What is an invoice?
An invoice is a document that charges a customer for goods or services you’ve provided. Also called a bill, an invoice shows all the information about a transaction. This includes:
- the quantity of any goods or services provided
- the rate charged
- the total cost
- a description of the transaction (so your customer knows what they’re paying for)
- when and how the customer should pay
Invoices differ from quotes. A quote provides an estimated cost. An invoice shows the actual time taken and actual cost of a job or transaction. For a customer, the invoice is a 'purchase invoice'. For a supplier, it’s called a 'sales invoice'.
Another function of an invoice is to remind your customer that they haven’t paid you yet. Larger companies may lose track of payments if they deal with many suppliers at once. For this reason, an invoice shows your customer when they should pay you. This is called a payment term. This might be 7 days, 14 days or even a month depending on the agreed terms. It’s often written as 'Net 14 days'.
Invoices should always be accurate, descriptive and timely. This is vital to keeping a steady cash flow for your business.
See related terms
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.