So, you’ve heard of invoices, and perhaps even received one or sent one without realizing that’s what it was called. Let’s dive in and tackle what is an invoice. Let’s start with a definition of invoice. Technically, an invoice is known as an itemized bill for goods sold or services provided, containing individual prices, the total charge, and the payment terms, according to Merriam-Webster’s Dictionary. 

Definition and synonyms

An invoice is often referred to as a sales invoice or a bill of sale, but both are the exact same thing. The person sending the invoice, the biller, will often refer to the itemized list as an invoice. On the other hand, the person who bought the goods or services may call the itemized list from the vendor or the supplier as a purchase invoice. All of these terms are referring to the same type of document.

There is also a lot of accounting terms related to invoicing that we covered to help you get started with invoicing.

Invoice types

There are several different types of invoices, including a credit memo, debit memo, timesheet, self-billing, commercial, consular, collective, customs, electronic, and pro forma invoices. For more information on the different types of invoices and their uses, please visit our page on invoice type comparisons.

Differences with a receipt or a quote

An invoice is not the same thing as a receipt or a quote, so be weary if you hear these terms used interchangeably. A receipt is proof of a completed sale, including payment, while a quote is typically an estimated dollar amount for an estimated amount of work or product. A quote is usually provided before any work is completed or product is sold, so the customer can decide whether or not to go through with the deal. Learn more about the differences between a quote and an invoice.

Uses of invoices in the business world

While the concept of an invoice is very simple, it solves a complex business problem of having to ask people for money. One of the worst parts about conducting business is having to bill others, but it’s a necessary evil.

The invoice provides a professional way to say, “Hey, I completed these services for you, or sold you these products, and now it’s time to pay up.”

Instead, you can say, “Please find attached the invoice for your most recent purchases/completed services”, and the invoice holds all the information the payer needs in order to complete the transaction.

An invoice has become the norm in terms of completing business transactions, as it is the equivalent of telling someone it is time to pay a bill they owe. Think about when you make a purchase at a store; you provide your credit card or cash when the cashier tells you the total amount owed from your purchase. That’s also how an invoice works.

There is a chance you might get paid for items or services before sending an invoice, but you would still be expected to send one, as the invoice often serves as a proof of purchase for the consumer.

Elements included in a invoice

Typically, a professional invoice will always include a standard set of information, such as a detailed list of the services provided or products purchased, a dollar amount for each of those line items, the date for each line item (the date of completion or sale), any taxes or fees, contact information for all parties involved, any special payment instructions, the date the payment is due, and the the total amount due. 

Read more

For more detailed information on exactly what an invoice is and the benefits of using them to conduct your business operations, visit our invoice definition page. Looking for a clear, detailed example of what a professional invoice looks like? Here are the steps to create a professional invoice.

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