What is an Invoice and why it is an important document
An invoice is a document given to a buyer enables the seller to collect payment. It is a document that notifies the customer of what should be paid. These documents are legal records and can also have specific requirements if the seller is a VAT vendor. It records a buyer and a seller's economic interaction.
Frequently asked questions
What are the Functions of Invoices?
The functions include:
- To maintain proper records
- Tracking payments to the business
- Legal protection
- Tax submissions
- Business Analytics
What are the different types of Invoices?
- Proforma – A commitment by the seller to sell goods to the buyer at a certain price.
- Commercial – Used for customer and tax declarations.
- Credit Note – Issued when goods are returned because of faults or damages.
- Timesheet – Sent to a client based on the hours worked.
- Retainer – This invoice is sent to the client to make an advance payment for a product or service.
- Recurring – These are created and sent to the client at regular intervals.
What are the Elements of an Invoice?
Important contact information and details around the transaction must be indicated on the sales invoice include:
- Invoice number
- The word invoice.
- Date the service is provided.
- Customer name.
- Seller name.
- Terms and Conditions.
- Details of the products or services.
- Tax Rates.
- Serial numbers.
- Total amount due / Total amount owing.
- Due date
- Early payment discounts
- Personalized notes and messages.
- Cut-away payment advice.
- Banking details.
What is the common pay back period allowed for invoices?
Most business require payment on presentation in this day and age. It is however to request an account with a payback of 30 days of the invoice date. The invoicing process is different based on the entity you are dealing with.
How can I make the process easier to issue these documents?
Ensure you choose software that enables electronic invoicing. Having a good system in place is essential for cash flow management.
What is a recurring invoice
When you want to send an invoice each month that has the same amount then you can set up a recurring invoice that will keep resending on the date you select. Most accounting and software packages have this functionality.
What is a pro forma invoice
This is similar to quote however once the pro forma is paid it is then converted to a tax invoice.
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