Invoice 101: What, Why, How?

What is an invoice? Why is it important?

If you’ve worked as an employee for most of your professional life, this little slip of paper may escape your notice. Unless you’re working as an accountant or in the finance department, you would probably ignore this document. But when you decide to quit and start your own company, you’ll most likely take a crash course in accounting matters and this includes knowing what an invoice is for.

writing an invoice

An invoice is an itemized summary of goods sold or services rendered.

An invoice is an itemized summary of goods sold or services rendered. It is a document made by the supplier that contains the amount the client needs to pay to the supplier of goods or services. On the side of the customer, it is used to know what exactly the customer is paying for and how much. On the side of the supplier, it is used to know how much the client owes him and for what.

Contents of an invoice:

A typical invoice contains the supplier’s name, address, contact details, date, the word “invoice”, invoice number, Customer’s name, description/particulars, quantity, price per quantity, total, breakdown of taxes, and grand total.

  • The supplier’s name, address, and contact details are usually printed on the topmost portion of the invoice.
  • The invoice number is usually found on the top or the bottom of the invoice. It usually starts with the number one and moves in ascending order.
  • The date of the invoice indicates the date when the goods were delivered or the services were made.
  • The customer’s name is the name of the buyer or client.
  • Description/Particulars indicate the specific item or service rendered, the more specific, the better.
  • Quantity indicates how many of a specific good was bought or how many times a specific service was rendered.
  • Price per Quantity indicates the price for each specific good bought or each specific service rendered.
  • Total is the amount for the specific good or specific service rendered. To get this amount, just multiply the quantity of the specific item or service rendered by the price per quantity of the specific good or service rendered.
  • The Description/Particulars, Quantity, Price per Quantity, and Total is usually placed in a table format to make it easier to read and for faster computation.
  • Breakdown of taxes are the taxes added to the transaction through the sale of goods or service rendered. Taxes involved usually vary depending on the city, state, or country.
  • Grand Total is the sum of all items purchased or service rendered inclusive of the taxes involved. It is the total amount payable by the customer to the supplier for the transaction.

invoice form

Although there is no specific format for the invoice, if your business is in the importation of foreign goods, the US Customs and Border Protection has certain requirements and criteria for the commercial invoice. Another important thing to take note of is the sales tax, which varies from state to state.

Now that you’ve got the basic details covered, the next step would be actually filling out an invoice form.

    How to write an invoice:

  • Indicate the date of the transaction.
  • Write the name of the client or customer.
  • Fill-up the specifics: Description/Particulars, Quantity, Price per Quantity, Total.
  • Compute for the taxes incurred for the transaction.
  • Compute for the Grand Total.
  • Give the invoice to the client.
Corporate Treasurer
Grace Ybanez is a BS Management graduate of Ateneo de Manila University and is currently the Corporate Treasurer of a company in the real estate industry. She has been issuing invoices for more than 5 years.

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