What is an invoice?

An invoice is a document that properly records and itemizes a transaction that occurs between a buyer and a seller. Typically a seller will send an invoice to the buyer, asking for a payment in exchange for the goods and/or services that the seller has to offer. Different types of invoices include a bill of sale, a receipt, and a sales invoice. The concept of an invoice dates back to biblical times, and invoices are now commonly recorded on paper or are computer-generated. An invoice indicates the quantity and the cost of the product or service offered by the seller. This document clearly specifies what the buyer is paying for, the date that the invoice is due, and if the item was purchased on credit, the invoice will typically denote the payment terms. An invoice includes the name and contact information of the buyer as well as the seller. It clearly specifies the total amount due and the cost per item, whether it be a product or service. An invoice typically has a unique identifying number, known as an invoice number, that is used for accounting and reference purposes.

Invoice Template

SBA.com® has created a template invoice for you to download and modify to suit your small business needs.

illustration of an invoice in exchange for money

The importance of invoices

Generating invoices can seem to be a time-consuming process but it is important for small businesses to generate, issue, and retain invoices. A well-designed invoice helps sellers get paid for their products and services rendered. Invoices also serve as a record-keeping system for both the parties involved in a transaction. A copy of sales invoices can serve as evidence that the services and the products offered by the business have been delivered. This document can establish the right of the business to receive a payment from the buyer. In case of not receiving a payment, the company can use the invoice to demonstrate legally that a payment is owed to them. Also, if your business is audited, you can share your invoices to show that you have reported your income for the audit period accurately. If invoices haven’t been properly issued and maintained, then you may face challenges during an audit. Generating and maintaining records of invoices sent to customers is important for any small business. Recording this data in a systematic manner can add clarity and organization to your company.

picture of a pile of receipts next to a computer

How to Create an Invoice

A standardized invoice document allows you to maintain both paper and electronic records of all services and products provided, including material costs, labor rates, taxes, and more.