Basics•January 15, 2024•By Bilto Team

What is an Invoice? A Complete Guide

What is an Invoice?

An invoice is a commercial document issued by a seller to a buyer that itemizes and records a transaction between them. It serves as a request for payment and provides a detailed record of goods sold or services provided.

Why Are Invoices Important?

Invoices serve several critical purposes:

**Payment Request**: They formally request payment from the buyer

**Legal Record**: They provide legal documentation of a transaction

**Tax Compliance**: They help with tax reporting and compliance

**Accounting**: They are essential for bookkeeping and financial records

**Dispute Resolution**: They can help resolve payment disputes

What Information Should an Invoice Contain?

A professional invoice should include:

**Invoice Number**: A unique identifier for tracking

**Date**: The date the invoice was issued

**Seller Information**: Business name, address, contact details

**Buyer Information**: Client name, address, contact details

**Description of Goods/Services**: Detailed list of what was provided

**Quantities and Prices**: Amounts and unit prices

**Taxes**: Applicable taxes (GST, VAT, Sales Tax)

**Total Amount**: The final amount due

**Payment Terms**: When and how payment should be made

Invoice vs Receipt vs Bill

These terms are often confused:

**Invoice**: Sent before payment, requests payment

**Receipt**: Issued after payment, confirms payment was made

**Bill**: General term that can refer to either an invoice or a statement

Types of Invoices

Common types include:

**Standard Invoice**: Regular invoice for goods or services

**Proforma Invoice**: Preliminary invoice before shipment

**Credit Invoice**: Used to correct errors or issue refunds

**Recurring Invoice**: For subscription or repeat services

Conclusion

Understanding invoices is essential for any business. They're not just payment requests but important legal and financial documents that help maintain proper records and ensure compliance with tax regulations.

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