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What Is On An Invoice? 5 Important Elements You Must Know

Invoices can be styled differently depending on a business’ preferences. Some prefer a simple, standard template, while others may use a dedicated template that better aligns with their branding. 

Whichever style you choose, it’s important to remember the five vital elements that are key in creating an invoice. Misunderstanding these elements could lead to serious consequences for both you and your customers.

Don’t worry, we’ve got you covered. Below, we’ve created detailed explanations for all five elements so you can create your invoices with confidence.

What is on an invoice? 

Typically, an invoice includes the following information:

  • The title of the document — “Invoice”
  • Full name and address of you and your clients 
  • The date of issue of the invoice 
  • A unique invoice number
  • Purchase order number (P.O.)
  • The payment due date
  • The delivery date of the products/services
  • Detailed descriptions of the products or services sold
  • The quantity and price of each product/service
  • The total amount due
  • Payment terms 

Here is an example of what an invoice would look like:  

Source: Invoice Home 

You can use the above information as a checklist and design a simple invoicing template yourself by using Microsoft Excel. You can also find a great deal of free invoice templates on the Internet. Here are a few links that you might want to check out:

The 5 Most important elements on an invoice  

Above, we listed a number of examples of information typically included in an invoice. Among those, there are 5 elements that matter more than the others as they determine the timeliness of your clients’ payments. Let’s take a look!

1. Your business’s contact information 

Your company’s name, address, and other contact information like an email address and phone number should be distinctly visible to every reader. Missing basic contact details could cause complications and delay payment. Make sure you include this basic information to ensure your customers pay on time.

2. Invoice Number

An invoice number is a unique, sequential code that is systematically assigned to invoices. An invoice number is undeniably important as it ensures that income is accurately documented for tax and accounting purposes. They also make tracking payments and managing past-due invoices much easier.

For example, when you receive payment from your clients, you can reference the invoice number on the pay stub to determine which invoice the payment is associated with. You can then ensure accuracy in your payment record keeping. This will also help you know when to proceed with further steps on overdue invoices, such as sending reminders or charging late payment fees.    

Invoicing numbers are particularly helpful when you have a lot of different transactions with one single customer because the numbers keep you organized when there are numerous pending invoices. 

3. Price 

The purpose of an invoice is to help you get paid on time for the right amount. That’s why it’s important to make sure you have the pricing numbers carefully checked before sending out the invoice. Otherwise, it would put you in an awkward position to either ask your customers for more money or ask them to return some cash. It wastes valuable time, and could severely impact your reputation and professionalism. 

The total amount due should be exactly the same as what you and your customers initially agreed upon. If the invoice includes many small units, make sure to divide them into categories and calculate a subtotal amount for each section. Put great care into making this information as clear as possible for both you and your client. 

4. Description 

Provide clear and precise descriptions of what you’re selling to avoid unwanted confusion and questions from your customers. Again, if your invoice contains small units, make sure to explain each product/service separately. Not only will precise descriptions help you get paid faster and prevent potential disputes, but they will also allow you to easily go back and double-check invoices for accounting, auditing, and administrative needs.

5. Payment Terms

Payment terms tell your clients when you expect payments from them on a sale. Popular terminologies used are “payable upon receipt”, “cash on delivery (COD)”, “net 10 days” “net 30 days”, “net 45 days”, “60” or “90”. For example, if your invoice is dated January 1 and says “net 30,” the payment is due on or before January 30. You can also rewrite the term in plain English “payment is due in 30 days,” to make it clearer to every customer.  

Apart from providing the expected payment date, payment terms can contain other information about a sale, such as discounts for early payment.

There is a multitude of reasons to offer a discount. For example, many businesses offer a discount if customers complete the payment before the due date as an incentive to process the payment quickly. It’s a win-win deal as you no longer need to wait up to 30 days to receive the check, while your customers can also save some money on their purchases.

If you want to include discount information on your payment terms, ensure that you use the correct terminology. Put the discount percentage and the cycle of early payment before your original payment term. 

For example, if you want to send out an invoice with credit terms of net 30 and a 10 percent discount if paid within 5 days, the term would be written as “10/5, net 30.”

Payment terms cover a wide range of transaction details of a sale. They tell your customers when the payment should be made and how, and under what conditions. For instance, if your business only accepts payment via Stripe or credit cards, that can be put in payment terms.  

See more: Five Tips On How To Create An Invoice That Makes Your Customers Happy.

Final thoughts 

We hope this article has helped clarify the most important elements you should include on an invoice. Ensure your invoices are well-designed and filled with clear, detailed information. That’s how to keep your customers happy and satisfied! 

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