What is an Invoice?

Definition: An invoice is a document issued by a seller to the buyer that indicates the quantities and costs of the products or services provider by the seller.

An invoice specifies what a buyer must pay the seller according to the seller’s payment terms. Payment terms indicate the maximum amount of time that a buyer has to pay for the goods and/or services that they have purchased from the seller.

An invoice indicates that a buyer owes money to a seller. Therefore, from a seller’s point of view, an invoice for the sale of goods and/or service is called a sales invoice. From a buyer’s point of view, an invoice for the cost of goods and/or services rendered is called a purchase invoice.

An invoice has historically been a paper document mailed to the buyer, but these days sellers can request payments online with electronic invoices.

What is included on an invoice?

Typically, an invoice document will contain a combination of the following details:

  • The word ‘Invoice’
  • A unique invoice number for both the seller’s and the buyer’s reference
  • The name and contact details of the buyer
  • The name and contact details of the seller
  • The date the product was sent/delivered, or the date the service was rendered
  • The date the invoice was sent
  • The payment terms (detailing the method of payment, when the payment should be received, details about late payment charges, early payment discounts, etc.)
  • A description of the product/service
  • The price per unit of the products (if applicable)
  • The total amount charged