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Invoice Purpose and Tips

Updated on :  

08 min read.

Invoice is issued by a business to its customers to record a sale transaction. The customers primarily issue invoices to demand payment against goods sold or services provided.

Purpose of an invoice

An invoice is primary evidence of a sale transaction. Some of the purposes invoices serve are as follows:

  • Accounting and bookkeeping- An invoice serves as a record for bookkeeping and accounting purposes. It helps to keep track of sales made.
  • Financial records- It serves as evidence for tax filings done each year. It’s also useful during audits.
  • Legal protection- An invoice contains complete details of goods sold or services provided and the date of sale. It protects the company from false lawsuits. It also serves as legal proof of goods sold and the amount due from customers.
  • Inventory management- Based on past sales records, you can project how much inventory will be required. You can also study consumer demands. Automated software helps you to track inventory based on sales invoices issued. 
  • Creating brand image- You can customise the sales invoices as per business needs and add a brand logo. This helps in business promotion.

Uses of an invoice

Some of the uses of an invoice from the sellers and customers points of view are mentioned below:

Sellers’ point of view

  • It helps to keep a complete track of sales
  • It helps to forecast future sales and inventory management
  • Request payments from customers
  • It is used as primary evidence for accounting purposes.

Buyers’ points of view

  • It serves as primary evidence to claim input credit of taxes paid on purchases.
  • It helps to track payments due.

Reasons why businesses need an invoice

Invoices are legally enforceable documents between the seller and the buyer. It is proof of goods sold and payments due from the buyer. It helps in inventory management and also manages companies finances. From the buyers’ perspective, invoices are very essential as an input tax credit of taxes paid on purchases can be claimed only if valid invoices are available.

Useful invoice creation tips for small businesses

Some of the tips for good invoicing are stated below:

  • Automate invoicing process – Manual invoicing is tedious, consumes a lot of time and is error-prone. Automation of invoicing processes reduces errors and improves overall efficiency. Even invoicing software can be linked with the other accounting software, which will further help inventory management and generate various financial reports.
  • Generating invoices on time – The issue of an invoice at the earliest is essential to get paid quickly. Specify your payment terms in the invoice. The issue of the invoice immediately ensures that your service is fresh in the customers’ minds, and you are more likely to get paid quickly.
  • Give a unique number to the invoice – Sequential numbering helps to keep a clean bookkeeping record. It also helps to keep track of individual invoices and maintain a proper accounting system. 
  • Communicate with clients – Make sure to be in touch with customers, and a polite conversation helps build strong bonds with clients. This ensures that customers return to you in future. 
  • Follow up –  Don’t hesitate to ask for payment when due. Also, charge interest for late payments.  

How does ClearOne help in raising invoices? 

ClearOne software helps businesses to raise invoices. Some of the features of using ClearOne software for raising invoices are:

  • Builds brand image: It helps to generate professional-looking invoices and customises the invoices as per business needs. This, in turn, creates a good impression on the customers.
  • Quick access: You can create, access, and share business documents from the web and mobile at your convenience. 
  • No setup required: You can just log in and start creating invoices. Thus, it is quick. You can create, style, and share in less than a minute.