What is invoicing? How invoices work and get paid fast

Published Saturday 28 February 2026

Table of contents

• What is an invoice?
• What to put on an invoice
• How to create an invoice
• When to send an invoice
• What are the different types of invoice?
• When does an invoice get paid?
• What is invoice accounting?
• What is invoice reconciliation?
• Simplify your invoicing process
• Online invoicing with Xero
• FAQs on invoicing

Key takeaways

• Include all essential details on every invoice: your business name and ABN, customer details, unique invoice number, date, description of goods or services, amounts including GST if applicable, and clear payment terms.
• Send invoices immediately after completing work or delivering goods rather than waiting until month-end to improve cash flow and demonstrate professionalism.
• Set shorter payment terms like seven days instead of 30 days, and use accounting software to automate payment reminders and track which invoices remain outstanding.
• Record invoices as accounts receivable when sent and reconcile payments by matching bank deposits to specific invoices to maintain accurate financial records.

What is an invoice?

An invoice is a formal document requesting payment for goods or services you've provided. It details what you sold, how much your customer owes, and when payment is due.

Invoices serve two essential purposes:

• payment collection: they tell your customer exactly what to pay and by when
• tax records: if you're Goods and Services Tax (GST) registered, invoices provide evidence of revenue earned and tax collected for the Australian Taxation Office (ATO). In fact, if a customer requests a tax invoice for a sale over $82.50, the ATO requires you to provide one within 28 days.

What to put on an invoice

Every invoice needs these details:

• your business information: business name, Australian Business Number (ABN), and contact details
• customer details: their name and address. According to the ATO, tax invoices for sales of $1,000 or more must also show the buyer's identity or ABN
• invoice number: a unique code to distinguish it from other invoices
• date of issue: when you created the invoice
• description of goods or services: what you provided
• amounts: individual item costs, GST (if applicable), and total due. When including GST, the ATO allows for a simple statement that the 'Total price includes GST' if the GST amount is exactly 1/11th of the total price
• payment terms: when payment is due and how to pay

For a step-by-step walkthrough, see our guide on how to make an invoice.

How to create an invoice

Creating an invoice is straightforward once you know what to include. To create an invoice:

1. Choose your method: use accounting software, a template, or create your own document
2. Add your business details: include your business name, ABN, and contact information
3. Enter customer information: add the customer's name and address
4. Assign an invoice number: use a unique number or code for easy tracking
5. List what you provided: describe the goods or services with quantities and prices
6. Calculate the total: add up line items, include GST if applicable, and show the final amount due
7. Set payment terms: specify when payment is due and accepted payment methods
8. Send the invoice: email it directly or use invoicing software to track delivery

Accounting software like Xero can automate most of these steps, letting you create and send invoices in minutes.

When to send an invoice

Send your invoice as soon as the work is complete or the goods are delivered. The sooner you invoice, the sooner you get paid.

Different situations may call for different timing:

• completed work or delivery: invoice immediately upon completion
• large projects: send interim invoices at agreed milestones, for example, monthly
• ongoing services: set up recurring invoices for regular billing
• advance payment: invoice before starting work if you require a deposit

Avoid waiting until the end of the month to send invoices. Prompt invoicing improves cash flow and shows professionalism.

What are the different types of invoice?

Different situations call for different invoice types. The most common types include:

• sales invoice: a standard invoice you send to request payment (when you receive one, it's called a purchase invoice)
• tax invoice: an invoice that includes GST, required for GST-registered businesses
• past due invoice: a resent invoice marked as overdue when you haven't received payment
• interim invoice: a progress invoice for large projects, usually issued monthly for work completed during that period
• final invoice: the last invoice in a series, signalling the work is complete
• recurring invoice: an automated invoice for the same amount each period, ideal for subscriptions or leases
• pro forma invoice: a preliminary quote showing items and prices before you confirm a sale
• commercial invoice: a legally binding invoice with fixed prices, often used for customs calculations on imports
• credit note: a document that reverses or reduces a charge from a previous invoice, used for returns or overcharges

When does an invoice get paid?

Payment terms determine when customers pay an invoice. Common terms include seven, 14, or 30 days from the invoice date. These short-term payment cycles align with Australian accounting standards, which allow for simplified revenue recognition when the payment period is expected to be one year or less. However, customers pay about half of invoices late, which can strain your cash flow.

To get paid faster:

• set shorter payment terms: seven-day terms are becoming more common
• confirm terms upfront: get payment terms signed off before supplying goods or services
• send invoices promptly: invoice as soon as the work is done rather than waiting until month-end
• automate reminders: use online invoicing and eInvoicing through Peppol-compatible software
• track outstanding invoices: follow up overdue accounts immediately

For more tips, see our guide on how to set up an awesome invoicing system.

What is invoice accounting?

Invoice accounting is the process of recording invoices in your business accounts. When you send an invoice, you record it as accounts receivable (money customers owe you). When payment arrives, you record the income and clear the receivable.

A bookkeeper or accountant can help you get this right. If you use accounting software to send invoices, most of these entries happen automatically.

What is invoice reconciliation?

Invoice reconciliation is when you match customer payments to specific invoices. It tells you which invoices customers have paid and which are still outstanding.

To reconcile invoices:

1. check your bank deposits for customer payments
2. match each payment to the correct invoice
3. mark paid invoices as settled
4. follow up on any overdue invoices

Reconciliation can be time-consuming if you do it manually. Accounting software can automate the process by matching payments to invoices for you.

Simplify your invoicing process

Good invoicing practices help you get paid on time and keep your records in order. Focus on the essentials: include all required details, send invoices promptly, set clear payment terms, and follow up on overdue accounts.

The right tools help you work faster. Accounting software can automate creating invoices, send payment reminders, and track what customers have paid, so you can spend less time on admin and more time running your business.

Online invoicing with Xero

Xero's invoicing software helps you get paid faster and spend less time on admin. You can:

• create and send professional invoices in minutes
• set up automatic payment reminders
• track which invoices are paid and which are overdue
• reconcile payments automatically
• access everything from desktop or mobile

Ready to simplify your invoicing? Get one month free or learn more about invoicing with Xero.

FAQs on invoicing

Answers to common invoicing questions.

What's the difference between an invoice and a bill?

An invoice and a bill are the same document viewed from different perspectives. When you send it, it's an invoice; when you receive it, it's a bill.

What's the difference between invoicing and billing?

Invoicing is the process of requesting payment for goods or services provided. Billing is a broader term that covers the entire process of charging customers, which includes invoicing.

Can I send an invoice before completing the work?

Yes. You can send a pro forma invoice as a quote, or invoice for a deposit before starting work. For large projects, you can also send interim invoices for completed stages.

What happens if my invoice doesn't get paid?

Follow up with a reminder as soon as the invoice is overdue. If payment remains outstanding, you may need to send a formal demand letter, negotiate a payment plan, or consider debt collection as a last resort.

Do I need accounting software to send invoices?

You can create invoices without accounting software, but it helps. You can create invoices using templates or documents, but accounting software automates the process, tracks payments, sends reminders, and keeps your records organised.