What is an invoice? Definition, types and key details

Published Tuesday 21 April 2026

Table of contents

• What is an invoice?
• Invoice vs bill vs receipt
• What to put on an invoice
• What are the different types of invoice?
• How do you create an invoice?
• When does an invoice get paid?
• Get your invoicing right from the start
• FAQs on invoicing

Key takeaways

• Include all essential details on every invoice, such as your business and customer information, a unique invoice number, an itemised list of goods or services, GST if you're registered, and clear payment terms, to meet legal requirements and set clear payment expectations.
• Send invoices immediately after completing work and set shorter payment terms of seven days rather than 30, as roughly half of all invoices are paid late, which puts pressure on your cash flow.
• Use accounting software to create, send, and track invoices automatically, which cuts processing costs, reduces errors, and gives you a clear picture of what's still owed compared to doing it manually.
• Follow up on overdue invoices straight away by tracking unpaid accounts and contacting customers as soon as a payment becomes late, rather than waiting for them to pay on their own.

Key takeaways

• Create invoices with essential information including your business details, customer information, itemised services with quantities and rates, GST (if registered), payment terms, and a unique invoice number to ensure legal compliance and clear payment expectations.
• Implement shorter payment terms of seven days instead of 30 days and send invoices immediately upon work completion to improve cash flow, as approximately half of all invoices are paid late.
• Use accounting software to automate invoice creation, tracking, and reconciliation processes, which saves time, reduces errors, and provides better visibility into outstanding payments compared to manual methods.
• Follow up actively on overdue invoices by tracking unpaid accounts and contacting customers immediately when payments become past due, rather than waiting for customers to pay voluntarily.

What is an invoice?

An invoice is a formal document that requests you be paid for goods or services you've provided. It shows exactly what you delivered and how much the customer owes.

Invoices serve two essential purposes:

• Payment request: They tell your customer what to pay and when
• Tax record: They prove your revenue and GST collected for IRD

You must keep copies of all invoices to meet tax deadlines and support your business records. Recent laws require businesses to maintain taxable supply information rather than traditional tax invoices.

Invoice vs bill vs receipt

Understanding the difference between these terms helps new business owners use each document correctly.

• Invoice: A payment request you send before receiving money, detailing what's owed and when payment is due
• Bill: Another word for invoice, often used informally to describe what you owe someone else
• Receipt: Proof of payment you give after you receive money, confirming the transaction is complete
• Purchase order: A buyer's request to purchase goods or services before delivery, not a payment request

The key difference: Invoices and bills request that customers pay before money changes hands. Receipts confirm that customers have paid.

What to put on an invoice

Every invoice needs these essential elements:

• Your business details: Name, contact information, and GST number if registered
• Customer details: Name and contact information
• Invoice number: A unique code that distinguishes this invoice from all others
• Date of issue: When you created the invoice
• Itemised list: Description, quantity, and price for each good or service
• Total amount due: Including GST if applicable
• Payment terms: Due date and accepted payment methods

For more detail, see the guide on how to make an invoice.

What are the different types of invoice?

Invoices come in many varieties, each designed for different business situations. The type you use depends on your payment arrangement and what you're selling.

Here are the most common types:

• Sales invoice: Requests payment from your customer for goods or services delivered
• Tax invoice:Includes GST details for GST-registered businesses, required within 28 days of request for supplies over $200
• Past due invoice: Resends an unpaid invoice with an overdue notice to prompt payment
• Interim invoice: Requests progress payments on large projects; you typically issue these monthly for work completed during that period
• Final invoice: Signals project completion as the last in a series of interim invoices, confirming no further charges will follow
• Recurring invoice: Bills customers the same amount at regular intervals, ideal for subscriptions or leases
• Pro forma invoice:Provides a price quote or estimates shipment value, not a legal record of sale
• Commercial invoice: Creates a legally binding document where prices cannot change until the invoice expires
• Credit memo or credit note: Reverses a charge from a previous invoice when customers return goods or you've overcharged

How do you create an invoice?

Creating an invoice takes just a few minutes when you have the right details ready. Follow these steps to create a professional invoice that gets you paid faster:

1. Gather customer details: Collect their name, contact details, and confirm what you've supplied
2. Add your business details: Include your business name, contact information, GST number, and a unique invoice number
3. List each item or service: Add a description, quantity, rate, and line total for everything you're billing
4. Calculate totals: Show the subtotal, GST amount if applicable, and final amount due
5. Set clear payment terms: Specify the due date and which payment methods you accept
6. Send the invoice promptly: Email or post it as soon as you complete the work

Choose your method: Use accounting software to automate invoices or create invoices manually using templates. Software saves time and reduces errors while keeping better records. Research shows it only costs $10 to process an e-invoice compared to $20 for traditional methods.

When does an invoice get paid?

Invoices typically get paid within 7–30 days, depending on your payment terms. However, about half of all invoices are paid late, often because they contain incorrect information or are sent to the wrong person. This creates cash flow challenges for small businesses.

Use these strategies to get paid faster:

• Set shorter payment terms: Give customers seven days to pay instead of 30, especially as New Zealand considers legislating a maximum payment term of 20 days
• Get clear agreements: Ask customers to sign payment terms before you supply goods or services
• Send invoices immediately: Bill customers as soon as you complete the work
• Use automated systems: Try online invoicing and eInvoicing through accounting software
• Follow up actively: Track unpaid invoices and chase overdue accounts straight away

For more tips, see the guide on how to set up an effective invoicing system.

Get your invoicing right from the start

When you invoice well, you save time, improve cash flow, and keep your business compliant. Use systems that automate routine tasks while giving you clear visibility into what's owed.

Smart invoicing software does the hard work for you. It creates professional invoices, tracks when customers pay, and chases overdue accounts automatically. This frees you to focus on growing your business rather than managing paperwork.

Ready to simplify your invoicing? Get one month free and see how automated invoicing helps you stay on top of cash flow.

FAQs on invoicing

Here are answers to common questions about invoicing for small businesses.

Is an invoice a bill or receipt?

An invoice requests that customers pay; it's not a receipt. You send an invoice before receiving money to tell customers what they owe. A receipt is proof of payment you give after you receive money. The terms "invoice" and "bill" mean the same thing.

How do you make an invoice in NZ?

Include these essential details on every New Zealand invoice:

• Your business name and contact details
• Customer name and contact information
• A unique invoice number
• The date you issued the invoice
• Description, quantity, and price for each item or service
• Subtotal and total amount due
• GST amount (if you're GST-registered)
• Payment terms and due date
• Your accepted payment methods