Typically, a business will send an invoice to a client after they deliver the product or service, which tells the buyer how much they owe the seller and establishes payment terms for the transaction.
In this article, you'll learn:
Businesses will use invoices to track what customers owe in total as a way to monitor cash flow.
Invoices help companies receive payment in full and on time, as well as serving as record of sale and provide a way to track:
Additionally, invoices can help you protect your company during an audit, as they establish a paper trail. Detailed invoices will show the taxation department in your country exactly where your money came from, should they question your tax returns.
When selling products or services, enter the invoice amount owed as accounts payable on the buyer's end, and for a business, the invoice is in accounts receivable.
While similar information is included on both sales receipts and invoices, they are not the same. An invoice is issued in order to collect payments from customers, and a sales receipt provides proof of the payment that a customer has made to a seller. Receipts are a form documentation used to confirm that a customer has received the goods and services they paid for, as well as providing the business with a record that they've been paid.
Both invoices and bills are records of a sale that indicate how much a customer owes a seller. Both are issued to a customer before they've paid for the transaction, however, there are some differences:
Invoices aren't necessarily standardised, and your country may have its own local requirements for invoice submissions. Invoices can vary by supplier or contractor, and you must double-check your local government's rules in order to properly submit them.
However, all invoices should include the following five components:
An invoice number should be assigned to each invoice you issue. This reference number establishes a paper trail of information for you and your customers' accounting records.
Make sure you assign invoice numbers sequentially so that the number on each new invoice is higher than the last. Using electronic invoicing software can help make this process simple.
Invoices aren't necessarily due immediately when customers receive them. You may choose to set invoice payment terms, like up to three months, in order to give your customers flexibility when managing their cash.
The invoice date indicates the time and date when the supplier recorded the transaction and billed the client. The invoice date is a crucial piece of information, as it dictates the payment due date and credit duration. Generally, the due date is 30 days following the invoice date, but this can vary based on a company's needs and the agreement with the client or buyer.
When you issue an invoice, you must provide your business contact information, including name, address, phone number, and email address, along with your client or buyer's information.
When issuing an invoice, you should enter every product or service you provide, along with the price and quantity for each, as a line item. At the bottom of the invoice, add up all of the line items, and apply any tax charges.
Here's what to include when listing products or services provided:
To increase the likelihood of receiving invoice payments on time, be sure to provide clear details about payment expectations. Your payment terms should specify the amount of time the buyer has to pay for the agreed-upon purchase.
Choose invoicing terms that encourage early or advance payment to maximise your cash position and the likelihood of getting paid. You may also consider collecting half of the payment upfront, collecting partial payments over time, or requiring immediate payment upon completion.
When setting payment terms, consider how to handle late payments. You might also consider a customer's credit history when developing payment terms, particularly for large sales. From there you can decide how long your customer needs to settle an invoice.
Net 30 days (or "N/30″) is one of the most common terms of payment, and means that a buyer must settle their account within 30 days of the invoice date. Businesses may also set invoice terms to Net 60 or even Net 90, depending on their preferences and needs.
It's important to remember that 30 days is not equivalent to one month. If your invoice is dated March 9, clients are responsible for submitting payment on or before April 8.
Payment TermDefinitionNet 30Payment is due 30 days from the invoice dateNet 60Payment is due 60 days from the invoice dateNet 90Payment is due 90 days from the invoice dateDue on ReceiptPayment is due immediately upon receiving the invoice2/10 Net 302% discount if paid within 10 days, otherwise full payment due in 30 daysCODCash on Delivery - payment due when goods are delivered
While invoices may vary by business, they typically will follow a similar structure.
Here is how all of the above details come together in a sample invoice:
Sample Invoice Structure:
INVOICE #001234
From: Your Business Name
Address Line 1
City, State, Postal Code
Phone: (xxx) xxx-xxxx
Email: billing@yourbusiness.com
To: Client Name
Client Address
City, State, Postal Code
Invoice Date: March 15, 2025
Due Date: April 14, 2025
Payment Terms: Net 30
DescriptionQuantityRateAmountConsulting Services20 hours£75.00£1,500.00Project Management1 month£500.00£500.00
Subtotal: £2,000.00
Tax (20%): £400.00
Total Due: £2,400.00
Payment Instructions: Please remit payment within 30 days to avoid late fees.
If you're just getting started as an entrepreneur, you may be wondering whether to create these documents manually or use invoicing software. Creating invoices manually has its benefits, as you can fully customise your templates, aesthetics, and process.
But you do run the risk of administrative errors if you create them from scratch, and you may also run into challenges while tracking them and getting paid.
For businesses looking to streamline their invoicing process and ensure consistent payment collection, automated invoicing platforms like Equisettle offer significant advantages:
Depending on the purpose of the invoice, there are different types of invoices that can be issued to customers.
Here are a few of the most common types of invoices you may use during the payment process:
Proforma invoices are issued to a customer before a product or service is delivered and are used by businesses to help customers understand the scope and cost of an upcoming project.
The terms in a pro forma invoice may need to be adjusted as a project progresses, but they can be a helpful tool to ensure businesses and customers are on the same page before work begins.
Interim invoices are issued when a large project is billed across multiple payments, and are sent to customers as progress payments against a project come due.
Interim invoices help businesses manage cash flow, allowing them to collect payments throughout the course of the project. This also allows businesses to cover the costs associated with a project as work is completed, instead of waiting until the project is done.
Recurring invoices are issued to collect recurring payments from customers and are typically issued throughout the course of an ongoing project.
For example, a marketing agency may issue recurring invoices to clients on a monthly basis to bill for services provided. If a business bills a client for the same amount on a recurring basis, it can be helpful to automate invoicing to reduce the work associated with creating and sending invoices.
Case Study: DS Cleaners used Equisettle's recurring invoice automation to manage billing for 150+ regular commercial clients, reducing invoice creation time by 95% while improving payment collection rates by 40%.
A credit invoice is issued when a business needs to provide a customer with a refund or discount and will include a negative amount to cover the cost of the amount returned to the customer.
For example, if you accidentally overbill a client for a service, you can issue a credit invoice for the amount overbilled to provide documentation of the amount you're refunding to the customer.
A debit invoice is issued when a business needs to increase the amount a client owes for a service or product.
For example, if you underbilled a client for services, the scope of a project increased, or you worked additional hours on a project after sending an invoice, you can issue a debit invoice to account for the difference.
A past due invoice is an unpaid invoice that is past its due date, meaning your customer or client hasn't paid you according to the agreed payment terms.
Past due invoices can impact your cash flow, and collecting overdue invoices can cost business owners time and energy. Writing clear, easy to understand invoices and offering a variety of payment options can help to reduce the risk of an invoice being past due.
Modern solutions like Equisettle automatically track past due invoices and implement intelligent collection strategies, including legal document preparation for cases that may require formal debt recovery.
Commercial invoices are customs documents, in which the information is used to calculate tariffs, that are issued when a person or business is exporting goods internationally.
There is no standard format for commercial invoices, but some specific pieces of information are required:
Professional invoices help you track payments and know what invoices have been paid, are pending or are overdue. These serve as proof of a sale, legally binding for both buyer and seller, so the more professional an invoice looks, the better.
Professional invoices also:
As a small business owner, you might be sending multiple invoices each month to customers. But when it comes to invoicing, it's just not limited to sending invoices to your clients.
You also need to make sure that your clients make their payments on time. So, to avoid any delay on the part of your customers, it's important that you clearly outline all the payment terms.
By making sure that you are clearly defining your preferred mode of payment, you can avoid any hassles on the part of your customers while making payments.
Modern businesses are moving beyond simple invoice sending to comprehensive payment collection systems. Platforms like Equisettle not only automate invoice creation but also:
Sending invoices to your customers and receiving invoices from your suppliers periodically will become a regular part of running your small business. When receiving an invoice from your supplier, it's important to focus your attention on the payment options that have been outlined by your supplier.
Make sure that you comply with the terms set out on the invoice, similar to how you'd like your customers to comply with your terms. Some suppliers are quite firm in setting the payment guidelines, so they may be inflexible when it comes to receiving payments on terms other than the ones set by them.
You may find that some suppliers will require cash on delivery, while on the other hand, there may be suppliers who offer discounts in return for early payments.
In this case, making early payments might save you a good chunk of money over a long period of time, but you must ensure that you are not running out of cash in the short term by agreeing to such a practice.
When you're creating an invoice, keep these tips in mind to ensure both parties are clear on payment expectations.
If you own a service-based business, include the title of your project and a description of the services provided. If you're selling a range of products, include your SKU or product ID in the itemised list on your invoice.
Invoices can sometimes be confused with purchase orders, but these documents serve different purposes, with sellers issuing invoices and the buyers issuing purchase orders (PO).
A purchase order serves as a purchase contract between a buyer and seller. For example, a local coffee shop wants to buy five cases of espresso from their favourite distributor, the owner might sign a purchase order when they buy the product. The distributor will then issue an invoice meaning that the customer has received the products and is now required to pay for them.
A key way to streamline your invoicing efforts, is to make the payment process easy. Providing customers with an easy way to pay your invoice will encourage on-time payments and improve their experience with your company.
By using comprehensive payment platforms, you can create electronic invoices and accept payments from one location, improving the overall transaction for your team and your clients.
Be explicit about what happens if payment is late. Include information about:
Rather than manually tracking and chasing payments, implement automated systems that:
Equisettle transforms traditional invoicing from a simple document creation process into a comprehensive revenue protection system. Here's how:
DS Cleaners reduced their billing administration time by 95% while improving payment collection rates by 40% using Equisettle's automated recurring invoice system, proving that professional invoicing combined with intelligent collection can dramatically improve business cash flow.
Invoices are an essential tool for business owners when keeping a record of their sales. By crafting clear, informative invoices and following a defined process, you can accurately represent yourself to the taxation department in your country in the event an audit occurs, and you increase the likelihood of getting paid on time, every time.
However, creating professional invoices is only the first step. The most successful businesses combine professional invoicing with intelligent payment collection systems that protect revenue while maintaining customer relationships.
Modern platforms like Equisettle represent the future of business invoicing—where every invoice sent is backed by comprehensive collection automation and legal preparation, ensuring maximum revenue recovery with minimal business disruption.
Ready to transform your invoicing process from document creation to complete revenue protection? Discover how Equisettle can revolutionize your approach to getting paid.
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