In plain English
Sending an invoice creates a receivable. Include dates, terms, itemized charges and tax.
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Number invoices in sequence.
Why it matters
An invoice is often the only written record of what a customer agreed to pay and when. If it is vague, missing a date or sent late, collections slow down and disputes become your word against theirs. Slow invoicing is one of the most common reasons a profitable small business runs short of cash.
Invoices also drive your receivables report. If some sales are billed outside the bookkeeping system, the report will not show who owes you, and nobody will chase those amounts.
Worked example
A $500 invoice with net 30 terms is due 30 days after the date.
How to handle it
- Create each invoice inside your bookkeeping software so it posts to accounts receivable automatically.
- Use a consistent numbering sequence and never reuse a number, even for a cancelled invoice.
- State the service date, payment terms, accepted payment methods and any sales tax as a separate line.
- When payment arrives, apply it to the specific invoice rather than recording it as a new sale.
- Review the open invoice list weekly and follow up on anything past its due date.
Common mistakes
- Recording a customer payment as fresh income instead of applying it to the invoice, which counts the same sale twice.
- Deleting an invoice the customer disputes instead of issuing a credit memo, which erases the audit trail.
- Waiting until month end to bill finished work, which pushes back every due date and stretches cash.
Not the same as: Credit memo
An invoice increases what a customer owes you. A credit memo reduces it, usually for a return, an overcharge or an agreed discount, and it keeps the original invoice intact. See Credit memo.
Go deeper
- Set Up Invoicing and Online Payments in QuickBooks: Customize invoices, terms, taxes and online payment options in QuickBooks Online so customers pay faster and you reconcile easily.
Try it
Related terms
- Journal entry: A manual accounting entry with equal debits and credits, used for items software does not create.
- Liability: An amount the business owes to others.
- Inventory: Goods held for sale or materials used to make them, recorded as an asset until sold.
Common questions
What is an invoice?
A bill sent to a customer for goods or services, with the amount due and terms.
Can you give an example of invoice?
A $500 invoice with net 30 terms is due 30 days after the date.
Is an estimate or quote the same as an invoice?
No. An estimate is a proposal and creates no amount owed in your books. Once the customer accepts and the work is done, you convert it to an invoice, which creates the receivable.
Should I invoice a customer who has already paid up front?
Yes, many businesses still issue an invoice or sales receipt so the sale is recorded and the customer has a document. If the payment came before the work, your accountant may want it held as a deposit until the work is delivered.
General information, not tax, legal or accounting advice. Confirm rules with the IRS, the NJ Division of Taxation or a licensed professional.
