What is an invoice?
An invoice is a seller’s written request for payment: it lists what was supplied, what it costs, and when and how to pay.
When you send an invoice, you’re recording that a sale has happened and that the buyer now owes you money. In accounting terms it creates an account receivable for you and an account payable for your customer. It is also the paper trail both of you keep for tax: the IRS lists invoices among the documents that support gross receipts (IRS recordkeeping guidance).
The documents around an invoice
An invoice rarely travels alone. Step through the sequence below to see what each document does, and which one actually creates a debt.
Invoice
- Direction
- Seller → buyer
- What it asks for
- Payment by the due date.
- In the books
- Seller records income owed (accounts receivable); buyer records a bill (accounts payable).
- Don’t forget
- Unique number, due date, how to pay.
The parts of an invoice
- Header: the word “Invoice”, your business name, logo and contact details.
- Invoice number and dates: a unique number, the invoice date and the due date. See invoice numbers.
- Bill to: the customer’s name and address.
- Line items: each product or service with quantity, unit price and amount.
- Totals: subtotal, discounts, tax, shipping and the amount due.
- Payment terms and instructions: e.g. Net 30, plus bank details or a payment link.
If you are registered for VAT or GST, extra fields are mandatory, such as your VAT number and the tax at each rate: see tax invoice requirements.
Types of invoice
| Type | Used for |
|---|---|
| Standard / sales invoice | Billing goods or services after supply. |
| Proforma invoice | A preliminary bill before supply, for prepayment or customs. |
| Commercial invoice | Customs declaration for international shipments. |
| Tax / VAT invoice | An invoice meeting VAT/GST content rules so the buyer can reclaim tax. |
| Credit note | Reducing or cancelling an invoice already issued. |
| Recurring / interim invoice | Retainers, subscriptions, and stage payments on long projects. |
Questions people ask
What is an invoice in simple terms?
A bill from a seller to a buyer listing what was supplied, how much it costs and when payment is due.
Is an invoice a legal document?
An invoice is a commercial record rather than a contract, but it is evidence of a sale and, for VAT/GST-registered businesses, a tax document with required contents. The underlying agreement is what creates the obligation to pay.
What is the difference between an invoice and a bill?
They are the same document seen from two sides: the seller sends an invoice; the buyer receives a bill.
Who sends the invoice, buyer or seller?
The seller (the person or business that provided the goods or services) sends it to the buyer.
How long should I keep invoices?
It depends on the country. The IRS says to keep records generally for three years, longer in some situations; HMRC says to keep VAT records for at least six years. Check the official guidance that applies to you.