What Is an Invoice? — Definition & How Invoices Work

What Is an Invoice?

An invoice is a request for payment for itemized goods and services that is sent from a seller to a buyer. Invoices are used by a person or company (offering goods or services) to tell a buyer that payment is now due.

A basic invoice should include the following details:

• Seller: person or company offering goods or services
• Buyer: person or company purchasing the goods or services
• Description: detail of each item sold or service provided
• Due Date: when payment is expected, either in 30 days or by a certain date
• Payment: whether the buyer should pay by check, money order, or other means
• Purchase Order Number: a unique identifier used to keep track of orders

Browse our invoice templates before creating your own to get a better sense of what an invoice looks like.

As a reference, this type of document may be referred to as a:

• Bill
• Tab
• Bill of Sale
• Itemized Bill
• Purchase Invoice

What Is an Invoice Used For?

As a commercial document, an invoice is needed whenever a business transaction involves payment for goods or services. Invoices are used to track inventory, accounts receivables, and expenses. The seller can either send one to the buyer once a transaction is completed or within 14 days of the transaction.

An invoice can be sent to the buyer immediately or within 14 days of the business transaction.

How Do Invoices Work?

Invoices work by providing those in a business relationship with a formal account of all goods and services rendered as well as a statement of the total sum owed. Once sent to the buyer, an invoice acts as an official record of the transaction.

Without a written invoice, the seller has no written proof that a business transaction occurred. After the seller provides goods or services, the buyer could simply not pay if an invoice isn’t sent. Practically speaking, invoices also serve as a professional reminder that payment is still due. Legally, they’re enforceable in court if the buyer continues to not pay or the seller provides bad goods or services.

Avoid unnecessary disputes when you use one our free invoice templates. They’ll provide you with stronger footing if you ever need to go to court.

Once payment has been received and/or processed, the seller can issue the buyer a receipt.

A properly sent invoice will address the following basic questions:

• Who is the seller and buyer
• What item or service is being purchased, including a description
• Where the items should be delivered or service performed
• When the payment is due (i.e. 30 days from the invoice date or before a certain day)
• How the payment should be made (i.e. check or money order)

Who Needs an Invoice?

If you want to get paid for goods or services provided, you should send an invoice. Freelancers, businesses, and service providers of all shapes and sizes use invoice templates or specialized apps to collect payments from clients.

Here are just a few of the professionals who may need one: