If you’re a small player in the business community – don’t fret; most started small, anyway – and still taking baby steps, learn about invoice templates ASAP. The business world is a world of transactions day in, day out, and a piece of document called invoice plays a vital role in the market. Both small businesses and big players recognize the value of an invoice.
If you’re a small player in the business community – don’t fret; most started small, anyway – and still taking baby steps, learn about invoice templates ASAP.
The business world is a world of transactions day in, day out, and a piece of document called invoice plays a vital role in the market.
Both small businesses and big players recognize the value of an invoice.
You should, too, if you’re running your own business or managing your own self as a freelance professional.
Knowing what an invoice is and what it can do for you will encourage you to discover how to make invoice templates for your own benefit.
An invoice is a dated document issued by a seller to a buyer where the item(s) sold and/or the service(s) provided and its/their corresponding price(s) is/are indicated.
Essentially, an invoice functions as a payment assurance for whatever product sold or service provided by the seller to a buyer. A seller (vendor/merchant) and a buyer (client/customer) can be an individual or a business entity.
If a seller sells a product and the buyer will pay at a later date, the seller will issue an invoice to the buyer. Therefore, if there’s an invoice, there’s credit, as explained by financial website Investopedia. Why? It’s because the buyer didn’t make an outright payment for a product/service the buyer already received.
Using accounting terms, the seller will have an account receivable (the payment to be received), and the buyer, an account payable (the credit to be paid).
When you’re invoicing someone, it’s like saying, “I’m giving you an invoice as a proof that you owe me money for something you bought from me.” Or, “Here’s the invoice for the service you asked me to do. It’s done and I’ll be expecting the payment from you in seven days.”
According to software company Zoho Corporation Pvt. Ltd., an invoice qualifies as a legal record based on the following merits:
That’s how detailed invoice templates can get, and details are extremely important in an invoice.
In the event that a client fails to pay and matters were taken to court, the court will consider an invoice as evidence. Evidence to what?
In short, an invoice serves as a “legal protection” for sellers, as mentioned by Zoho.
GoCardless, a London-based fintech, pointed out that an invoice and a receipt are two different but related documents.
Again, related but not entirely the same. In what particular aspect are they related? An invoice and a receipt are both used in processing payments.
The main point of difference between an invoice and a receipt is the use or purpose of each, according to GoCardless.
An invoice is issued to make “a request of payment.” A receipt, in contrast, is issued to give a “proof of payment.”
In this case, an invoice is created first before a receipt.
It’s like saying, “OK, here’s the invoice for the ten wheelbarrows and five shovels. I’ll give you the receipt once you pay on or before the 30th of this month.”
Once payment has been made, a receipt will be issued and the invoice will now be considered paid or settled. When an invoice gets paid or settled, it can now function as a receipt in the sense that it can serve as a proof of payment.
As mentioned earlier, an invoice contains several details that are all important; therefore, when preparing invoice templates, make sure not to miss even a single detail.
The general elements of invoice templates are the following:
Can be written in invoice templates as:
Each invoice has its own unique invoice number, and the numbering system can be done in a chronological manner.
An invoice number serves as a reference number, which is useful when:
making inventory control (basically checking available stocks to ensure that customer demand can be fulfilled)
doing accounting tasks
“Invoice Date” (month, day, full year)
“Delivery Date” (month, day, full year)
“Due Date” (month, day, full year)
Note: When it comes to dates, invoice templates vary. An invoice may indicate:
only two dates
all three dates
Note: Regarding the address, it’s possible that there will be two addresses indicated in invoice templates:
For example, the buyer is a supermarket in Los Angeles, California. The supermarket bought 50 sacks of 5-kilo brown rice and asked the seller to deliver the rice at its warehouse in San Diego, California.
In an invoice, it will appear like this:
The word “Terms” refers to the payment terms agreed upon between the seller and the buyer.
It appears in invoice templates between “Issue Date” (or “Delivery Date,” if it’s indicated) and “Due Date.”
The payment term should be clear and specific.
As a short way to specify the payment term in invoice templates, sellers also use the following terms:
Those terms mean that the customer should pay in full within or no later than 7, 15, 30, 60, or 90 days from the invoice date. Anyway, the due date will specifically tell when that will be.
Based on the aforementioned elements, the upper half or part of some invoice templates may contain the following details:
A table usually follows where the next eight elements (from number 7-14) in invoice templates will be found.
The term “item” refers to the specific kind of goods/services.
Note: Sometimes, instead of “Item,” the words used in invoice templates are “Item Code.” The items/products sold by companies are sometimes coded for easier reference.
For a specific product, the description of goods may include details, such as:
For a specific service, the description of services could be like this:
Note: If “Item Code” is used instead of “Item,” the “Description” may simply state the specific product and its brand and product model.
For goods, count per item/piece
For services, it’s the number of hours spent on labor
This will be the price of the:
In a purely service-oriented company, the term “Price” is replaced with “Rate.”
A sample of a table in invoice templates:
The tax levied on goods and services varies, depending on the existing tax rules implemented in a certain country/state/city.
A sample of a table in service invoice templates, with elements 12-15 included:
Normally it’s just a generic one-sentence message. It could be something like:
The said space in invoice templates can sometimes be also used by the seller to promote its business.
Indicated here is/are the payment method(s) accepted by the seller, and it/they could be via:
Depending on the payment method(s) enumerated by the seller, additional information will be provided by the seller.
There are several elements found in invoice templates, and the elements generally found in an invoice are the ones identified and discussed earlier.
Still, depending on the business transaction between the buyer and the seller, there could be other or additional elements that may comprise invoice templates, such as:
indicated in an invoice as:
in case the invoice is 2-page long (or even longer)
usually appears under “Due Date”
Note: In some invoices, if a purchase order was issued, the following words may appear:
Invoice for: P.O. #: PO5001
A purchase order, by the way, is a document created by a buyer and given to a seller. It contains information about the products/services that the buyer wants to receive as well as the corresponding quantity, price, and payment terms. A buyer makes a purchase order to confirm an order to a seller, according to Ohio-based accounting software company Patriot Software.
In a transaction, something like this happens (in the following order):
Note: Tax is applied after the discount was computed.
A sample table in invoice templates where a discount was given and a partial payment was made may appear like this (check the other elements/terms introduced):
See how invoice templates change depending on the transaction made between a buyer and a seller?
Now take a look at the sample invoice below issued by a freelance painter:
Depending on the nature of the business, invoice templates also take different formats and contain various information or details.
In this Information Age, nothing seems to escape digitalization, and in the business world, the existence of an invoice generator serves as a proof.
Through an invoice generator, electronic invoicing (e-invoicing) has been made possible, replacing paper invoices with digital invoices.
Listed below are some online invoicing services for one’s own invoice generator (indicated monthly fees were as of October 1, 2021):
Freelance professionals and business owners must know invoice templates for a smooth-running trade as well as to establish and maintain a harmonious buyer-seller relationship.
And, of course, aside from correct invoice templates, delivering the right goods/services at the appointed time and paying properly on time will always remain important.
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