Editor’s note: this article is for new business owners and tailored to those who are starting to earn revenue from clients. This article is very elementary and does not apply to many business owners! But if you’re just ramping up your business and a client says to you, “invoice me”, it’s probably best to act like you know what you’re talking about and agree that you will. But it begs to question if you’re unfamiliar, what is an invoice?
What is an Invoice?
An invoice is basically a “bill” you send a customer after you’ve provided them with goods or services. Quickbooks defines it as “a bill for an account between a buyer and a seller indicating what was sold, and how much is owed”, and claims the invoice system is 5,000 years old. Investopedia defines an invoice as “a commercial document that itemizes a transaction between a buyer and a seller. If goods or services were purchased on credit, the invoice usually specifies the terms of the deal, and provide information on the available methods of payment.”
Put more simply, an invoice is the bill you send your customers, requesting that they pay you within a fixed time period, who don’t pay you cash upon the delivery or when you finish your work. An invoice includes information about the service or product delivered, with the due date, preferred or accepted methods of payment, and any special terms regarding payment or discounts.
How do I invoice a client?
There are many free services online that allow you to invoice a client with a basic invoice template. Ideally, you should keep invoices very simple so they are easy to understand and identify how much is owed and for what. Having an invoice system in place too is very important. This will require that you label invoices consecutively, i.e. Invoice 001, 002, 003, 004. Invoice numbers should be independent of the customer – meaning you can send multiple invoices to a single customer. Keeping track of invoice is extremely important for a few reasons. First is that it will keep you organized. Secondly, you want to have the ability to track invoices and to whom they were sent in the future (especially when closing out the books at year end).
Other Words for “Invoice”
Invoices are also known as “accounts receivable”, “A/R”, or simply a “bill”. Once an invoice is issued to your client, you need to increase the Accounts Receivable account in your accounting system with a simple accounts receivable journal entry. And whatever you do… don’t forget to invoice your clients!