Invoices are essential for small businesses as they serve as documents that help them receive payments in exchange for the goods or services sold to the customers. It also benefits the customers and helps them to track their expenses and identify their spending habits better.
Table Of Contents :
What Is An Invoice?
Fundamentally, an invoice is a time-specified commercial document issued by businesses to their customers and specifies the cost of goods or services that must be paid as per the payment terms. The document offers details related to products or services that will be transacted between a buyer and a seller.
If the goods or services are availed on credit, the invoice highlights the terms of a deal and also provides information about payment methods. An invoice can be a paper receipt or an online record.
Invoices come with a unique number that are useful for both internal and external reference. The number, along with the information of the service provider or seller, helps to solve errors related to billing.
With KredX’s invoice discounting services, you can maximise the utility of your invoices and use them to meet your business’s working capital requirements seamlessly.
Components Of An Invoice:
Invoices may serve as a legal document if they contain proper details of both buyers and sellers. The following are the components of a standard invoice –
- Invoice number
- The date on which a service was availed or products were sold
- The date on which the receipt was issued
- Name and contact number of the buyer
- Name and contact number of the seller
- Total amount due
- Taxes
- Details of product or service
- Cost per unit of product
- Personalised note
- Terms of payment explaining the mode of payment, date of receipt, cash discount for early payment, late payment charge, etc.
Types Of Invoices:
The following are the most common types of invoices –
|
Types Of Invoices |
Description |
|
Pro Forma Invoices |
It states the commitment of the seller to dispatch goods or services to a buyer as per the agreed terms of payment. |
|
Commercial Invoices |
This invoice is used for customer declaration in case of sale of exported goods. |
|
Timesheet Invoices |
It charges customers on an hourly basis for a service provided. |
|
Retainer Invoices |
A customer receives this receipt when he/she makes an advance payment for goods or services. The stated amount is deducted from the buyer’s final payment on delivery. |
|
Credit Notes |
It is issued to a buyer when goods are returned either because of a mistake or damage. |
|
Recurring Invoices |
This receipt is created and sent to buyers at intervals for repeating transactions. |
Importance Of Invoice:
Invoices are a vital element of accounting and audit that also help with internal control. The key functions of invoices are –
- Maintaining Record Of Sales
Invoices help to maintain a legal record of sales. With the help of these receipts, businesses can find out the time of a particular good’s sale, the purchasing party and the time of such purchase.
- Tracking Payment
Working as a tool of accounting, invoices help both buyers and sellers to track their payment and outstanding dues easily.
- Easy Tax Filing
Keeping a record of sales invoices helps businesses to report their income and further helps to pay off a correct amount of taxes.
- Business Analysis
Businesses can accumulate substantial information about their buyers’ spending patterns, peak buying times, popular trends, and products by analysing the invoices. In turn, they come in handy to develop useful marketing strategies.
- Legal Protection
An invoice with all essential documents serves as legal proof of an agreement between a buyer and a seller. Such a document protects merchants against fraudulent lawsuits.
- A Means To Raise Capital
With the help of invoice discounting services, businesses can raise funds against their unpaid invoices and increase their immediate cash flow successfully. In turn, companies can meet their current working capital needs with minimum hassles.
At KredX, you can access funding via the invoice discounting services within 24-72 hours* at attractive terms of services. All you need to do is complete the application process online and upload your unpaid invoices on our portal.
As India’s leading integrated cash flow solutions provider, KredX provides easy-to-avail funding options with up to 90% of the value of total invoices for your working capital needs. Contact us now to learn more!
FAQs
A. Though both carry information related to the sale of goods or services, invoices and bills are different from one another. While invoices are used to collect money from clients, bills refer to documents used by customers to identify the amount they owe their suppliers.
A. Sellers refer to a receipt issued for the sale of goods or services as a sales invoice. Alternatively, invoices issued for the cost of products sold or services rendered are referred to by buyers as purchase invoices.
A. An invoice is not a receipt. An invoice is issued before payment and is used as a means to request payment for goods and services. On the other hand, a receipt is issued after payment and serves as a proof of transaction. Both are, however, often used interchangeably.
A. A quote offers clients a fixed price for a project and is subject to a set time frame known as validity.
