What is Invoice

Invoice Definition

An invoice is an official statement of payments issued by the seller to the buyer describing the number of items sold, the rate of each item, date and time of shipment, and the total price payable by the purchaser. An invoice is also referred to as ‘bill of sale’ or ‘contract of sale.’ An invoice, therefore, serves as a vital document carrying all the detailed information about the products or services offered by the vendor. Typically, an invoice should contain the following information:

• An invoice reference number
• The date of purchase and delivery
• Name and contact details of the seller or vendor
• Name and contact details of the purchaser
• The reference to serial number of the products
• The total amount payable to the seller
• The mode of payment

With the help of an invoice, one can track the transaction of different purchases, manage inventory, utilize the invoice data for accounting and tax calculations. An invoice can also serve as a credit document if the buyer opts to make payments after receiving the products and services from the seller.

Types of Invoice:

It is essential for any business to maintain the record of their transactions. Invoices prepared for each industry, however, are unique to their trade. The different types of invoices are listed below.

• Standard invoice: Though there is no particular coinage for the term, for explanatory purposes, people refer to the most basic format of the invoice as a standard invoice. This is the common layout of providing all the essential data of the transaction and purchase can be used by any industry.

• Tax invoice: In case any business is registered for Goods and Services Tax (GST), the invoice shall also contain the tax components. These kinds of invoices are known as a Tax Invoice.

• Progress invoice: These invoices span over a period. This style of invoicing is most common in the construction industry due to the fact the projects taker longer duration to complete and each phase of the project is equally expensive.

• Pro-forma invoice: Unlike the other invoices that give a vivid description of the purchases to the buyer, a proforma invoice only provides a rough estimation of the cost. It is usually used as an instrument to declare that a product or service shall be offered at a certain agreed price. It is not used as a true record of payments.

• Fixed-bid invoice: This kind of invoice is prepared when there is a clear specification of the demands to complete a certain project. Small-scale companies or freelancers use this kind of billing to prepare a memo of their payments for accomplishing the agreed task.

• Pending invoice: With the help of this invoice, the seller documents the outstanding amount of money that was not cleared by the buyer in the previous transaction. This expense record only maintains the partial payment that needs to be paid to the vendor next time. The process prolongs until the buyer makes the full payment.