What Can an Invoice Do for Your Business?


When a business expands, filing and documenting payments becomes increasingly cumbersome and tricky. You need invoices for the heavy lifting regarding incoming and outgoing business proceeds. Creating an invoice or bill makes payments more manageable and streamlines your business processes, such as production and sales.

If you have a business that communicates with buyers worldwide, invoices become an integral part of your business process as they itemize business transactions. With an invoice, you can better maintain records, track your payments, serve as a legal document, aid your tax filling, and help with business analytics & monitoring inventory.

As a plus, invoices make it easier to access sales records for the seller (you) and the client with an invoice. Writing an invoice is not a fun process, but incorporating them into your business helps to prevent misunderstandings with the delivery and purchase of various services. Plus, it is also a way of recording sales and other business processes for taxation purposes.

Purpose of an Invoice


A major reason you need an invoice is to ensure that you get proper payment for your work, and in good time too. But it goes beyond this. Regular invoicing serves other goals you may not be aware of, such as:

1.   Tax Filings

Sales invoices serve as valid documents to make periodic tax filings. To ensure you pay the correct tax, keep daily records of your invoices, receipts, and other business documents. Proper tax filings are a reliable source of data that gets you hassle-free business audits.

2.   Inventory Tracking

Invoices record incoming earnings and provide the accurate financial history of a business. The data invoices contain to make it easy to track sales volume and revenue. Invoices are also used to track your income for a specific period and to know a project’s execution, completion, and amount of money realized during the project.

Invoice data is used to collect, collate, and record incoming and outgoing revenue & expenses. The records then help to calculate your key metrics, such as net margin and profit. This information is vital to determine if the business is making a profit or running at a loss.

3.    Sales and Business Analytics

Invoices record key information that helps you gain insights into the state of your business. The report includes:

  • Sales volume.
  • The number of transactions made.
  • The unit price of your services over a period.

Invoices provide information about clients’ purchasing patterns, in-demand products, least popular services, peak sales, and production periods.

You can make new business plans and adjust previous strategies to align with current sales trends with insights. Plus, it becomes easier to target the right customers with demand forecasting.

4.    Business Legal Insurance

Usually, legal issues may arise as you run your business. You want to be sure you’re not caught unaware. For example, how do you navigate an issue where the customer accuses you of going against agreed terms you didn’t agree to?

You will need a document that actually shows the right agreement. An invoice will serve as a contract agreement in most business-client disputes.

When the terms of an invoice are clear and include an official signature, it protects your business against wrongful lawsuits. It further acts as a reliable business record between the client and you.

5.    Timely Payments

Invoices ensure you receive complete payment for your services without delays. Depending on the information contained within an invoice, both parties (you and the client) must act per the agreement. When a client refuses to honor the data within an invoice, you can take legal action against them to get your money.

6.   Payment Records

Invoices let you track and monitor your clients’ payment status. If their payments are almost due, you can send them timely reminders. When the charges are overdue, you can follow up appropriately.

With invoices, you can estimate your future revenue and keep an eye on the current cash flow. Plus, it helps you and your client keep track of payments made or yet to be made.

Content of an Invoice

For an invoice to be effective, it must contain the following information:

  1. The word “invoice” logo and brand image must be prominent on the document.
  2. An invoice should have a unique number or reference to distinguish it from other invoices.
  3. Ensure it contains the date you rendered the service and when the invoice was issued.
  4. It should include your company name and contact information.
  5. Do not forget to include the client’s contact and other necessary details.
  6. You should ensure that all of the company’s terms and conditions are listed on the invoice.
  7. An invoice should consist of the details of the services purchased, such as cost and product description.
  8.  The total amount payable and the tax rates should be present in the document.
  9. Don’t forget to include a thank-you note. It is not required, but it helps to personalize the customer’s experience.

What is the difference between an invoice and a purchase order?


A purchase order is entirely different from an invoice. First from who it is targeted at and second based on the transaction phase where they become useful.

A purchase order usually begins a transaction. It details what the customer would like to purchase. It is a request made to the buyer to make sure products or services are available. A buyer is the one who issues a purchase order. When issued, the seller has to confirm that they can deliver all items requested.

If they can, the items or service is supplied, and then an invoice is sent to request payment. If the purchase is canceled for whatever reason, the seller cannot supply the requested items.

A purchase order is often used to request certain product prices or service charges. An invoice, on the other hand, is the response to the purchase order and will inform the customer of the price of the products or cost of service to be rendered or already rendered.

The purchase order is usually sent at the beginning of the purchase period, while the invoice is sent at the end of the transaction to request payment.

Usually, a purchase order will contain more information than an invoice, although an invoice may be created to have some more information than regular. A purchase order contains items to be purchased, a purchase agreement, and discounts or coupons to be applied.

On a purchase order, you’ll also find other information like the expected delivery date and the buyer’s contact information. On the other hand, an invoice will contain the products or services sold/rendered, their prices, and the total payable amount.

Also, an invoice is usually followed by payment as essentially the document in itself is to request payment. A purchase order, however, doesn’t follow the same order. It doesn’t request or guarantee payment.

Both documents, however, are official documents that can be signed or edited with more information to make legal documents.

Benefits of an Invoice


1.   Customer Satisfaction and Retention

A business progresses when there are constantly new and repeat customers, and proper invoicing helps with that. When you issue invoices, you are offering your customers a convenient way to pay for your services.

Furthermore, invoices give clients a “financial map” of their purchases, and who doesn’t love that? Invoices contain necessary information on purchase services, sale prices, additional fees, late payments, and other processes.

Invoices further serve to build trust between your brand and its clients. It shows that your business, regardless of size, is professional and willing to use orderly systems to ensure an easy customer sales process.

You will get more client retention with a well-put-together invoicing system since it gives you a competitive edge over other businesses. Sending top-notch invoices to your clients keeps them satisfied and turns them to repeat buyers naturally.

2.   Improves Your Business Image

Invoices give an insight into your brand. The more fluid and top-notch your invoicing processes are, the more people recognize your brand image. You can communicate certain aspects of your brand throughout your clients’ sales touchpoints, such as tone of voice and logo.

This is why your invoice must carry your business logo, name, and possibly contact information in addition to the terms and other information.

Not only does it improve the brand’s perception as credible and trustworthy, but it also creates a strong positive association. All of these increase the business’s overall value.

3.    Keeps Your Business Organised

If you constantly deal with lots of unfinished paperwork, invoicing is just what you need to clear the excess paperwork off your desk. You can completely utilize this with the digitalization of your invoice. This makes it easier to search out information in invoices easily and quickly.

Also, a digital invoice helps save your business some costs. You get to save money on regular printing and packaging.

Your entire payment records become available for you to access anytime and from anywhere.

4.   Saves Time

Sending invoices also saves time; you don’t have to go through a pile of documents in search of a piece of information and can channel the time to other business processes. Since invoices are easily accessible, you can send, edit and perform other invoicing processes while running your business errands.

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About the Author: John Abraham

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