Sending an invoice is the act of formally requesting payment from a client for goods delivered or services rendered. This standard business practice creates a professional record of a transaction, signaling to a customer that payment is due. It formalizes the financial aspect of a business relationship, ensuring all parties have a mutual understanding of the outstanding balance.
The Purpose of an Invoice
An invoice’s primary function is to request payment, but it is also a foundational document for maintaining accurate financial records. It provides a clear trail of sales and income, which is necessary for tracking revenue and managing cash flow. When using accrual accounting, the amount on an invoice is recorded as accounts receivable, representing money owed to the business.
This documentation is also for legal and tax reasons. An invoice serves as a time-stamped record of a transaction, detailing what was sold, to whom, and for how much. In the event of a dispute or audit, a well-prepared invoice can act as evidence of the agreed-upon terms. It professionalizes the payment collection process by establishing a documented expectation for payment.
Key Elements of a Professional Invoice
A professional invoice contains several distinct elements to ensure the document is easy to understand and process. Including these standard components prevents confusion, helps clients process payments quickly, and ensures your records are thorough. A well-crafted invoice reflects the professionalism of your business operations.
Your Business Information
The invoice must clearly display your business’s name, address, phone number, and email. This information identifies you as the sender and provides the client with contact details for any questions. Placing this information prominently, usually at the top of the document, makes it simple for the client’s accounts payable department to process.
The Client’s Information
Equally important is the inclusion of the client’s name and address. This ensures the invoice is directed to the correct person or company, reducing the risk of it getting lost or delayed. For larger companies, specifying the exact department or contact person can further expedite the payment process.
An Invoice Number
Every invoice you send should have a unique invoice number. This number serves as a specific identifier for the transaction, which is important for record-keeping and tracking. A sequential or systematic numbering system (e.g., 2024-001, 2024-002) helps you and your client easily reference the document in communications.
Important Dates
Three dates are typically found on an invoice: the date the invoice was issued, the date the goods or services were provided, and the payment due date. The issue date establishes when the payment clock starts ticking. The due date communicates your deadline for receiving payment, and the supply date provides context for the charges.
An Itemized List of Services or Products
The body of the invoice should contain a detailed breakdown of the products sold or services rendered. Each line item should include a brief description, the quantity or hours, the rate, and the total for that item. This transparency allows the client to see exactly what they are paying for, which can prevent disputes.
The Total Amount Due
After the itemized list, the invoice must clearly state the subtotal of all charges, any applicable taxes, and any discounts that have been applied. These figures lead to the final, bolded total amount due. Presenting the calculation clearly helps the client understand how the final number was reached.
Payment Terms
This section outlines how and when you expect to be paid. It should include the payment methods you accept and the payment deadline. Common terms like “Net 30” mean the full payment is due within 30 days of the invoice date. Clear payment terms manage expectations and reduce the likelihood of late payments.
How to Send an Invoice
Once an invoice is prepared, the next step is delivering it to the client. The most common method is email, as it is fast, efficient, and provides an electronic paper trail. When sending an invoice via email, use a clear subject line, such as “Invoice [Invoice Number] from [Your Business Name].”
The body of the email should be polite and concise. A simple message like, “Please find attached invoice [Invoice Number] for [brief description of services/products]. The total amount of [Total Amount] is due on [Due Date]. Thank you for your business,” is sufficient. The invoice itself should be attached as a PDF file, as this format is professional and not easily alterable.
While email is prevalent, some businesses still send invoices through postal mail if the client requires a physical copy. Another popular method is using dedicated invoicing software or accounting platforms. These tools can automate the creation and sending of invoices and send automatic payment reminders, streamlining the process.
Managing Invoices After Sending
Proper management of outstanding invoices is part of maintaining healthy cash flow. It is important to have a system for tracking which invoices have been sent, pending, and paid. This can be done with a spreadsheet or through accounting software that automatically updates the status of each invoice.
Following up on payments is a standard part of the process. If the payment due date is approaching, a polite reminder email can be helpful. For overdue invoices, a follow-up message should be sent promptly. This communication should remain professional, referencing the invoice number and original due date while politely inquiring about the payment status.
Once a payment is received, the invoice should be immediately marked as “Paid” in your records. This is for accurate financial reporting and prevents you from accidentally sending a reminder for a settled invoice. Keeping organized copies of all paid invoices is necessary for tax purposes and for analyzing your business’s financial history.
Invoice vs. Other Financial Documents
You will encounter several financial documents that, while related, serve different purposes. An invoice is a formal request for payment after goods or services have been delivered. A receipt, by contrast, is proof of payment issued after the client has paid the invoice, confirming the transaction is complete.
A bill is a term often used interchangeably with an invoice, but it generally implies a more immediate demand for payment, such as a restaurant bill. A purchase order (PO) is a document sent from a buyer to a seller to officially order goods or services. The PO authorizes the purchase, and the seller then issues an invoice referencing the PO number to request payment.