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Concept
Invoice
Summary
An invoice, bill or tab is a commercial document issued by a seller to a buyer relating to a sale transaction and indicating the products, quantities, and agreed-upon prices for products or services the seller had provided the buyer.
Payment terms are usually stated on the invoice. These may specify that the buyer has a maximum number of days to pay and is sometimes offered a discount if paid before the due date. The buyer could have already paid for the products or services listed on the invoice. To avoid confusion and consequent unnecessary communications from buyer to seller, some sellers clearly state in large and capital letters on an invoice whether it has already been paid.
From a seller's point of view, an invoice is a sales invoice. From a buyer's point of view, an invoice is a purchase invoice. The document indicates the buyer and seller, but the term invoice indicates money is owed or owing.
Within the European Union, an invoice is primarily legally defined by the EU VAT directive as an accounting voucher (to verify tax and VAT reporting) and secondly as a Civil law (common law) document.
An invoice should not be mixed up with Proforma Invoice that indicates commitment, intention, or prepayment request.
Invoices appear as one of the very earliest manifestations of written records in ancient Mesopotamia.
'A typical invoice may contain:
The word invoice (or tax invoice);
A unique reference number (in case of correspondence about the invoice);
Date of the invoice;
Credit terms;
Tax amounts, if relevant (e.g., GST or VAT);
Name and contact details of the seller;
Tax or company registration details of the seller, if relevant, e.g. ABN for Australian businesses or VAT number for businesses in the EU;
Name and contact details of the buyer;
Date of sending or delivery of the goods or service;
Purchase-order number (or similar tracking numbers requested by the buyer to be mentioned on the invoice);
Description of the product(s);
Unit price(s) of the product(s), if relevant;
Total amount charged with currency (symbol or abbreviation);
Payment terms (including one or more acceptable methods of payment, date the payment is expected, and details about charges for late payments, i.
Official source
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Related concepts (5)
Purchase order
A purchase order, often abbreviated to PO, is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services required. It is used to control the purchasing of products and services from external suppliers. Purchase orders can be an essential part of enterprise resource planning system orders. An indent is a purchase order often placed through an agent (indent agent) under specified conditions of sale. The issue of a purchase order does not itself form a contract.
Letter of credit
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, or letter of undertaking (LoU), is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exporter of goods. Letters of credit are used extensively in the financing of international trade, when the reliability of contracting parties cannot be readily and easily determined. Its economic effect is to introduce a bank as an underwriter that assumes the counterparty risk of the buyer paying the seller for goods.
Accounts receivable
Accounts receivable, abbreviated as AR or A/R, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. The accounts receivable process involves customer onboarding, invoicing, collections, deductions, exception management, and finally, cash posting after the payment is collected. These are generally in the form of invoices raised by a business and delivered to the customer for payment within an agreed time frame.