{"id":7901,"date":"2017-01-23T09:10:46","date_gmt":"2017-01-23T08:10:46","guid":{"rendered":"http:\/\/blog.invoiceberry.com\/?p=7901"},"modified":"2017-01-23T10:13:38","modified_gmt":"2017-01-23T09:13:38","slug":"what-is-an-invoice-how-can-i-make-one","status":"publish","type":"post","link":"https:\/\/www.invoiceberry.com\/blog\/what-is-an-invoice-how-can-i-make-one\/","title":{"rendered":"What Is an Invoice And How Can I Make One?"},"content":{"rendered":"

When most small businesses start working on their own finance documents<\/a>, they often ask: what is an invoice?<\/p>\n

Invoices are, in many ways, the bread and butter of most businesses.<\/p>\n

They\u00a0are very important for businesses because they are the basis of increasing cash flow. Once the seller provides the buyer with an invoice, the buyer has an obligation to pay.<\/p>\n

There are many aspects to invoicing (most of which are very specific), and which may be different for you depending on your industry.<\/p>\n

In our full guide today, we\u2019ll look at everything there is to know about invoices and how you can make your own invoice using Microsoft Word or Excel.<\/p>\n

What is an Invoice?<\/h2>\n

To begin with, we need a clear invoice definition.<\/p>\n

An invoice (agreed upon by both sides) is a legally-binding document <\/a>that indicates to the buyer the payment that is owed for the product or service\u00a0the seller has already provided. These can be products or services, or a combination of both, and lists the agreed-upon prices for these goods.<\/p>\n

Therefore, an invoice is by definition non-negotiable.<\/p>\n

An invoice is different from a receipt, as the receipt is an acknowledgement of payment, whereas an invoice is a request for payment.<\/p>\n

While the seller creates the invoice and provides it to the buyer, both parties have different terms for them.<\/p>\n

The seller calls it a sales invoice<\/strong>, whereas the buyer calls it a purchase invoice<\/strong>. In effect, however, they are the same document.<\/p>\n

The difference in name is only for filing purposes in the appropriate accounting department.<\/p>\n

A purchase invoice goes to your account payable (liabilities), whereas the sales invoice goes to your account receivable (assets).<\/p>\n

The Anatomy of an Invoice<\/h2>\n

While there are many different types of invoices, they all tend to have the same sections (although they may be in different places).<\/p>\n

\"What<\/p>\n

These sections include:<\/p>\n

1. The name and contact information of the seller<\/h4>\n

You should clearly state who you are, including your logo, address, email and phone number.<\/p>\n

2. The word ‘invoice’<\/h4>\n

You should make the word invoice prominent so that the buyer (your customer) will see exactly what the document is about.<\/p>\n

3. A unique invoicing number and date of the invoice<\/h4>\n

Your invoicing number should be uniquely identifiable to your business. Your invoicing number should be unique and sequential, meaning only one invoice has that invoice number.<\/p>\n

You can choose to do it either as numbers only (0034) or letters and numbers (JGN0045). It is necessary to include the date of the invoice for record-keeping and tax purposes.<\/p>\n

4. The name and contact information of the buyer<\/h4>\n

Your client\u2019s details should also be clearly stated and placed in such a way that you it will be seen through the window envelopes when the invoice is folded and mailed.<\/p>\n

\"These<\/p>\n

5. A description of the product(s) or service(s)<\/h4>\n

Make sure that your product or service descriptions are accurate and clear. Each item has to be put in a separate line.<\/p>\n

6. The date that the goods or services were provided<\/h4>\n

You should include when the product or service was provided to avoid any confusion.<\/p>\n

7. The quantity of goods sold<\/h4>\n

Write down how many goods were sold\u2014do so for each product or service listed.<\/p>\n

8.The unit price of the product(s) or service(s)<\/h4>\n

For each item, include the unit price, even if they are all the same price.<\/p>\n

\"These<\/p>\n

9.The total amount being charged<\/h4>\n

Your total, including taxes, should be shown clearly at the bottom, optimally in a different size font.<\/p>\n

10. The due date for the payment<\/h4>\n

You should always include a due date for your invoices. Although 30 days is standard, it is actually better to set the payment due date at 15 days.<\/p>\n

\"These<\/p>\n

Other important parts of an invoice<\/h4>\n

It is also recommended to include other invoice sections, such as the payment terms which discusses the due date for the payment, any charges for overdue payments, and the method of payment.<\/p>\n

Other invoices may also contain any necessary taxes (such as GST, VAT or other local taxes), credit terms, \u00a0discounts, and the tax or registered company details (such as the business number).<\/p>\n

In countries where e-invoicing is common, it is standard to include the bank account number of the seller along with a reference code for online or wire transfer payments.<\/p>\n

Legal Requirements of an Invoice<\/h2>\n

Different regions have different legal requirements for invoices. We\u2019ll take a look at three countries to see how their invoicing regulations differ.<\/p>\n

The United Kingdom<\/h3>\n

The invoicing requirements for the UK are not far off from what we discussed in our previous invoice definition section.<\/p>\n

For sole traders<\/strong> in the UK, your invoice should include your name and business name being used, if any. It should also state the address where legal documents can be sent if you are using a business name.<\/p>\n

For limited companies<\/strong>, your invoice should include the full company name that appears on the certificate of incorporation. If you are adding any names of directors on your invoices, then your invoice should include the names of all the directors.<\/p>\n

If you and your client are VAT registered<\/strong>, you have to use a VAT invoice. VAT invoices generally include more information than non-VAT invoices, such as your VAT registration number.<\/p>\n

Unless otherwise agreed, the client has an obligation to pay you within 30 days<\/strong>. If payment is not made in time, you can use a statutory demand<\/a> to make a formal request of the payment owed to you.<\/p>\n

Some UK business require taking money from a client each time they use a service, such as online trading. In those instances, you will need to first get authorization from the Financial Conduct Authority<\/a>.<\/p>\n

The United States<\/h3>\n

Luckily for business owners, the US doesn\u2019t have national regulations on invoicing.<\/p>\n

It may differ state-by-state, but most businesses only issue simple receipts to their customers.<\/p>\n

As we mentioned above, a receipt is not the same as an invoice, and cannot be treated as such.<\/p>\n

\"This
This is an example of a Square receipt<\/figcaption><\/figure>\n

Receipts show the payment that has been done, while the invoice shows the payment that needs to be done.<\/p>\n

In the case of selling digital goods or ecommerce, the invoice will differ by showing the line items of the products or services being sold.\u00a0 It will also have specific details about the client.<\/p>\n

If you are in the US and selling only to customers in the US, then you don\u2019t need to create an invoice for your customers.<\/p>\n

Canada<\/h3>\n

GST (goods and services tax) is mandatory for certain sales, with requirements based on different sales minimums.<\/p>\n

Although Canadian federal laws<\/a> do not require GST to be explicitly shown on the invoices, there are other requirements based on the sale amount.<\/p>\n

\"These
These are the requirements for Canadian invoices concerning GST. Image source<\/a>.<\/figcaption><\/figure>\n

Australia<\/h3>\n

Businesses in Australia are mostly required to charge GST<\/a> (goods and services tax) on all sales. These sales must be itemized on an invoice.<\/p>\n

This also applies to foreign or international businesses operating from within Australia.<\/p>\n

For business outside of Australia but selling goods or services to Australians valued at more than AUD$1000, GST may also be required<\/a>.<\/p>\n

The European Union<\/h3>\n

EU member states (which excludes the UK) have stricter invoicing regulations<\/a> than the Americans do. In the EU, it is necessary to charge VAT when you are selling products or services.<\/p>\n

This includes additional responsibilities for the seller beyond what is listed in the invoice definition section. The seller must:<\/p>\n