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Why is it Important for Businesses to Receive an Invoice

By Annapoorna

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Updated on: Dec 20th, 2021

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1 min read

Running a successful business is quite challenging. There are a plethora of things to do when running a business. However, doing simple things right could save you from many avoidable hassles. For instance, the simple task of tracking and managing invoices can benefit your business substantially.

An invoice is a receipt that a business has to provide to its clientele for their purchases. An invoice is a bill or a document that records a company’s sales transaction. This bill contains the details such as the selling price, discount, tax, date of sale, and description of the product/service.

Top Reasons to Collect an Invoice From the Seller

The main purpose lies in providing a business and its customers with a record of sale and purchase. However, an invoice also offers several other benefits to the buyer. Let’s look at some of its benefits and understand why it is important for a business to receive an invoice from its vendors.

(1) Maintaining legal records – The most significant benefit of invoices is that they serve as a legal record of the purchase. This makes it convenient for the buyer to find out when the goods were purchased, who sold them, and when. Invoices are the foundation of any organisation’s bookkeeping. For accurate and proper accounting, businesses must record every purchase transaction. With the help of invoices, organisations can prepare accurate profit and loss accounts.

(2) Track payments – Invoices are an invaluable tool for accounting. It helps the buyer keep track of its payments and the amounts the company owes.

(3) Legal protection – Invoices are legal proof of the agreement between the seller and buyer at a set price. This protects the buyer from deceitful lawsuits. Businesses at times have to face different issues from suppliers. Sometimes, such issues could escalate into legal matters. Invoices are proof of a business transaction and contain crucial details like the purchase price, discount availed, purchase date, etc., which could be used for refuting false claims.

(4) Inventory management – Invoices can help organisations in managing their inventory. Managing invoices can help determine goods the organisation needs to order, when to order and how much to order based on its historical data and inventory count.

(5) Tax filing – Maintaining all invoices helps the buying organisation report its expenses and accurate tax reporting and reconciliations. Moreover, a buyer needs to have invoices at hand if tax authorities have concerns with any return filed or to check that the business hasn’t evaded any taxes.

(6) Business analytics – Analysing invoices could help businesses gather information from their buying patterns and identify trends, peak buying times, and more.

A proper invoice isn’t just a receipt. It’s a legal document that safeguards a business against risks and errors. The right invoicing tool can help businesses streamline their invoicing process, enhance their cash flows, and simplify their accounting process.


About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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Quick Summary

Invoices are crucial for tracking payments, legal protection, inventory management, tax filing and business analytics. They serve as legal records and help in maintaining proper accounting. Invoices protect against deceitful lawsuits and help in managing inventory. Analysing invoices can provide insights into business analytics.

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