What is an Invoice?

In most business transactions, the initial contract negotiation gets the most attention. But once all the terms have been agreed upon and the signatures have been collected, there remains the critical issue of actually collecting payments. That’s where invoices come in.

Almost everyone will work with invoices at one time or another, and many of us see them every day. Despite how familiar they may seem, however, there’s more to the humble invoice document than you may realize.

Here’s everything you need to know about one of the most common types of document you’ll ever work with throughout your career—including a few easy ways you can create, file, and send invoices more effectively than ever.

What is an invoice?

An invoice is a written document that lists and itemizes goods and services provided to the recipient. It briefly describes the transactions completed, the associated cost of each of these transactions, and the terms of payment requested by the party who completed them.

An invoice functions as a formal request for payment, as well as documentation of that request that can be filed and referenced for proof of transaction. Vendors use them to keep track of what has been or will be exchanged in a deal or service and how much that exchange will cost.

Why are invoices important?

In addition to serving as a formal document announcing that payment is due for a business transaction, invoices are essential for effective business accounting. Businesses must keep copies and records of every invoice they send to a customer to prove that the transaction took place and to keep track of how much payment was received from it. 

How to write an invoice

While there is no official list of what is required to make a document an invoice, there are several standard elements that should be included in every invoice you produce.

Omitting any of these fields will not necessarily invalidate an invoice, but it may result in additional questions from the customer. Depending on what’s missing, you may even need to write and send a new invoice with more information attached. This kind of issue is common and has the potential to significantly slow down payment and the proper documentation of transactions. Thankfully, it’s easily avoidable.

As you create your invoices, be sure to include all of the following information:

  • Statement of invoice. An invoice must clearly state what it is at the top of the document.
  • Invoice number. All invoices should have a unique identifier called the invoice number. This signifier is used to catalog all invoices a business sends in order, so they can be quickly referenced for future documentation.
  • Vendor and client contact information. This includes the names, addresses, phone numbers, and often email addresses of each party.
  • Issue date. The date an invoice is sent is an important record for ensuring that both the vendor and customer are complying with the terms of payment.
  • Terms of payment. Even if the terms of payment are established in a separate document such as a contract or purchase order, they should also be included in the invoice for proper documentation. The more clearly the invoice specifies the exact terms of payment, the more useful the document for proof of transaction and future bookkeeping.
  • An itemized list of goods or services being purchased. Include a complete accounting of what was provided, along with the units for each.
  • Taxes, fees, credits, and penalties. The price of the goods or services being provided is not the only cost that should be included on an invoice. Anything that will impact the total cost should be included on a discrete line, including any taxes associated with the transaction, credits for previous deposits, or late fees from previous invoices.
  • Amount owed, and total amount if applicable. If the payment terms call for payments to be made in installments, the amount owed for each installment should be listed, including the total amount due for the first payment along with the total amount due.
  • Invoice number. Numbering invoices is crucial for internal and external recordkeeping. It is also a helpful way to ensure there is no confusion between vendors and customers if they are dealing with multiple invoices. 

Do invoices need to be signed?

An invoice is simply a record of a transaction, not a legal agreement. Because of this, neither the creator nor the recipient of the invoice needs to sign it for the document to be considered valid.

There are good reasons to request a customer sign your invoices, however, making it a fairly common practice. Signing an invoice ensures that all involved parties acknowledge and agree with the information on the invoice.

If you are working with a digital invoice, an electronic signature field can be added to make signing faster and simpler. 

Is an invoice proof of payment?

No. Generally, an invoice is a document specifying that payment is due, not completed. 

Automate invoice generation

For enterprise organizations that deal with hundreds or thousands of invoices a year across multiple vendors, preparing and sending invoices can be time-consuming.

A digital document automation system can create and distribute invoices automatically. A best-in-class invoice solution also offers batch invoice generation, customizable templates, and Salesforce object support.

Benefits of digital invoices

Paper invoices have been the norm for centuries, but just as with nearly all other business documents, they are increasingly becoming digitized. Digital invoices present many advantages over paper, such as:

  • Reduced mistakes due to human error
  • Digital audit trail 
  • Automated creation and sending
  • Easier and more permanent electronic documentation 
  • Integration of invoice information with digital search tools, making it far easier to find and access specific invoices within your database
  • Integration of invoice payment information with business analytics technology, enabling faster analysis of invoice data
  • Faster time to payment
  • Lower cost
  • Reduced paper use

Add an option to pay digital invoices

One of the most common frustrations associated with invoices is the lag between when an invoice is sent and when payment is received. With digital invoices, however, an option to pay can be added directly to the invoice itself. This makes it easier for customers to pay right when the invoice is top of mind. 

Send digital invoices with DocuSign 

Whether you are creating and sending hundreds of invoices a month or just a few each year, DocuSign has a solution to make invoicing easier. To get started with creating digital invoices, sign up for a DocuSign free trial.

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