Invoice
Learn what an invoice is, what to include on one, and how clear invoicing keeps your cash flow healthy.
Published Monday 31 August 2026
Table of contents
Key takeaways
- An invoice is a document you send to a customer to request payment for goods or services, recording what they owe and when it's due
- A complete invoice shows your business details, a unique invoice number, a description of what you supplied, the amount due, and the payment terms
- Invoices are different from quotes, bills, receipts, and purchase orders, and each one belongs to a different point in a sale
- Clear, prompt invoicing keeps money flowing into your business and gives you accurate records at tax time
What is an invoice?
An invoice is a document you send to a customer to request payment for goods or services you've supplied. It lists what you provided, how much the customer owes, and when payment is due.
For a small business, the invoice is the moment a sale turns into money you can collect. Until it's paid, the amount sits in your money owed by customers, and when VAT applies it also acts as a tax document.
What to include on an invoice
Handy resources
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Your guide to invoicing
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Online invoicing with Xero
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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.
A clear invoice leaves no room for confusion about who owes what. Include these details every time so your customer can pay you without a follow-up question:
- Your business name, logo, and contact details
- A unique invoice number so you can track each sale
- The customer's name and billing address
- An itemised description of the goods or services supplied
- The amount due, including VAT if your business is registered for it
- The payment due date and the methods you accept
- The invoice date and any reference or purchase order number
How payment terms work on an invoice
Payment terms tell your customer when payment is due, how to pay, and what happens once the due date passes. Setting them clearly on every invoice helps you get paid on time and saves you chasing overdue amounts later.
These are the payment terms small businesses set most often:
- Due on receipt: the customer pays as soon as they get the invoice
- Net terms, such as net 15 or net 30: payment is due within a set number of days of the invoice date
- Early payment discount: a small price reduction when the customer pays before the due date
- Late payment fee: an added charge that applies once the due date has passed
Choose terms that match your cash flow needs and your relationship with the customer. Shorter terms bring money in sooner, while longer terms can help you win larger clients who expect them.
Common types of invoices
Not every invoice does the same job. The type you use depends on the sale, your tax registration, and how often you bill the customer:
- Sales invoice: the standard request for payment after you deliver goods or services
- Tax invoice: shows VAT for businesses registered with the Bureau of Internal Revenue
- Recurring invoice: sent automatically on a set schedule for ongoing work or subscriptions
- Credit note: reduces or cancels an amount on an invoice you've already issued
- Proforma invoice: an estimate sent before work begins, not a formal request for payment
- Interim invoice: bills for part of a larger project as you reach agreed milestones
You can set up recurring invoices in accounting software, or send a one-off invoice from your phone with the invoice app for small business.
How invoices differ from similar documents
An invoice is easy to mix up with the other paperwork around a sale. Here's how it compares to the documents you'll handle most often:
- Quote: an estimate of costs you send before the work is agreed, not a request for payment
- Purchase order: a document a buyer sends to confirm what they want to order from you
- Bill: an invoice you receive from a supplier and need to pay, which sits in your accounts payable
- Receipt: proof of payment you issue after the customer has settled the invoice
How invoices support your cash flow
Say you're a graphic designer who's just finished a client project. The invoice you send is what turns that finished work into money in your bank account, so the sooner it goes out, the sooner the payment clock starts.
Accurate invoices also cut down on disputes and delays. Online invoicing tools can send automatic reminders and let customers pay by card straight from the invoice, which keeps your cash coming in on time.
Send professional invoices with Xero
Xero lets you create and send invoices from your desktop or phone, track what customers owe, and set up automatic reminders and online payments. That means less time chasing payments and a clearer view of what customers still owe you. New customers in the Philippines can get one month free to see how invoicing with Xero fits your business.
FAQs on invoices
These quick answers cover the invoicing questions small business owners ask most often.
Is an invoice the same as a receipt?
No. An invoice requests payment before it's made, while a receipt confirms payment after the customer has paid.
When should you send an invoice?
Send it as soon as you've delivered the goods or finished the work, so your payment terms start straight away and you're not left waiting.
What details make an invoice valid for tax in the Philippines?
The Bureau of Internal Revenue sets the details a valid invoice must show, so check the current requirements for your registration type. VAT-registered businesses have extra fields to include.
Can you change an invoice after sending it?
Avoid editing an invoice you've already sent. Issue a credit note or a corrected invoice with a new number instead, so your records stay accurate.
What happens if a customer doesn't pay an invoice?
Send a reminder close to the due date and follow up once it passes. Accounting software can automate these reminders so overdue invoices don't slip through.