Understanding Invoice

An invoice is a commercial document that contains details or documentation of transactions carried out by sellers and customers or service providers and clients.

This invoice or invoice is usually used for business people who sell products of a large quality if they are factories. Generally used by freelancers such as writers, graphic designers, etc. That’s just a small example because usually, any business model can use invoices as a tool to document transactions.

Documenting each transaction is a very necessary activity for both small and large entrepreneurs. If you don’t have records of every purchase, sale, and return of goods transactions, it can affect your business cash flow, tax management, and even when evaluating your business performance.

Characteristic features

In the invoice document, you will usually understand that the invoice is written. The contents must include the invoice number, buyer’s name, seller’s name, company name, transaction date, quantity of goods/services, price of goods/services, name of goods/services, contact information for the seller or service provider, payment terms, discounts if any, payment system (payment in advance or installments, etc.), payment method (transfer, cash, etc.), fines for late payment (if any).

Usually, it includes an explanation of other costs that must be covered, such as cargo, handling of goods, and taxes. In the past, the invoices that customers received were usually in printed paper form, but recently this method has been abandoned and moved to digital. So, document printing is only carried out if it needs to be printed. Otherwise, the invoice will be sent via email to the relevant party. With this electronic method, it is much easier to search and determine current transactions according to the date.

Invoice Function

There is more than one invoice function that you must understand, here is a review:

  • The most important function of using an invoice is to store detailed purchase information and payment terms which will be used to bill customers so that they can immediately make payments according to the agreement or according to what is stated in the invoice.
  • Invoices can be a valid reference when there are discrepancies in the bill payment system or delivery of goods.
  • It is a valid reference when you want to resell goods that have been purchased to other people.
  • As a place that makes it easier for business people to follow up on the development of the business they manage.
  • As a tool to facilitate the company’s financial reporting or bookkeeping system.

Publication Objectives

In issuing invoices, the company must have a goal, namely:

To collect payment for goods and/or services that have been purchased by customers. As a legal document for billing, invoices contain clear transaction details and information, so that sellers and customers can carry out transaction activities transparently.
Aims to provide insight regarding the expenses that have been incurred by the company.
Systematic payment management is needed by companies to track payment transactions in writing. The aim is to show how much money has been spent and what bills have not been paid by the company.

Legally, invoices serve as a business agreement with clients because they provide services or sell special products and payment is due. You will also understand the average time a client needs to complete their bill. That way, the company’s finance team can manage cash flow better.

From the explanation above, you must have guessed, who issues the invoice. The person who issues or produces the invoice is the seller. So, this invoice is issued and created before the customer makes payment.

Contents and Components

Transaction records such as invoices usually have more complicated contents or components when compared to notes or other proof of payment. This is because invoices are related to financial reports so that they can be recorded properly to serve as a reference in producing financial reports. The following are the general contents and components:

  • Invoice writing
  • publication date
  • Invoice number
  • Names and addresses of both parties regarding the transaction that occurred
  • Details of the goods or services that are the object of the transaction, including the quantity of the unit price up to the total
  • paid
  • Discount (if any)
  • Tax
  • Payment due date
  • Payment terms and conditions (if necessary)
  • Payment system to choose (cash, credit, or debit)

As proof of valid payment bills, invoices must be stamped.

How to Make an Invoice

Making an invoice is not complicated as long as you know the components and contents of the invoice. The following is a good way to generate invoices:

Prepare the logo and company name to be placed on your company invoice header.
Provide a line to write the identity of the seller including the buyer.
Create a table that will be filled with numbers, product names, descriptions, quantities, units, unit prices, discounts, and quantity or overall price.
Insert the VAT line and the total payment to be invoiced.
Provide an area for additional notes below the table if needed.
Don’t forget to write down the location, time, signature, and client’s name as valid proof of the invoice.

Types of Invoices

The following are the types of invoices that you should know:

Proforma invoice
commercial invoice
Credit note
Collective invoice
Interim invoices
recurring invoices
detention invoice

Those are the things you need to know about invoices, especially if you are an entrepreneur who has to issue invoices as billing documents for your clients.

Did you know that now you can create, publish, and send it in just one application? You can do everything in Mauju Invoice Pricing. The process is easy, fast, and accurate. You can also send your invoices to your clients simultaneously with just one click. Curious? For further information, you can click here.