What is an invoice? And why is it so important for your business?

Oct 18 2019 | Contributing writer Gene Marks, CPA and small business expert

An invoice is perhaps the most important document you produce for your business. Learn what an invoice is, why it's important, and the three things you need to consider when creating your invoice layout.

What is an invoice?

An invoice is a commercial document given to a buyer by a seller that states the total amount due for goods or services rendered - which is a fancy way of saying it's the bill a business sends a client to get paid. An invoice lists the products or services provided by the seller, as well as payment terms, and any other information relevant to the buyer. For many businesses, the invoice also serves as the buyer's receipt. 

Why is an invoice important?

Besides helping you get paid, an invoice represents who you are as a company. Yes, your bill for consulting services (or any other services that you perform) is just a form - whether a physical document or one generated online. But here’s a fact: it’s viewed countless times by your customers. It’s your brand. It's your image. It tells a story about your business - where you are, what services you provide, what you look like. It says to the world that you are proud of what you do all the way through to the final receipt you deliver. 

How to write an invoice.

So what makes a great invoice? In my opinion, there are three big things you need to consider in your layout: presentation, content, and messaging.

1. Presentation.

Your bill should look the same whether it's mailed or sent electronically. It should represent all that's good about your business. So how do you make it look good?
  • Have a great logo.  Hopefully your logo is professional and unique. If not, then consider getting it redone - there are many online services that will do this for you, or you can look for a graphic artist on freelancer sites. It should be the same logo from your stationary and website. It should be crystal clear and sharp.
  • Instead of or in addition to your logo, have a cool graphic. Some of my customers send bills with photos of their building, or products or a group of their employees.  I've seen beautiful sunsets and hometown cityscapes on bills sent to me from vendors.  A few of them even substitute cartoons or professional drawings for a photo.  A cool graphic like that draws attention.
  • Ideally your invoice should be one page. But don't sweat that detail.  You want to make sure your fonts are large enough so that anyone - even those boomers - can see all the information without reading glasses.  If that means going on to a second page then so be it.
  • Your bill should also be black and white. That's my opinion. Sure, you can colorize your logo or graphic.  But keep the rest of it straight up and easy to read.  Too many colors create confusion and are distracting from the bill's main purpose:  reminding your customer that payment is due.

2. Content.

As said above, the main purpose of sending a bill is to notify your customer that they owe you payment for a product or service rendered.  You want to make sure your invoice has all the information a customer needs to accomplish that task as quickly as possible.  What information is that?
  • Client address:  Include the specific name of the human being this bill is going to along with their address. That's the person you're going to want to talk to if there's any problem.
  • Place where service was performed:  Sometimes the work is done at different locations and you want to indicate that.
  • Your salesperson:  This can be a last name or initials of your person who did this deal. It's important to track their sales (probably for commission) but also to have someone internally who owns this invoice.
  • Invoice number:  Every bill has to have an assigned, unique control number for accounting purposes. Different companies take different approaches to assigning an invoice number and there's no right answer. Maybe you want to combine a number with a date or just have an ongoing log of sequential numbers. 
  • Date: This is the date that the bill was created (and hopefully sent). The clock for payment starts ticking here.
  • Payment terms: Net 30 (due in 30 days) is the most common but maybe you'd like to do a 2% net 10 which means you're offering a two percent discount if you receive payment within ten days.  This is a common practice and a helpful way to speed up cash flow.
  • Service date:  This is the date the service was performed.  That's important for your buyer's accounting department so they can potentially recognize their payable. For example, if a service was performed in March but then you didn’t bill until April (tsk, tsk) then the customer may want to record that liability at the end of March for their accounting purposes.
  • Item description:  This is your place to shine!  Include a detailed description of every item provided or service performed.  As the seller, you need to make sure you're using consistent wording with the buyer's purchase order and your own quote/proposal. Your description should be explanatory enough so that your client has little reason to question all the great things your company does.
  • Price or fee:  This amount should always agree to the buyer's purchase order and your quote/proposal...or you'll have a fight on your hands!
  • Net invoice amount:  Hold your horses:  this is what you're owed before you take taxes into account.
  • Taxes:  Generally the amount of sales tax charged on the order. Tax laws on services performed vary by state and jurisdiction. That's a whole other can of worms!
  • Total invoiced amount: A summing up of the total payment due. It's basically your favorite number on the document.
Sure, it's a lot of information.  But presented the right way, it can be the difference between getting payment when the amount is due or going on a wild goose chase.  Trust me, I've been on that goose chase and it is not fun.
 

3. Messaging.

Many people think that sending a bill is just about getting paid and I agree that's the primary purpose.  But a great invoice can be a lot more.  It can also be a great marketing tool. In these days of overwhelming emails and overflowing voicemail boxes, your invoice is actually the one document you send to your customers that always gets read. So why not take advantage of that opportunity and add a message?

To that end, make sure you're able to customize your bill so that you can include a short note at the bottom.  What do you put in this note?  Maybe you can invite the client to stop by your booth at the next industry trade show.  Or to consider a complementary service.  Or to be aware of a special discount you're offering on something else.  Or maybe just to say thank you for your business or happy holidays or some other personalized greeting that makes a client feel a tiny bit more special.  It works and if you take notice, you'll see a lot of great companies doing that.

The good news about your invoice is that you don't have to do this all from scratch. There are great templates - like this free invoice template from PayPal - that you can use to create and send a bill online to your customers to get paid quickly. Your bill is a critical document.  Don't shrug it off.  Take it seriously.  Make it look great. Investing resources in your invoices can pay off over the long term. 

The contents of this site are provided for informational purposes only. You should always obtain independent, professional accounting, financial, and legal advice before making any business decision. 
 

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Frequently asked questions.

You can send the same invoice to up to 100 recipients.

Simply click Create Invoice and enter each recipient’s name or email address in the "Bill to" field.

We’ll send a separate invoice to each recipient. If you include only your recipient’s name, we’ll create a payable invoice. You can then print and deliver the invoice yourself or share a link to the invoice with your customer. 


See also:
Easy Invoicing with PayPal
What is an invoice?
The Business app makes creating, editing, and updating invoices easy. To create a new invoice tap Create New Invoice either on the Home screen, or on the Invoicing screen. You can also tap + on the Invoicing screen.
 
When you create an invoice you can enter all the necessary transaction information such as to whom the invoice is going, the date, when it’s due, what it’s for and the pricing information. You can also customize any terms and conditions you may have, add a note to the customer, leave a memo for yourself, or add pictures. Finally, you can also save the invoice as a draft, edit or delete it, and of course send it to your customer.
 
Need to send the same invoice to multiple customers? Tap the invoice you created and then tap More. Tap Copy to duplicate the invoice and then edit the customer information on it as well as any other information. You can save the copy as a new invoice (it will automatically be titled the same but with a number on it) or send it.
 
As part of the invoice creation process, you can add to the app different items you sell or services you provide as well as multiple tax rates. Just tap Invoicing and then tap the cog.
 

See also:
Create Invoice Template
Construction Invoice Template

Sales Invoice Template
Contractor Invoice Template
Freelancer Invoice Template
Catering Invoice Template
After you send your PayPal invoices, your customers will be sent an email that links to your invoice. Your customer can then review the invoice and choose to pay you online with their debit or credit card, or using their PayPal Wallet.

You'll get an email confirming that we've sent your invoices, and when you've been paid.
 
Simply access the invoicing tool in your PayPal account, click on an invoice number or recipient name and view invoice details. Click the More button to access the Share link option. This will provide a URL to your customer’s version of the invoice.  

Because invoices contain your customers’ personal information, never share the invoice link in a public forum.