An invoice is a document that you send to customers to request or collect payment for a good or service that has already been provided. The invoicing process starts when the business fulfills the order and delivers it to the customer. If you’re using QuickBooks Online, you can create invoices easily, send them to customers via email, and monitor payments as they arrive.
Purposes of an Invoice
- Demand for payment: An invoice is an official notification for payment. When an invoice is issued, it signifies that you have provided the goods or performed the services.
- Business promotion: You can insert promotions or exclusive offers in invoices. If you have a customer loyalty program, you can talk about membership benefits and exclusive discounts. You can also insert special promotions like warehouse sales and discounts for bulk purchases.
- Charge disputes: Invoices provide the customer a detailed listing of what exactly they’re being charged for and provide them an opportunity to dispute the charges. Customers should be encouraged to raise any issues they find because the sooner you can smooth over any differences, the sooner you’ll get paid.
Components of an Invoice
Invoice designs may differ, but they must contain all basic components. We’ve listed the necessary invoice components below, but you’re free to add more line items. With QuickBooks Online, there are different ways to customize invoices like adding new line items or modifying the overall design.
A. Company Details
Your invoices should always include your name or your company’s name. State your business address and preferably your business email and phone number at the top of the invoice. You may also add your logo and colors for branding.
In the sample invoice from QuickBooks Online, you’ll see an email address included below the company’s business address—and it’s important in case the payor of the invoice wants to dispute the invoice amount or details. Note that on QuickBooks Online invoices, you may even add logos and modify color schemes.
B. Recipient’s Information
As with your own contact information, you should likewise include all the same details of the recipient, so be sure to include the name of the client’s contact who handles your account. In our example above, we billed the invoice to Aaron Berhanu because he’s the point of contact for transactions with Maple Leaf Inc.
C. Invoice Number & Due Dates
Devise a unique numbering system for every customer and invoice. This will help both you and the customer to track the transactions. For instance, instead of saying, “That invoice I sent you last month,” you can note, “refer to invoice #9235.” Ensure you assign numbers to your invoices systematically just to keep everything in line. With QuickBooks Online, invoice numbers are auto-generated whenever you enter a transaction.
The invoice due date must be displayed prominently in the invoice so that your customers can see them easily. In our example above, we can see the due date in between the total amount due and credit term.
It’s also critical to include the payment terms, including the due date and late payment fee. Having an explicit due date, rather than something general like “Due Upon Receipt,” will help with sending collection letters if that becomes necessary. Aside from payment terms, you can include cash discounts for prompt payment. Giving early payment discounts can speed up collection and reduce the likelihood of too much bad debts.
A solid paper trail helps you in sending follow-ups or overdue notices and charging interest if the client hasn’t paid on time. It’ll also serve as a reminder to your customer of when they need to process the payment.
E. Mode of Shipment
You should specify the shipping carrier that will deliver the goods to your customer. Skip this field if shipment is unnecessary or if you’re a service provider.
F. Sales Representative
Customers can refer to the sales representative in the invoice in case they have questions about the product or service. You can also use this information to assess the performance of your sales representatives.
G. Method of Payment
Be clear on how your customers should pay you. Specify if they can pay via check, credit card, or other methods like PayPal. You can set up a payment link within QuickBooks Online in the Sales menu.
For large projects, ask clients beforehand of their preferred payment method or come to an agreement about the payment method you both like. Then, provide all the necessary information about the agreed-upon payment method. For foreign transfers, you’ll need more than your account number, so make sure to include all the required details and indicate who will shoulder the transfer charges, if any.
H. Itemized List of Services and Costs
People always want to know what they’re paying for. Don’t use a general description such as “Design.” Tell your client exactly what they have received from you—and be as specific as possible. Include a breakdown of the goods or services that you provided and what you charged. Here’s a list to help you:
- Detailed description of the work or products provided
- Date the service was performed or when the product was ordered
- Number of products purchased or the number of hours you worked
- Product cost or your hourly rate/service charge
- Total price, including any delivery fees and taxes
I. Notes section
It’s a good idea to add a message box to your invoice template. You can note important account information, mention seasonal promotion details, or simply thank them for doing business with you. Read our article about entering invoice messages in QuickBooks Online and how you can use this section in many different ways.
Check out our article about invoice samples and best practices to learn more about different invoice designing and management.
Frequently Asked Questions (FAQs)
What is an invoice vs a receipt?
While they may contain similar information, an invoice is a request for payment for goods and services provided, whereas a receipt is confirmation of payment by the customer.
What is an invoice number?
It’s a unique number generated and assigned to an invoice document. No invoice document should share the same invoice number. It can be a simple sequential numbering system or a specifically crafted number that combines customer account number plus a sequential number. For example, invoice number 2201-33 may pertain to invoice 33 of a customer with an account number of 2201.
Is an invoice just a bill?
The terms “invoice” and “bill” are two accounting terms that are often misunderstood. An invoice is a document that you send to customers to ask for payment, while a bill is a document you received from vendors requesting payment. In other words, what the sender refers to as an invoice is often called a bill by the customer.
Invoices are an important request for payment sent to clients. Invoicing is an important process that provides confirmation to your customer of the products and services that have been provided and lets them know it’s time for them to pay. With the help of accounting software programs like QuickBooks Online, you can reduce the clerical work in invoicing by letting QuickBooks Online send and record invoices. For other great invoicing options, see our guide to the best invoicing software.