Everything You Need to Know about an Invoice

You may have come across the term “invoice” at least once in your life. Or if you haven’t, don’t worry because this guide takes you to the ins and outs of this rather important financial aspect, especially among businesses. So, let’s get into the core features as well as the key processes of invoicing.

What is an Invoice?

Considered a pivotal part of any business, an invoice is a key document that lists the products and services availed by the buyer. This document establishes an obligation on the side of the buyer and an opportunity to collect payment on the part of the seller. In general, a business invoice should be concise, clear, and clean.

What should be included in an invoice?

A business invoice normally covers all the relevant information about the order availed by the customer. It should also provide the payment details required by the seller. To give you an overview, an invoice should include the following:

  • business contact information
  • customer’s contact information
  • invoice number or invoice ID
  • itemized list of products or services availed
  • payment terms
  • amount due

Why is an Invoice Relevant?

While the main reason for having an invoice is to record both the customer’s and business owner’s obligations, there are more remarkable benefits surrounding this document. These are as follows:

  • Serves a tool to demand payment

Businesses use invoices to establish the customer’s responsibility in relation to their availed products or services. Because of this document, they can demand payments in return. Do take note that an invoice is a legal document, which means it legally binds both parties according to the payment terms and conditions.

  • Maintain records efficiently

Having an invoice is not just about documenting the order purchased but also ensuring that all legal sales records are well accounted for. This is very helpful to provide a thorough record of when, who, and by whom the goods were sold.

  • Ensures seamless tax filing

In relation to the above-mentioned reason, having an invoice also helps in terms of filing taxes. The records of the sales cover the income gained, which allows businesses to pay the appropriate taxes within the deadline.

  • Provides legal protection

As a legal document, an invoice is a crucial part of a business. It serves as an agreement between the seller and buyer, hence protecting the merchant and the customer from possible fraudulent lawsuits.

What Is an Invoice ID?

Also called an invoice number, an invoice ID is a unique number given to each invoice created by the seller. This is a vital element because it provides a distinction so businesses can easily differentiate an invoice. Often than not, an invoice ID comes with numbers and letters. It’s also important that businesses follow a consistent ID system to avoid duplication. In general, each invoice is only assigned once.

How to Properly Assign Invoice Numbers?

There are several ways to assign an invoice number. Some of the most used approaches are:

  • sequential
  • chronological
  • by project ID
  • by customer ID

How Do I Make an Invoice?

When generating an invoice, it’s a must to take into account the relevant details of both the seller and the buyer. The time period when you make the invoice is crucial as well. The most reasonable time to create and send an invoice is when the vendor completes the customer’s order. If the business is product-based, then the invoice is generated after the delivery. Meanwhile, if the order is to provide service, then creating an invoice is done once the project is completed.


Invoices are certainly important among businesses. Aside from serving as a legal document between the seller and the buyer, it provides thorough documentation of the sales. Therefore, make sure to understand the technicalities of an invoice for the benefit of both parties.