What Is an Invoice?

If you’re starting a business, there are several things you need to organize before you can begin trading. One of the most essential things to sort out right in the beginning is your invoicing system.

Invoices serve multiple purposes within a business, and if you are to function efficiently, you need to know how to handle invoicing customers for services rendered.

But how do you create an invoice that is brand-representative of your company? We have the answer for you, so keep reading as we discuss what is an invoice and why you need it.

What Is an Invoice?

An invoice is a functional way of indicating to the buyer what they received from the seller, generally in exchange for money. Invoices act as a record of all business transactions and are legally binding documents.

Functions & Benefits of Invoices

In order to receive a payment, a business needs to issue an invoice to the customer. However, invoices serve other purposes as well:

Record Keeping

Whether you use paper or digital invoices, they both serve as a legal record of the sale. In addition, keeping copies of invoices issued allows you to review details on past sales should the need arise. An example of this would be for warranty purposes.

Legal Protection

When invoices are issued, it serves as formal proof of the sale agreement, which can be helpful if a customer disputes a cost. If they’ve already agreed to the invoice, they are liable to pay the invoiced amount.

Tax Filing Purposes

All businesses should be reporting their income. Keeping copies of all invoices helps the company ensure that taxes are calculated and filed accurately according to income.

What to Include on Invoices

For an invoice to be compliant in the USA, it needs to meet some requirements. This may vary from state to state, but generally, an invoice should include the following information:

  • Company tax ID
  • Business registration numbers
  • Seller information that includes company name and contact details
  • Buyer information
  • An invoice number for ERP system referencing
  • The unit price for goods and services
  • Any taxes or VAT/GST
  • An accurate description of goods or services rendered

How to Make a Professional Invoice

If you don’t have professional invoicing software to generate invoices, you can open your favorite image editing software and create your own. However, if design is not your best skill, then finding the best invoice templates online will be your best bet to get you started.

Find an invoice template you like and tailor it to match your company’s brand before sending any out.

Smart Businesses Use Invoices

Having an invoice system for your business is essential to its continued success. Understanding what is an invoice and how to implement it in your company best can have several benefits like legal protection down the road and improved cash flow.

Having an invoicing system can also allow you to do business with companies you might not have been able to otherwise, so don’t delay in setting up this essential business tool.

If you’ve enjoyed this article, we encourage you to check out more like it in our Business and Finance categories.

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