What Is an Invoice Element?

Invoice elements are individual parts or fields that combine to make a complete invoice. The elements represent essential information about the deal, including a brief description of services rendered, a breakdown of costs, and client details.

Additionally, invoice elements give a professional look to an invoice, making it clear and complete. It eliminates the chances of confusion between buyer and seller. Thus, the buyer makes on-time payments, and the business leverages smooth cash flow.

What Is the Objective of an Invoice and Why It Is Needed?

An invoice is a kind of financial document that sellers share with buyers to request payment. Thus, it enhances the payment process. This document covers information about the seller, the buyer who purchased the product or service, and the total amount that the buyer paid to the seller.

The following points represent the core purpose of the invoice and its requirements:

Request for Payment
A formal invoice urges for payment from the buyer about the purchase.

Record Keeping
Invoices are also useful for maintaining and tracking records. A professional invoice carries all the information in the prescribed format that eases the record tracking process.

Tax Filling
An invoice is also useful for taxation purposes. Business people use invoices for filling out tax forms that help them to avail of applicable tax relaxations.

Legal Process
Invoices also help to simplify the legal process as they are legal compliance documents. Professionals can simplify the legal process through a professional invoice.

What Are the Main Elements of an Invoice?

Now, we uncover the answer to the question of what to include in an invoice. An invoice becomes a complete invoice through certain sections. The main components of an invoice are listed below.

1. Invoice Number and Date

Invoice numbers act as a unique identifier for an invoice and are one of the core elements of an invoice. This unique identifier is specific to each invoice and is valuable for tracking invoices. Similarly, the invoice date refers to the date the invoice was issued.

2. Purchase Order

Including purchase order numbers on sales invoices is good practice. This simplifies transaction tracking because there is a direct link between the invoice and the corresponding purchase order. Buyer and seller match and verify to confirm that the bill contains the exact details of the ordered product or service.

3. Company’s Details

The business owner who issued the invoice should include the company’s details. These details let the customer know who issued the invoice.

Company details typically cover the following details:

• Company name
• Business logo
• Address and contact details
• Email ID
• Tax Identification Number (TIN)

4. Client Details

Client details are essential to include in an invoice. These are details related to the recipient who received the invoice.

The typical details include:

• Customer name
• Customer’s address and contact details
• Email ID

Like other elements, client details should also be highly accurate. Any error in this section not only leads to confusion but also negatively affects the business image.

5. Payment Method

There are different payment methods through which business owners can receive payment. It is good practice to include the payment method in an invoice while creating an invoice. Credit Cards, PayPal, and Bank Transfers are some methods of accepting electronic payments that you can include in an invoice. Utilize invoicing software that offers various payment methods.

6. Currency

Currency is important to include in an invoice when dealing with an international client. The currency should be according to your client’s country. It is good practice to include a currency conversion when the client’s country’s currency is different from the currency of your country. Invoicing platforms like Moon Invoice offer multi-currency support.

7. Line Items Details

This section includes the details of services and products that clients have purchased. Professionals must include proper details of services sold or products sold along with the cost of bifurcation. You need to maintain high transparency here with a clear presentation of data. It is good practice to mention quantity, unit price, applicable tax, and discount. Always add the items in proper list form for better understanding.

8. Signature

The signature makes the invoice an authorized document. This signature can be of the company’s owner or any other authorized person of the accounting department. Many invoicing software like Moon Invoice offer a separate signature-adding feature to add digital signatures while creating professional invoices.

9. Payment Terms

Including payment terms makes a positive impact on timely payments. These terms are useful for enhancing the client’s understanding. Generally, payment terms include the due date, applicable late fee, acceptable payment method, and anything related to company norms. Professionals must use easy language while describing payment terms.

10. Additional Information or Notes

Besides payment terms, if you have anything else to share with the client, you can add those to the footer side of an invoice. It can be either a thank you note or a company website that also contributes to marketing.

What Are the Different Types of Invoices in Business?

There are several kinds of invoices and each one of them has a different purpose.

1. Standard Invoice
   A standard invoice is a formal document that business professionals use to send as a bill to their clients. It acts as a formal payment request and covers all the required information. A standard-looking invoice covers all the essential elements of an invoice – invoice number, invoice date, due date, client details, business details, and description of purchased services or products with cost.
2. Proforma Invoice
   A Proforma invoice is an estimated invoice sent before the completion of the project. Delivery date, estimated cost, and other details are covered by this invoice. The buyer reviews the pro forma invoice and then gives the go-ahead signal to the seller.
3. Commercial Invoice
   Commercial invoices are widely used in international trade to collect payments from foreign clients. Moreover, they are also helpful in determining taxes and calculating tariffs. These invoices are used by professionals to secure customs clearance for goods shipments.
4. Recurring Invoice
   This invoice is sent at regular intervals to collect the amount for the recurring services that clients consume regularly. Professionals send recurring invoices weekly, bi-weekly, or monthly. Utilizing SaaS products and streaming services are typical examples of recurring payments.
5. Interim Invoice
   Professionals use interim invoices for billing long-term projects. This invoice is sent at different stages to receive payment on completion of multiple phases. The amount is calculated based on milestones achieved in the project.
6. Final Invoice
   It is the final bill that professionals send after the project’s completion. This invoice covers a brief description of the purchased product or service and the total payable amount that the client needs to pay. Due dates, payment methods, and payment terms are additional information covered in this invoice.
7. Overdue Invoice
   This invoice is useful when the buyer fails to pay the payment on the mentioned due date. In this case, the buyer becomes a defaulter, and the seller can send reminders about late fees or take legal action.
8. Outstanding Invoice
   Sellers issue an invoice but payment is due from the client side. Such an invoice is known as an outstanding invoice. These kinds of invoices are also known as open invoices and often contribute negatively to a company’s financial base when not paid for a long time.

Top Tips to Follow for Creating Professional Invoices

So far we have uncovered the true answer to what is on an invoice. Additionally, professionals must be aware of a few things to craft the best invoice.

• Always use professional invoice templates to create a professional invoice easily
• Never add useless information
• Keep the information accurate
• Add the due date, invoice number, and invoice date
• Highlight the total amount and the due date
• Represents the offered services or products in breakdown form
• Add the payment terms in an easy and understandable language to avoid confusion
• Keep the overall layout simple
• Always recheck the complete invoice before sending

Final Touch

Elements of an invoice are essential components that make the invoice complete and meaningful. Whenever you create professional invoices, you must focus on the above elements and try to include them in your invoice.

Always remember that an invoice is not just a payment request document that is used only to collect the amount. It serves many purposes, so treat the invoicing process as a valuable operation.

Frequently Asked Questions