What is An Invoice?
What is an Invoice? Newer merchants often ask this question. Understanding this is essential to modern business. Simply put, without invoicing, most companies could not function. You need to understand what an invoice is, what is in one, why you need one, types of invoices, and best practices for invoicing.
What is an Invoice, and What’s in It?
An invoice is an essential document for any merchant or company that tracks a transaction between a buyer and seller. This can either be between merchants and consumers or between two companies. Just as important to knowing what an invoice is is knowing what is included in one.
Whatever form an invoice takes must clearly state that it is an invoice. Additionally, a number will be associated with that particular transaction on the invoice. This allows the buyer and seller to track the transaction without additional information efficiently.
Within this section of an invoice are terms and information that are important to the transaction. This could include discounts applied, fees, cost per item, amount of items purchased, and consists of the total amount owed. The transaction terms allow both buyer and seller to see what factors lead to the amount owed clearly.
One of the most important pieces of information both buyers and sellers need to know is when the transaction occurred. This is especially important for transactions that allow buyers to pay over time rather than all at once. Buyers who are unaware of when a purchase occurs are unlikely to pay their bills on time, hurting buyers and sellers.
Why Do I Need an Invoice?
Easier to Audit
Creating an invoice allows a company to very efficiently audit transactions that occurred. They will enable a company’s finance team to see what was sold, when it was sold, and who it was sold to. This also makes it a lot easier for your company to keep records for tax filing.
Keeping consistent records of invoices enables your company to fight fraud and fraudulent lawsuits more easily. Unfortunately, they are not legal proof of an agreement but are still a valuable extra layer of legal protection for any company.
Keeping Track of Payments
Invoices allow sellers to ensure their customers keep up with their bills. Customers can easily be sent invoices to remind them to pay their bills and provide companies with a record of who has and has not paid.
Types of Invoices
An essential aspect of knowing what an invoice is is understanding the various kinds of invoices companies use.
This is an invoice that informs a customer that the amount owed needs to be increased. This often is issued when the initial invoice does not meet the amount required for the purchase. A debit invoice is used to correct for this error.
A credit invoice works in a very similar way to debit invoices. It is also typically used to correct previous invoicing errors, but in this case, the customer is provided credit or a refund. The total amount owed will be negative on these invoices.
These invoices are used for repeated payments. This is an invoice commonly used for subscription payments. Recurring invoices are also sent out at regular intervals.
Interim invoices are part of an extensive series of invoices. This means the customer paid for a large purchase, and rather than paying in one lump sum, they pay with regularly scheduled payments. Each one of these payments gets its own interim invoice.
Pro Forma Invoice
A pro forma invoice is essential to providing accurate customer quotes. This allows customers to see the projected cost of a purchase before they make a purchase. The customer is still waiting for the service to be performed or the goods to be delivered.
Past Due Invoice
This invoice informs buyers who still need to pay a payment date. The buyer has not abided by the terms of the purchase, and the seller must inform them. These past due invoices are effective at ensuring customers pay as soon as possible.
Look for the ideal clients for your business. Evaluate whether they would be a hassle to do invoicing for. Also, ask what their budget is for the purchase so that way you know how much they can afford to pay. This ensures you invoice them for a purchase they can afford.
If your client asks what is an invoice or any other questions, be clear about the purchase terms. Clear communication with clients can dramatically reduce the risk of missed payments.
Use the Right Fee Structure and Schedule
Make sure your company creates a clear billing schedule that is easy to collect. It should also be easy for customers to understand. It is essential that you choose the right fee structure for your business. This can take the form of a lump sum, percentage of overall cost, or hourly rate. You will need to explore the option that works best for you.
Use Invoicing Software
Applying automatic software solutions is a game changer for invoicing. This allows you to track and record an invoice in real-time. It also enables you to go back and search through invoices quickly.
Invoicing with Treati
If you are still asking yourself, what is an invoice? Please contact us at Treati. We are happy to provide you with any information that you need. With our payment solutions, invoicing is a breeze. We also offer various integrations from inventory and employment management and invoicing. Many of our integrations make the entire invoicing process much easier, whether you are using recurring, debit, or any other type of invoice.
With Treati, you can expect to get high-quality customer service ready to answer any questions or concerns you may have. Our system is designed to be customizable so that you can find the best payment and invoicing solutions. We want you to provide your customers with clear and accurate invoicing.
You are also guaranteed the highest quality security and hardware with Treati. Your business deserves nothing but the best, and that's what we provide.