An invoice is a bill given by either the seller or a buyer. It relates to the transaction sale and indicates what products, how much of the product and the price of the product/s the seller has given to the buyer. The payments are all stated in the invoices. An invoice can also be referred to as a sales invoice, bills or statements.
What is an invoice used for?
They can be used for a one off bill or a recurring bill. They are used majorly once the work has been completed and where there are ongoing payments being taken. Traditionally invoices used to be handwritten and posted to customers, now they can be sent by either email or they can be stored on a system with security that only the paying customer can access.
An invoice is a request for payment, whether this is from the items you buy or a service that was provided, the money on an invoice is owed. Your invoices are also tax documents. You are always required to keep copies to show what money you have earned and any tax that may have been collected from the sale. An invoice should be kept for 6 years, a great way of storing these documents is via an electronic method i.e software, app or scanning them. This will greatly reduce the need for physical paperwork in your business.
What should be included in an invoice?
- You must include the word “Invoice” clearly at the top of the document
- A unique number or a reference (this could be made up of letters and numbers)
- The name, address and contact details of either the individual or their company
- The name and invoice address of the person or business giving the invoice *A description of what product or service
- The date of the invoice being issued to the customer and the date of supply
- Any money owed making sure to include VAT, if needed, or any discounts and then overall what they have paid
- Make sure to also include the due date, the deadline for when this payment is required to be made.
- The amount of the individual goods/service that is to be paid
What is an invoice address?
An invoice address is the legal address of the buyer or the address of where they receive correspondence. It is different from a shipping address or even a delivery address. In some cases the address may be different however in some they may be the same. It is best to ask the buyer to either submit the details they want showing on an invoice to ensure mistakes are not made that could delay payment.
What is an invoice due date?
This is the date when a full payment of the invoice is due to be paid. If the date goes past and this has not been paid in full then the invoice is overdue. It is best practise to ensure your buyer understands the payments terms before work commences i.e invoice paid within 7 working days.
The due date is the latest the payment can be accepted before becoming overdue.
How do invoices work?
A customer will agree to purchase goods or a service from you and should be aware of the terms on conditions of sale before accepting. The details of the sale and the people involved for example you and your customers business, are on an invoice as described above. You create the invoice which can be done manually but with new technology is often done electronically and is issued to the customer, a basic template can be found in many word processers such as Microsoft Word.
Once the invoice is received your customer then has a period of time to pay you by which they legally have signed to do, this could vary with each person or business but ensure you work these payment due dates that work best for your business cash flow. The final step is that the customer will then make the payment in full whether this be via Direct Debit, card, cash etc.
There are three main invoice types
How invoices work here at Simply COLLECT
With us here at Simply COLLECT our clients are paid twice a month and invoices are deducted at source so you never have to work out what you need to pay us, which in turn creates less admin and hassle for you.
On our system you will get three logins, under your management login you will be able to view your invoices and statements. Here you can also print off any invoices you need to show to your accountant rather than letting them login.