What is an Invoice?
Invoices are commercial documents given by sellers to purchasers for payment of goods or services that they have provided. Invoices are legal documents; invoices contain all the transactions between the seller and the buyer and can be used as proof of liability for the buyer and service rendered by the seller.
Invoices have been in vogue since time immemorial, according to the records invoices were used by the traders in Mesopotamia during 5000 BC, they used to make invoices by using stones and clay eventually new method of printing and writing emerged, paper invoices came into vogue. After technological advancements electronic and e-invoices have come up in recent times whatever may be the form of the invoices, the substance remains the same in all times i.e., invoices are used to record the transactions and to inform the purchaser about the payment.
Purpose of the invoice
After going through the brief history of the invoice let us understand the purpose of the invoice.
Track records
Using invoices, you will be able to track records in the future, as they contain information about the transaction, such as when goods were sold and how much amount was paid.
Legal help
Invoices are legal documents it contains all the transactions between the seller and the purchaser so, you can use them legally as proof of liability or discharge of duty.
Tax
Keeping records of invoices helps you in calculating the profit and liabilities of your firm and, thus you can pay the appropriate tax amount.
Analytics
When you have invoices, you can analyse your total sales and determine which product sells the most, and then you can develop proper strategies for your business.
Types of Invoices
There are various types of invoices, every invoice has its own significance and relevant invoice types should be used by small businesses.
Pro forma invoice
The Pro forma invoice is not an invoice in the true sense, because it is sent by the seller before the transaction takes place. It is similar to a preliminary invoice which is used to tell the purchaser how much he will have to pay for the services
Interim invoice
Interim invoice is useful in larger projects, you can send interim invoices multiple times in larger projects to maintain the cash flow as the project completion will take time so you can ask for payment by interim invoices.
Recurring invoices
Recurring invoices are useful for regular clients or where subscription-based plans are operative you can set auto timings for recurring invoices. Invoicing software benefits includes that they allow you to set automated recurring invoices.
Tips
- Make your invoices simple and easy to understand with a clear call to action so that your client can understand them well.
- Make a schedule for invoice payments request your clients to pay on time.
- Keep a record of your all invoices, store them digitally.
- Communicate clearly with your clients regarding charges and services you provide don’t make a hidden deal.
- Use invoices to analyse our business and understand analytics to grow your business.
- Use the auto invoicing method, if applicable.
- Use invoicing software for invoice management, there are various free invoicing software download isavailable easily.