What is an invoice?
An invoice asks your customer to pay for goods or services. Learn what to include and how it works.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- An invoice is the document a seller sends to request payment for goods or services already supplied
- Accurate invoices with a unique number, itemised charges and a due date help you keep cash flow steady
- Payment terms such as ‘Net 14 days’ tell your customer exactly when the money is due
- In Indonesia, only businesses registered for value added tax issue a tax invoice (faktur pajak), and invoices belong in your records for 10 years
What is an invoice?
An invoice is a document you send a customer to request payment for goods or services you’ve supplied. It records the details of the sale and tells the customer when and how to pay.
The same document goes by different names depending on which side of the sale you’re on. As the seller, you issue a sales invoice; your customer records it as a purchase invoice, and many buyers simply call it a bill.
Say you run a catering business in Surabaya and supply lunch for a client’s 40-person workshop. Once the event wraps up, you send an invoice showing the meals, the price per head, the total and the date you expect payment.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.
What an invoice is used for
An invoice asks for payment and also creates a written record that both businesses rely on long after the sale. Here’s how invoices help you day to day.
- Request payment in writing, with a set amount and deadline
- Prove a sale took place if a customer queries a charge
- Support your tax returns and accounting records
- Track the money customers owe you, known as accounts receivable
Add up your unpaid invoices and you’ll see how much cash is still on its way in. That total helps you plan wages and stock orders with confidence.
What to include on an invoice
A complete invoice gives your customer everything they need to approve and pay it without follow-up questions. Most invoices share these core details.
- The word ‘Invoice’ at the top of the page
- A unique invoice number, usually in sequence
- The issue date and the payment due date
- Your business name, address and contact details
- Your customer’s name and address
- A description of each product or service, with quantity and rate
- The subtotal, any tax and the total amount due
- Accepted payment methods and your payment terms
Accurate, descriptive invoices leave your customer little to query, which keeps cash arriving on schedule. If you’re starting out, this step-by-step guide walks you through how to make an invoice using a simple layout.
Invoices vs bills, receipts and quotes
These four documents often get mixed up because they describe the same sale. Each one appears at a different point in the transaction.
- A quote comes first and gives an estimated price the customer can accept or decline
- An invoice follows the work and lists the work actually supplied and its final cost
- A bill is the buyer’s name for an invoice they’ve received and need to pay
- A receipt comes last and confirms the customer has paid
Picture a builder who quotes Rp15 million for a kitchen renovation. The client then asks for an extra window, so the final invoice comes to Rp16 million to reflect the actual work.
Common types of invoices
The invoice you use depends on the kind of work you do and how your customers pay. These are the types small businesses use most often.
- A standard invoice requests payment for a one-off sale
- A pro forma invoice sets out expected costs before delivery so the buyer can plan ahead
- A recurring invoice charges the same amount on a regular schedule, such as a monthly retainer
- An interim invoice bills part of a long project at agreed milestones
- A credit note reduces or cancels an amount you’ve already invoiced
- A commercial invoice travels with international shipments and lists the goods for customs
- A tax invoice records the tax charged on a sale and meets local tax rules
Tax invoices (faktur pajak) in Indonesia
In Indonesia, the tax invoice is called a faktur pajak. It records the value added tax (VAT, or PPN in Indonesia) charged on a sale, and only VAT-registered businesses issue one.
The Directorate General of Taxes (DJP) sets a turnover threshold for VAT registration of Rp4.8 billion in a financial year. Businesses at or above it must become a VAT-registered business (Pengusaha Kena Pajak, or PKP), while smaller businesses can opt in.
Under DJP guidance on the new faktur pajak rules, a PKP must create one for every delivery of taxable goods or services, including exports. The deadline is no later than delivery or payment, and PKPs create these invoices electronically, mainly through Coretax DJP.
The statutory PPN rate is 12%, but most non-luxury goods and services are taxed at an effective 11%. That’s because the tax base is 11/12 of the price. Luxury goods are taxed at the full 12%, as the DJP explanation of PPN rates sets out.
A faktur pajak needs more detail than an everyday commercial invoice. Under Article 33 of DJP regulation PER-11/PJ/2025, it must show at least the following.
- The seller’s name, address and taxpayer identification number (NPWP)
- The buyer’s name and address, plus an ID number such as an NPWP, a population ID number (NIK) for resident individuals, or a passport number for foreign individuals
- A description of the goods or services, with price and any discount
- The PPN charged, plus luxury goods sales tax (PPnBM) if it applies
- A code, serial number and issue date
- The name and signature of the authorised person
Indonesian tax law also sets how long you hold on to this paperwork. As DDTC News explains, books, records and supporting documents must be kept in Indonesia for 10 years. The rule comes from Article 28(11) of the General Provisions and Tax Procedures Law (KUP Law).
Payment terms on an invoice
Payment terms tell your customer how long they have to pay. Printing them on every invoice removes guesswork on both sides of the sale.
- ‘Due on receipt’ asks for payment as soon as the customer gets the invoice
- ‘Net 14 days’ gives the customer 14 days from the invoice date to pay
- ‘Net 30 days’ gives the customer 30 days from the invoice date to pay
- A fixed due date names the exact day payment must arrive
Shorter windows, such as seven or 14 days, bring cash in sooner, while a month gives trusted customers more breathing room. Pick payment terms that match your cash flow needs, then apply them consistently. An unpaid invoice also works as a reminder that money is still owed.
How to send an invoice and keep records
A simple routine makes invoicing quicker and keeps your records ready for tax time. Follow these steps for each sale.
- Confirm the job details, including quantities and any changes agreed since the quote
- Create the invoice with the next number in your sequence and every required detail
- Issue a faktur pajak as well if you’re a PKP making a taxable sale
- Send the invoice by email or with an online payment link
- Watch the due date and follow up on overdue invoices with a friendly reminder and a copy of the original
- Record the payment when it arrives and mark the invoice as paid
- Store every invoice and faktur pajak for the full retention period in a system you can search
Create and send invoices with Xero
Accurate, timely invoices keep money moving into your business and make tax time simpler. With online invoicing in Xero, you can send customised invoices in a few clicks and set automatic payment reminders.
Your customers get more ways to pay, and you can see who has paid at a glance. Choose the plan that suits your business and get one month free while you send your first invoices.
FAQs on invoices
Here are quick answers to other questions small business owners often ask about invoices.
What is an invoice in simple words?
It’s a written note that says what you supplied and what the customer owes you. Think of it as the business version of the bill a waiter brings to your table.
Does an invoice mean you’ve paid?
An invoice shows that money is owed until the seller marks it as paid. Once payment clears, a receipt or a paid invoice becomes your proof of payment.
When should you send an invoice?
Send it as soon as you’ve delivered the goods or finished the work. For longer projects, agree upfront to invoice at milestones or take a deposit before you start.
Can you change an invoice after sending it?
Keep the original, issue a credit note to reduce or cancel it, then send a new invoice with the right amount. This keeps your numbering sequence intact and gives your records a clear history.
Can you add a late fee to an invoice?
You can, as long as your customer agreed to it before the work began. Include the fee and when it applies in your payment terms so it shows on every invoice.