What is an invoice?

Cover fiche pratique

Maybe you have worked for a client and they requested an invoice. You may only be familiar with receipts that come after you must have provided the service. While invoices work like a receipt, they are a little bit different concerning some components. In this article, you will learn about the differences between receipts and invoices and when to use them.

Logo HelloPrimo
Answer Adeosun
Nov 7, 22 · min read
Too long to read?
Become an entrepreneur with HelloPrimo.

A team of experts will get you the answers you need to get started with your business.

What is an invoice?

An invoice is a piece of document that itemizes goods and services provided to a client either on credit or they have been paid for. When you present an invoice, you can offer the client discounts and it can include VAT. If the goods and services were provided on credit, the invoice will be the date by which the payment must be made and the payment method.

Usually, the main aim of using an invoice is to intimate the client of the amount due to be paid to you and when you are expecting to get paid. 

As a matter of fact, you can view an invoice like a bill made out to inform a client of the amount they are owing you or your business.

Components of an invoice

Some components must compulsorily be contained in an invoice to render it valid.

1.  Invoice ID – this indicates the reference number that uniquely identifies each invoice made out. This ID can be used to reference a particular invoice if there have been many invoices made out to the same client.

2.  The name and address of the service provider – this is so that you can be contacted if the client feels there is a billing error. It can be the name of the individual freelancer, firm, or company.

3.  The name and address of the client – this is provided because it shows the client details to whom the billing is made out. It can be the name of an individual, a firm, or a company.

4.  The date the invoice was issued

5.  The date by which the invoice must be paid

6.  The list of items – this could be goods or services provided.

7.  The units of each item – for example, if you were to supply 20 pens, then you must indicate that on the invoice.

8.  Unit price – you need to indicate the price of each unit of goods or services provided.

9.  Item price – this is the total price of all the units for each item. Say a pen costs £1, then the item price for 20 pens will be £20.

10.  Total cost – this indicates the total payment you are expecting or have gotten from the client.

11.  Discount offers – if you want to offer the client a time-bound discount, you must include it on the invoice

12.  Value Added Tax (VAT) – you can offer to deduct the VAT from the total cost of the goods or services provided to the client.

13.  Any other provisions – if some other provisions and exceptions must be met by you or the client, they must be expressly stated on the invoice. For example, if the goods sold are not returnable or payments made are non-refundable, your invoice must state that clearly.

Types of invoices

There are about 15 types of invoices and they are based on the type of service you are rendering, the purpose of issuing the invoice, the time, etc. Will give a brief description of each of these types to give you an idea of when and how to use an invoice.

1.  Proforma invoice – this is made out as an estimate of the goods and services to be provided which the client can negotiate.

2.  Sales Invoice – this is the regular invoice made out to a client to request payments for goods or services rendered.

3.  Overdue invoice – you can use this to request long overdue payment. Usually, you reference the sale invoice that was earlier issued in this.

4.  Consolidated invoice – this can be issued if there have been some pending invoices to be paid by the same client so that all payments to be made can be on one document.

5.  Retainer invoice – is made out to a client to collect retainer fees before you start to render a service.

6.  Final invoice – this comes at the end of a project or contract to list the remaining payment that should be made by the client.

7.  Interim invoice – this can be used to collect partial payments while carrying out a project so that the project is partially funded in the interim.

8.  Timesheets – these are used by companies to log the number of hours their employees work so that they are paid based on those hours. The time sheet will contain the number of hours worked and the details of the services provided in that period.

9.  Credit memo – this is used to inform the buyer that the seller is owing them an amount and the mode of repayment.

10.  Debit memo – this can be used to make an additional request for payments if there was a price increase.

11.  Mixed invoice – this contains the items in both credit and debit memos indicating the total final payment expected from the client.

12.  Recurring invoice – usually issued on a recurrent basis for recurrent goods or services rendered either weekly, biweekly, monthly, biennially, quarterly, or yearly.

13.  Commercial invoice – this is issued for international goods and services provided for safekeeping and legal purposes.

14.  Digital invoices – are generated by software when the seller has imputed the necessary information as required.

15.  E-invoices – this comes autogenerated without any input from either the seller or buyer but contains pieces of information that could be understood by both parties.

Common mistakes on invoices

Some common errors that lead to discrepancies and disagreements on invoices include

1.  Error in the invoice ID – the invoice ID should be in a particular order such that no two invoices can bear the same ID otherwise it leads to confusion

2.  Mistake in VAT assigned – if you over- or underbill VAT, it could become an accounting issue.

3.  Description of service not detailed enough – if the service is not explicit enough, it can lead to disagreement between the seller and buyer.

4.  A mistake on the buyer’s information – making a mistake on the name or contact information of the client can lead to defaulted payments.

5.  Error in dates – if you made an error in the invoice issue date or date of expected payment, it can lead to an accounting error or even misinform the client of when the payment is due.

Usefulness of invoices

·   For keeping records of transactions made so that proper tax filings can be done.

·   For tracking sales.

·   To ensure payments are received on time from clients.

·   They can help to forecast sales while planning for a new business year.

When to use an invoice instead of a receipt

An invoice is a form of receipt with the exception that is most often issued before the payment has been made. So, except if a client specifically requests an invoice, if the payment is yet to be made, a receipt can be issued instead.


Understanding the intricacies of creating and issuing an invoice important for your business. You should also note that errors on the invoice can lead to disagreements. Therefore, you must pay attention to all the details on the invoice before you send it to the client to avoid unnecessary stories down the line.

How to create an invoice?

You have to
HowTo step image

1. Brand the invoice

Include a header with your name or business name. You can include a watermark to make it more unique

1 sur 4
Become an entrepreneur with HelloPrimo.

A team of experts will get you the answers you need to get started with your business.

Frequently asked question

What are the different types of invoices?
How is an invoice different from a receipt?

Topics in

Define your needs and find the right solution for your project
Get Started
logo HelloPrimo newsletter
No noise. Just signal.
Get the latest news in business dropped to your email once a month.