What exactly is an invoice and when should I use one?

An invoice is a document that is issued to a customer after a product or service has been provided. It details exactly what has been provided as a service or product, how much is owed and how the payment can be made. 

An invoice reflects on your business and becomes another touchpoint with your customer. Therefore, it’s important that it looks professional and reflects your business positively. 

What’s the difference between an invoice and a receipt?

The significant difference between the two is that an invoice is issued prior to a payment being made, while a receipt is issued after the payment is made. An invoice will track the sale of goods or services, while a receipt acts as documentation for the buyer that the amount requested has been paid.

What should you include on an invoice?

The invoices your business sends should include the following information to help ensure you are paid accurately and on time. 

1. Label the invoice accurately

The word ‘Tax Invoice’ should be included at the top of the document and should be very clear. This ensures your customer won’t confuse your invoice with an estimate, quotation or receipt for money paid.

2. Names and addresses

Make sure  your invoice has your company’s full name and address, along with your client’s full company name and address.

3. Your ABN or ACN

Make sure the invoice accurately lists your ABN or ACN. 

4. Date and reference number

List the date the invoice was created and a reference that can be used to track when payment is made. You can also include your customer’s reference such as a job number or purchase order, so they know exactly what they’re paying for.

5. List the items sold, quantity and price

Detail on the invoice the items or services provided, the cost per item or hour/day aligned with the above entries. Don’t forget to include the total.

6. GST

The GST amount (if any) payable. You can display GST for each item in a separate column, or within the total price. If you choose not to display it separately, use a statement such as ‘Total includes GST’. 

7. The extent to which each item sold includes GST.
You’ll meet this requirement if you either:

• show the GST amount for each item
• clearly state that the total price includes GST.

8. The payment methods you accept

Make it easy for your customers to pay you by showing them how they can pay. If you sign up to Pay Advantage you can offer your customers multiple ways to pay. These include BPAY, credit card and direct debit. 

Can I see some examples of invoices? Check out the ATO’s website for examples of tax invoices.