, when should the buyer pay and give you a discount for early payment? The conditions are expressed as 2/10 net / 30. This means that you will receive a 2% discount if the payment is received within 10 days and the balance is due within 30 days.
Invoices can be sent by post, e-mail or fax to a customer.
When a customer pays, the invoice number should appear on the proof of purchase and be consistent with the proof of purchase in his accounting software so that it is clear that the invoice has been paid. The payment eliminates the outstanding amount of your debtor account.
Bills vs. orders
Invoices are sometimes confused with orders. Orders (PO) are before the transaction and the invoices are after the transaction. Orders capture an order from a customer to a supplier or supplier. On an invoice, on the other hand, the receipt of the product or service and, as indicated above, the terms of payment are noted. Orders are used by many companies as part of an approval process.