An Invoice in One Paragraph
An invoice is a document a seller sends to a buyer that states what was supplied, how much it costs, and when payment is due. It is not a receipt — a receipt confirms that payment has already been made, while an invoice requests it. In most businesses the invoice is also the accounting record that triggers revenue recognition and, where applicable, tax reporting.
The Fields an Invoice Needs
Requirements vary by country, but a practical invoice almost always includes the following.
- A unique invoice number. Sequential numbers make reconciliation possible and are usually mandatory for tax purposes.
- The issue date and the due date. The issue date starts the payment clock; the due date states when payment must arrive.
- Seller details. Legal name, address, contact information and, if registered, a tax or VAT number.
- Buyer details. The name and billing address of the party being invoiced, plus a purchase order reference if one exists.
- Line items. A description of each product or service, the quantity, the unit price and the line total.
- Totals. Subtotal, any discount, the tax amount at each rate, and the grand total.
- Payment instructions. Bank details, a payment link, or a note about accepted methods.
Payment Terms Explained
Payment terms describe when payment is expected. "Net 30" means the full amount is due thirty days after the issue date. "Net 15" and "Net 60" work the same way with different windows. "Due on receipt" means payment is expected immediately. Some contracts split payment into stages — for example 50% on signature and 50% on delivery — in which case each stage usually gets its own invoice.
Terms also commonly include a late fee. A clause such as "interest of 1.5% per month applies to overdue balances" gives you something to point to if payment slips, though the enforceability of late fees depends on your jurisdiction.
Tax on Invoices
If you are registered for VAT, GST or sales tax, the invoice normally has to show the rate applied, the tax amount on each line or on the invoice as a whole, and your tax registration number. Discounts complicate this: a trade discount reduces the taxable base, so tax should be calculated after the discount rather than before it. The invoice tools page includes a calculator that applies the discount first and the tax second.
Invoice vs Receipt vs Purchase Order
A purchase order is issued by the buyer before any work begins, authorising the purchase. An invoice is issued by the seller after delivery, requesting payment. A receipt is issued by the seller after payment has been received, confirming it. In a well-run process all three exist for the same transaction and reference each other by number.
Common Invoicing Mistakes
- Reusing or skipping invoice numbers, which makes reconciliation harder and can cause tax problems.
- Applying tax before the discount instead of after.
- Leaving out the due date, so the client has no deadline.
- Describing line items so vaguely that the client's accounts team has to query them.
- Forgetting to include payment details, which delays payment by at least one email exchange.
Ready to Create One?
The invoice generator produces a print-ready invoice with all of these fields in place, and lets you download it as a PDF without creating an account. Everything runs in your browser, so nothing you type is uploaded.