Chapter 1

What is an invoice?

What exactly is an invoice? What does it do and what are the core building blocks that make one? Let’s take a look.

What is an invoice?

Invoices are a request for payment, so it goes without saying you need to get them right. If you make a mistake, a customer may not be able to pay, there may be delays, or they may pay you the wrong amount.

An invoice lists the goods or services you’ve supplied to your customer, what they owe you in return and when they need to pay you.

In many places, invoices are also tax documents when sales taxes are included, so they need to comply with tax office requirements. You need to keep copies to show what revenue you earned and any tax you’ve collected on the sale.

What to put on an invoice

  • Identify the supplier and the buyer
  • List the goods or services exchanged and the amounts charged
  • Show any taxes that apply
  • Clearly state the total amount owed
  • Say when and how to pay
  • Explain if late payment fees will apply

Types of invoice

Now that you know what a basic invoice is, let’s look at some of the different types out there:

  • Sales invoice: If you send an invoice, then it’s a sales invoice. (If you receive it, it’s a purchase invoice.)
  • Interim invoice: If you require progress payments on a big piece of work, you could send one or more interim invoices.
  • Final invoice: The last in a series of interim invoices, a final invoice signals that the work is complete and that no other invoices will follow.
  • Recurring invoice: If you charge your customer the same amount every time, you can send a recurring invoice. These are great for subscriptions or leases.
  • Pro forma invoice:These are often used to show the price of goods before a sale is final so that a buyer can arrange finance for the purchase, or arrange clearance with customs. They are not a record of a sale.
  • Commercial invoice: These are exchanged between importers and exporters to clarify the responsibilities of each party when dealing across borders. They may also include customs duties and fees, or provide information that helps local customs calculate those fees.
  • Credit memo or credit note: These reverse a charge from a previous invoice. They’re issued when goods are returned or when a customer is overcharged.

What is invoicing?

An invoice is a document that seeks payment. Invoicing is a process that starts before the document is sent and finishes only when payment is received. There may be many steps.

Steps in the invoicing process

A good invoicing process makes everything clear between the customer and supplier. It ensures they both know what the customer is getting, what they’re paying, and when that payment is expected.

The unbreakable rule of invoicing

By far the most important thing about invoicing is that you remember to do it. That may sound ridiculous, but business owners really do forget all the time.

Find a regular time that suits you to do your invoicing. That might be the end of the day or the end of the week. Put that time aside and just get on with it.

If it’s fast and simple to make an invoice, you won’t be so tempted to put it off. Consider using a mobile app so you can invoice on the go from your phone.


Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

How to invoice

Looking for help on making and sending invoices and getting them paid? Check out these tips on the art of invoicing.

  1. What is an invoice?

    What exactly is an invoice? What does it do and what are the core building blocks that make one? Let’s take a look.

  2. How to make an invoice

    You’ve done the work; now it’s time to get paid. Let’s walk through the process of making an invoice.

  3. How to send an invoice

    How you send invoices can have a big impact on how quickly you’re paid. Let’s look at some of the basics.

  4. The invoicing process

    Sending a bill is just one part of the invoicing process. Find out what else it takes to get paid.

  5. Tools and guides for your business

    Running a business takes a lot of hard work. Xero’s got resources and solutions to help.

Download the guide to invoicing

Learn how to create and send invoices that get opened, understood, and paid. Fill out the form to receive our invoicing guide as a PDF.

Start using Xero for free

Access Xero features for 30 days, then decide which plan best suits your business.