Invoice — Definition, Types, Tips For Making It

Invoice is a document that is often used in buying and selling transactions, especially for business entities registered by tax.

The lay term of invoice is a note, usually a business entity that has not been registered with taxes and is still conventional, using a note instead of an invoice. So what is the difference between an invoice and a note? Here’s the explanation!

What Is Invoice?

Invoice is a mandatory document owned by every taxable business entity, and is used as evidence of a purchase transaction containing the item and the amount of payment to be paid.

Both small and large companies are required to have this document. Apart from being proof of collection, invoices are also used as evidence that the business entity has fulfilled its obligations as a taxpayer.

In an invoice, there is some information that must be included and should not be left out. In order to maintain the accuracy of recording transactions. The information that should be included in an invoice is:

  • Buyer’s company description
  • Sales company description
  • Transaction date
  • Items or types of goods or services purchased
  • Price per item
  • Total overall price
  • Tax amount
  • Price to be paid or billed after tax

Invoices must be made in several copies or integrated, the purpose is to archive certain parties, which are used for certain purposes as well. For example, for buyers the invoice archive is used as proof of cash out and proof of a purchase transaction.

For sellers, invoice archives are used as proof of cash in, billing and proof of tax payments. Both the seller and the buyer have separate sections or divisions that have an interest in filing the invoice.

Types Of Invoices

Invoice turns out to have 3 types, depending on its function. The following are the types of invoices:

Regular Invoice

Invoice is the most commonly used invoice when making a transaction. The contents of this invoice are descriptions of the business entity of the seller and buyer, product items, and the total price to be paid by the buying company .

Proforma Invoice

A proforma invoice is an invoice that has a temporary nature. This document is given to the buyer before the seller sends all the ordered goods. Usually the goods will be sent periodically. If all the goods have been received by the buyer, then the seller will provide a regular invoice. The purpose is as a billing document and proof that the goods have been received by the buyer in their entirety.

Consular Invoice

Consular invoices are used specifically for international or inter-country trade. So that this invoice is an invoice that cannot be arbitrarily printed, it must have a special stamp as a sign of ratification and approval from the embassy of the State or representative of the country in question.

Difference Between Invoice Vs Notes

After knowing what an invoice is, it’s actually already clear what the difference is with a note. Here are the basic differences between the two documents.

  • Invoices are generally used for taxable business entities, while notes are not. Notes are usually more unprofessional.
  • Invoices are printed automatically and most companies already have digital templates, while notes are written manually.
  • The price of the goods on the invoice is subject to tax, while the price of the goods on the memorandum is not subject to tax.
  • Usually, the data on the printed invoice will be entered in an integrated information system. Notes do not have a history track record in the system, because the creation is still manual.

In fact, even if you are not registered as a taxable entrepreneur, the use of an invoice is recommended rather than a memorandum. The data on the invoice will be saved automatically and make the work of the sales or finance department easier.

Integration in the system will also help reduce paper usage, because data will go to designated sections or divisions. In general, digital documentation on the invoicing system is required by the company.

6 Tips for Invoicing to Run Smoothly

Invoicing will not be useful if the customer does not pay the bill on time. Because payments from customers are closely related to the company’s operations.

If the payment is not smooth, then your business will be threatened “out of business”. Then how can customers pay on time according to a pre-determined agreement? Here are 6 must-try tips to help smooth payments:

1. Rewards & Punishments

This system is quite effective to use. At the time of the transaction, write in an invoice or it can be delivered directly, that the company will give a reward if the customer pays the bill on time or sooner than the agreed time. Rewards can be in the form of discounts, vouchers for the next purchase, raffle points or whatever.

On the other hand, apply a punishment system if the customer does not pay the bill on time. Punishment is useful to provide a deterrent effect, so that later customers will learn to pay invoices at a predetermined time. Punishment can be in the form of additional fees or interest penalties, or freezing of further orders for goods.

2. Prepare Alternative Payments

Sometimes one of the reasons customers are late paying is the absence of a payment method that matches what they have. For example, the customer is the type of person who likes to pay by transfer, but the company only accepts cash. Or suppose the customer only has bank account A, but the company only has bank account B, and other reasons.

So companies must prepare various payment methods so that they are easily accessible to customers. Types of payment methods include: cash, credit cards, cheques, bilyet giro, m-banking or sms banking, and debit cards. Try to use at least 2 banks, consisting of private banks and state banks.

3. Clear Format

Invoices sent to customers must be clear, both the goods ordered and the agreed deadline. It could be a late payment because the company’s invoice details confuse customers. Invoices must be detailed, simple and easy to read. You can give a bold format on the due date, as a sign of a column that needs more attention. The format described above is quite detailed. You can use it as a reference for company invoices.

4. Send Invoice Long Before Due Date

To allow time for customers to arrange payments, send invoices at least 1 week before the due date. Also pay attention to the delivery time, if it takes more than 1 day, make sure the invoice arrives at the customer exactly 1 week before the time of payment. In addition, this method is also an “alarm” for customers to immediately pay off their trade debts.

5. Friendly to Customers

Believe that attitude also has an important role in any business venture. Be friendly to customers, say thank you when the transaction is complete and when the payment has been paid. Tell them if the company has sent an invoice to the customer, this is a friendly gesture too. In addition to reminding the payment indirectly, customers will feel special attention. The convenience they get will build a sense of reluctance if they will pay past due.

6. Clearly Written

Especially for the due date section, if there are certain conditions, write them clearly. Usually there are invoices that only write > NET 25, 2%. This means that above payments over 25 days from the date listed there is a fine of 2%. Not all customers understand this. It is better to clearly write “Payment is maximum 25 days from the date of issue of invoice, on the 26th day there will be a fine of 2%”.

7. Down Payment (DP)

Down payment can ease the payment at the end

In every transaction, usually the customer is asked for a down payment by the seller. Determine what percentage of the advance to be paid from the total number of items ordered. There is no need to hesitate to ask for a down payment, because it is a common thing.

Advances help the turnover of goods sold. For the next payment, you can use the installment system. For example, the down payment is 30% of the amount, the second payment is 30% in the 2nd week, and the remaining 40% is in the 4th week.

Invoice Article Conclusion

Invoice is a summons to pay trade payables or bills for the purchase of goods and services. The smoother the payment, the easier it will be to establish cooperation, maybe even customers will get priority in the company.

Not only trying to get customers to pay invoices as quickly as possible, but it’s a good idea to get used to your own company also paying invoices on time. Don’t forget to always archive invoice data not only on your device, but also on Google Drive or Dropbox as a data backup. Do you understand about invoices? But do you know what a quotation is ? Don’t forget to read it, greetings!

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