What is an invoice? Definition, types and when to send

Published Friday 20 March 2026

Table of contents

• What is an invoice?
• What to include on an invoice
• Why you need to send invoices
• Types of invoices
• How to create an invoice
• Simplify invoicing with Xero
• FAQs on invoices

Key takeaways

• Include all essential details on every invoice such as your business information, customer details, unique invoice number, itemized services or products, quantities, rates, taxes, total amount due, and accepted payment methods to ensure professional communication and faster payment processing.
• Send invoices immediately after delivering goods or completing services to maintain healthy cash flow, as the invoice date determines when payment becomes due and affects your tax reporting obligations.
• Use invoices as legal protection and accurate record-keeping tools since they serve as documented proof of transactions, help track money owed, and provide the necessary information for tax compliance and GST/HST reporting.
• Choose the appropriate invoice type for your situation, whether it's a standard invoice for completed work, recurring invoices for ongoing services, proforma invoices for quotes or deposits, or interim invoices for large projects billed in stages.

What is an invoice?

An invoice is a document that requests payment from a customer for goods or services you've provided. It lists what was sold, how much is owed, and when payment is due. Some people call it a bill, though invoices typically include more detailed transaction information.

A standard invoice includes:

• Quantity: the number of goods sold or hours of service provided
• Rate: the price per unit or hourly charge
• Total cost: the full amount owed, including any taxes
• Description: a clear explanation of what the customer is paying for
• Payment terms: when and how the customer should pay

Invoices differ from quotes. A quote provides an estimated cost before work begins. An invoice shows the actual cost after you've delivered goods or completed a service.

The same invoice has different names depending on who's using it. For you as the seller, it's a sales invoice. For your customer, it's a purchase invoice.

Invoices also serve as payment reminders. Larger companies dealing with many suppliers can lose track of what they owe. Your invoice tells them exactly when to pay you.

Payment terms specify your payment deadline. Common terms include 7 days, 14 days, or 30 days after the invoice date. You'll often see this written as "Net 14" or "Net 30."

Accurate, clear, and timely invoices help you get paid faster. The sooner you send an invoice, the sooner you can expect payment, which keeps your cash flow healthy.

What to include on an invoice

Every invoice needs certain essential details to be complete and professional. For example, customers who are GST/HST registrants need specific information to support their claims for input tax credits. Missing information can delay payment or create confusion for your customer.

Include these elements on every invoice:

• Your business details: business name, address, phone number, and email
• Customer details: their name, company name (if applicable), and address
• Invoice number: a unique identifier for tracking and record-keeping
• Invoice date: when you issued the invoice
• Payment due date: when you expect payment
• Itemized list: each product or service with a clear description
• Quantities and rates: how many units and the price per unit
• Subtotal and taxes: the amount before and after applicable taxes
• Total amount due: the final amount your customer owes
• Payment methods: how customers can pay (bank transfer, credit card, cheque)

Clear, detailed invoices reduce back-and-forth questions and help you get paid on time.

Why you need to send invoices

Invoices do more than request payment. They protect your business, help you track money owed, and keep your financial records organized.

Professional payment requests

An invoice formalizes your transaction and sets clear expectations. It tells your customer exactly what they're paying for, how much they owe, and when payment is due.

Legal protection

Invoices serve as legal records of your business transactions. In Canada, businesses must include enough information for customers to know they have satisfied their tax liability. If a dispute arises about what was agreed, your invoice provides documented proof of the goods or services provided and the amount owed.

Payment tracking and cash flow

Invoices help you see who owes you money and when payments are due. Seeing this clearly is essential for managing your cash flow and following up on late payments before they become a problem.

Accurate record-keeping

At tax time, your invoices document what you need. The Canada Revenue Agency notes that the invoice date will determine when you need to report and remit GST/HST, creating a clear trail of your business income for bookkeeping and tax compliance.

Types of invoices

Different situations call for different invoice types.

Standard invoice

The most common type, sent after you deliver goods or complete a service. It includes all the essential details: what was provided, the amount owed, and payment terms.

Recurring invoice

You use this for ongoing services you bill at regular intervals, like monthly retainers or subscriptions. Accounting software can automate these, creating them for you each time.

Proforma invoice

You send this preliminary invoice before work begins or before you ship goods. You commonly use it for quotes, customs purposes, or when you require a deposit. Learn more about proforma invoices.

Credit invoice

Some call this a credit note. It adjusts or cancels a previous invoice. You'd use it for refunds, returns, or to correct billing errors.

Interim invoice

You use this for large projects you bill in stages. Instead of waiting until the project is complete, you invoice for work completed at agreed milestones.

The right invoice type depends on your business model and what works best for your customers.

How to create an invoice

Creating a professional invoice takes just a few minutes when you know what to include.

1. Choose your method: use a template, spreadsheet, or accounting software.
2. Add your business name, logo, and contact details.
3. Include your customer's name and contact information.
4. Assign a unique invoice number for tracking.
5. Add the invoice date and payment due date.
6. List each product or service with a clear description.
7. Include quantities, rates, and line totals.
8. Calculate the subtotal, add any applicable taxes, and show the total due.
9. Specify your payment terms and accepted payment methods.
10. Review for accuracy before sending.

Accounting software like Xero can automate much of this process. You can create branded invoice templates, set up recurring invoices, and send them directly from your phone or computer.

Simplify invoicing with Xero

Managing invoices can be quick and simple. With cloud-based accounting software, you can create professional invoices in minutes, track payments automatically, and send reminders when payments are due.

Streamline your invoicing today. Get one month free and see how Xero works for your business.

For more information, read the Xero guide to invoicing.

FAQs on invoices

Common questions about invoices and invoicing.

Is an invoice a receipt?

An invoice and a receipt are different documents. An invoice requests payment before you've been paid, showing what's owed and when it's due. A receipt confirms that payment has been received.

Is an invoice the same as a bill?

They're very similar. Both request payment for goods or services. The main difference is usage: businesses typically send invoices (especially for business-to-business transactions), while bills are more common for immediate consumer purchases. Invoices usually include more detailed information like payment terms and invoice numbers.

Does an invoice mean I owe money?

Yes, if you receive an invoice, it means you owe money to the sender for goods or services they've provided. The invoice shows how much you owe and when payment is due.

When should I send an invoice?

Send invoices promptly after delivering goods or completing a service. This is critical because, for tax purposes, payment is deemed to become due on the date the invoice is issued. For products, invoice when you ship. For services, invoice immediately after the work is done. Some businesses invoice in advance or on a recurring schedule. Whatever timing you choose, being consistent helps maintain healthy cash flow.