Invoice

Definition

A commercial document requesting payment for a transaction between the seller and a buyer. Generated by the seller, an invoice states the terms of the sale, such as the quantity and the final cost of the products or services sold by the seller to the buyer, and other details like the seller’s contact information.

In the accounts payable process, an invoice serves as documentation of an outstanding payment. As a legal document, an invoice must include relevant information that ensures accurate records for bookkeeping and payment processing. An invoice should have the following information:

  • The word “invoice” clearly printed in the document
  • Contact information for the seller
  • The date invoice was created
  • An invoice number
  • Description of the products or services sold
  • The date when the products or services were delivered
  • Unit cost of an item or service, which may include taxes, freight or shipping charges
  • Payment terms, such as discounts or finance charges for late payments
  • Total quality of items purchased

An invoice may contain additional information depending on the industry.  For example, a business that deals with international shipments must produce a commercial invoice; in addition to the information typically on a general invoice, a commercial invoice includes packaging description, insurance costs, and a country code linked to the origin of the shipment.

Best practices:

Even though invoices are generated by the seller, accounts payable need to ensure that invoices meet their requirements for efficient payment processing:

  • Require that onboarding sellers follow company invoicing policies. While sellers may have their invoicing system, being upfront with the information you need in an invoice will improve efficiency and accuracy in your accounts payable workflow. Vendors will more than likely comply with your invoicing standards because they’ll want their invoice payment sooner rather than later.
  • Adopt paperless invoicing. Digital invoices make it easier for your accounts payable to capture the necessary information for recording and processing the payment, thus speeding up payee disbursements.  
  • Pay original invoices. Paying a copy of an invoice increases the risk of paying the same invoice twice.

Datapoints

Source: What Is an Invoice And How Can I Make One?

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