What is an Invoice? Know All About Invoice & How to Use it?


An invoice is a document that is given by the buyer to the seller after making a successful product or service sale. It includes all the costs of products, services, taxes that the buyer needs to pay to the seller. The invoice also serves as a legal document with the name of the customer & seller, description of price & terms of payments.

What is an Invoice?

As discussed, an invoice is a simple document with a list of all products, price descriptions, tax breakups that establishes an obligation on the buyer to pay the seller for the purchased goods or services. An invoice is also referred to as a bill in general terms. A bill or invoice can be easily generated by billing software ready with GST. In the market, there is n number of billing software available for invoice generation. You only need to pick the right one.

What is the Definition of Invoice

As defined by the Oxford English Dictionary, the term invoice is a list of goods sent or services provided, with a statement of the sum due for these; a bill.” Invoice is a crucial document for every business because invoices enable the business to get paid for their varied services. In simple words invoice meaning is a legal document served by the seller to the buyer to get paid for the purchased goods. Invoices serve an important purpose for both the seller & the buyer. An invoice helps expedite the payment process by providing a reminder to the customers. For customers, the invoice acts as a record of an expense than can be later reconciled by the books. The most common way to get started using an invoice is to use invoice generation software. Invoice software had predefined invoice templates that make it easy for you to design beautiful business invoices. Using an invoice template & invoice software saves your time so that you don’t need to repopulate the same information every time you generate an invoice. For your benefit, Marg invoice software provides easy to use invoice templates.

For what purpose Invoice is used?

For business accounting invoice is used as a source of legal document. Invoices are useful for maintaining a record of sales transactions a business makes. Invoices may be used for a variety of purposes, such as:

  • To keep track of sales
  • To forecast future sales using historical data
  • To request timely payment from customers
  • To track inventory, for businesses selling products
  • To record business revenue for tax filings

What are the Functions of Invoice?

Businesses need to give invoices in order to demand payments. An invoice is a legal document abiding the customer to pay the said amount. It has some other functions, such as:

Maintaining Records

The most important function of an invoice is to maintain legal records of each & every transaction. With an invoice, you can easily identify the seller, buyer, date of transaction etc.

Tracking of Payment

An invoice is an important tool for accounting. It helps both the seller and the buyer to keep track of their payments and amounts owed.

Legal Protection

An invoice is a legal document that acts as proof of transaction between the seller & the buyer on a described price. It protects the merchant from fraudulent lawsuits.

Tax Filing

The Invoice also helps in proper tax filing. The company can maintain records of sale invoices & ensure the proper amount of taxes are paid.

Business Analytics

Analyzing invoices can help businesses gather information from their customers’ buying patterns and identify trends, popular products, peak buying times, and more. This helps in effective market forecasting.

What are the different types of an invoices?

There are various types of invoices that you (as a business) can send to your customers:

  1. Standard Invoice
  2. Pro forma Invoice
  3. Commercial Invoice
  4. Credit Invoice
  5. Timesheet Invoice
  6. Retainer Invoices
  7. Recurring Invoice
  8. Expense report
  9. Interim Invoice
  10. Final Invoice
  11. Past due Invoice
  12. E-invoice

What is an Invoice ID?

An invoice number also referred to as invoice ID is a unique number that’s assigned to each invoice. The invoice number is a crucial invoice element because it allows a business to easily identify and refer to individual transactions with clients.

An invoice ID can include both numbers and letters. The Invoice ID system ensures that you don’t assign an invoice number more than once.

What are the elements of an Invoice?

The elements of the invoice may vary from company to company based on the requirements of the business. A good invoice includes the following elements:

  • The word Invoice
  • Invoice Number
  • Date of Transaction
  • Date of Invoice Generation
  • Contact details of Seller
  • Name & Contact of buyer
  • Terms & Conditions
  • List of products & services
  • Cost per unit of product
  • Tax Rates 
  • Total Amount including Tax
  • Discount if any
  • GSTIN of the seller
  • Payment mode of the buyer

How does an Invoice look?

Invoice Templet

How to generate an Invoice?

To generate invoices for your clients, you can create and send an invoice using modern invoice software. You must generate the invoice & send it to the customer as soon as you’ve completed the sale. That way, you can receive payment as quickly as possible. Make sure your invoice includes all the details your clients will need to pay you, including your business name, the invoice due date and the total amount due. Marg Invoice Software lets you create beautiful invoices in a snap of your fingers.

What are the Advantages of Invoice Software?

Apart from generating invoices, there are a few advantages also for using invoice software. Let us discuss the advantages in brief. Invoice software helps to streamline your accounting and financial processes by automating important tasks. By doing so, you can:
  • Reduce expenses by cutting staff costs in the invoicing and billing department
  • No need to follow up and chase for late payments
  • Improve your cash flow with faster payment
  • Improve security by reducing fraud
  • Offering faster error resolution to enhance customer satisfaction

There is no difference between invoice & bill. Bill is the generic term for an invoice that is owed by the customer.

An invoice is not a legal document unless it is generated via invoicing software. Invoices are not a legally enforceable contract between the customer & seller, however, it is vital for accounting practice.

The word invoice is generated in the 16th century from the French word "envoi" which means to "dispatch or send goods", similar to the word "envoy" meaning messenger.

A tax invoice is a sale document issued by the supplier to the customer that is complied with GST norms. The seller based on tax invoice files GST return.

Yes, the invoice & receipt are two different documents. An invoice is issued for the payment, whereas a receipt is given after payment has been received. The invoice acts as a request for payment, and the receipt acts as proof of payment.


Please enter your comment!
Please enter your name here