What is an invoice?

What an invoice is, and when you send one

An invoice is a document in which a seller asks a customer to pay for goods or services they've supplied, and which both sides then keep as the record of that sale. You write it and send it, and your customer checks it against what they ordered, pays it and files it. Because the same document ends up in two sets of books, it has to be clear enough that someone who wasn't involved could read it a year later and see what was sold, for how much and when.

Most invoices go from one business to another, because businesses need them for their accounts: a freelance copywriter invoices a marketing agency, and a builder invoices a property company. Private customers get them too, from a plumber, a tutor or a wedding photographer, while a shop selling over the counter usually just hands over a receipt.

You normally send an invoice once you've done the work or delivered the goods, because that's when you've earned the money and the client can see what they're paying for. For longer jobs you can agree other dates in advance, such as a monthly invoice for ongoing work, one at each stage of a project, or a deposit before you start and the rest at the end. Each of those is an ordinary invoice with its own number, and it should say which month, stage or deposit it covers, so the final invoice can show what has already been paid.

What an invoice is used for: payment, records and tax

An invoice does three jobs at once. The first is getting you paid: it tells your client what they owe, what for, by when and how, which removes the usual reasons a payment stalls, such as an accounts team that can't match the bill to an order, or a missing bank detail. Many business clients can't pay at all until an invoice arrives, because that's where their payment process starts, so send yours promptly.

The second job is the record. You keep a copy as evidence of your income and your client keeps theirs as evidence of an expense, so if either of you is later asked where a figure came from, the invoice is the answer. That's why you keep invoices for years, and why you shouldn't quietly change one once your client has it.

The third job is tax, which is why governments set rules for what an invoice must show. In countries with VAT (value added tax, charged on most sales), a VAT-registered business adds VAT to its prices and pays it to the tax office, while a business customer can deduct the VAT it paid on its own purchases. The invoice is the evidence for that deduction, so a business client who receives one with a detail missing may not be able to reclaim the VAT and will ask you to correct it.

In the UK the standard rate is 20%, and only a business registered for VAT may charge it, showing its VAT registration number (for example GB123456789) on its invoices; a business that isn't registered charges no VAT. In Germany the tax is called Umsatzsteuer (USt) and the standard rate is 19%. A German invoice shows either the seller's Steuernummer, the tax number from its local tax office, or its VAT ID, the Umsatzsteuer-Identifikationsnummer (USt-IdNr.), which it needs for sales to businesses elsewhere in the EU. Small businesses using the Kleinunternehmerregelung (§ 19 UStG) charge no VAT and say so on the invoice instead.

The US works differently. The tax that may appear on an American invoice is sales tax, and whether a sale is taxed, and at what rate, depends on the state. Getting it right still matters. As a rule, sales tax you charge by mistake, or charge too much of, is not yours to keep: in California it must be returned to the customer or else paid to the state, and in Texas the state will not refund a seller until the seller has refunded or credited the customer. The details differ by state, so check with each state where you collect sales tax. In practice, that means adding sales tax only to the lines that are taxable where you sell, and leaving it off everything else.

What goes on an invoice, and why

Invoices look much the same everywhere, because they answer the same questions: who sold what to whom, when, for how much, and how to pay. You can use this list as a checklist of the parts almost every invoice has, though your country's tax rules may add more.

• The word "Invoice", a unique invoice number and the invoice date
• Your name or business name, address and contact details, plus any VAT or company number you have
• Your customer's full name and address
• The date you delivered the goods or did the work
• A description of each item, with its quantity, unit price and amount
• Any tax, shown separately with its rate, and the total amount due
• When the invoice is due and how to pay it, for example your bank details

The names and addresses tell each side's books exactly who the other party was, so use your client's full business name rather than the name of the person you dealt with. The description and the dates prove what happened: "services" means nothing a year later, while "Logo design, three concepts and two rounds of changes, October 2026" says exactly what was bought. The date of the work can differ from the invoice date, and tax rules usually care about when the work was done. Amounts go line by line, quantity times unit price, with tax on its own line, so your client can check every sum.

The invoice number is the part people underestimate. It lets you and your client refer to one invoice without confusion, and because the numbers count up, anyone checking your books can see that none are missing. In the UK this is part of the VAT rules. Every invoice needs a unique identification number, and a VAT invoice needs a sequential number, from one or more series, that uniquely identifies it. The US has a lighter touch. No federal law prescribes invoice numbering; giving each invoice a unique number is customary, and invoices to federal agencies must carry an invoice number, account number or other identifying number agreed in the contract. Either way, pick one series and keep to it; the maker counts up for you and doesn't reuse the number of a deleted invoice.

Last come the payment terms, which turn the invoice into a clear request: a due date, such as 30 days after the invoice date, and the details your client needs to pay. What the law requires on top of all this differs between countries and tax schemes, so before your first VAT invoice or your first client abroad, read the guides to invoicing in the UK, invoicing in Germany or invoicing as a US contractor.

Invoice vs quote, receipt, purchase order, bill and statement

Several business documents look like invoices, and mixing them up causes confusion over whether money is actually owed. The quickest way to tell them apart is to ask who writes each one, when, and what it says.

A quote, also called an estimate, is an offer rather than a request for payment, so nobody owes anything because of it; once your client accepts it, its prices become the basis of your invoice. In the maker, "Create invoice from this" on an accepted quote makes the invoice for you, so the lines, client and prices carry over and it gets the next invoice number. A purchase order runs the other way: it's the buyer's own document saying what they want to buy, and if a client sends you one, put its number on your invoice so their accounts team can match the two.

A receipt comes last and confirms that you've been paid, which is why an invoice on its own never proves payment; the guide to invoices and receipts explains when a client needs which. "Bill" is mostly another word for an invoice, and many accounting programs use it for the invoices a business receives from its suppliers. A statement asks for nothing new: it lists the invoices and payments over a period, so a client with several open invoices can see what they still owe.

Two more documents are worth knowing about as ideas. A proforma invoice looks like an invoice but is only a preview of one, sent before the sale so the client can approve the amount or pay in advance, and the real invoice still follows. A credit note does the opposite, reducing or cancelling an invoice that has already been sent, for example after a return. The maker makes proforma invoices as well as invoices and quotes, and receipts once a client has paid; the guide to proforma invoices explains when one is the right document.

A short example invoice

Say you're a freelance web designer in Leeds, not registered for VAT, and you've just spent three days building a website for a bakery at an agreed £400.00 a day. Your invoice starts with the word Invoice, the number INV-0007 and the date, 6 November 2026, followed by your name, address and email and then the bakery's full company name and address. The single line reads "Website design and build, 3–5 November 2026: 3 days × £400.00 = £1,200.00", and as there is no VAT, the total due is also £1,200.00. Under it you write "Payment due within 30 days by bank transfer" with your bank details, and at the bottom the note "Not registered for VAT."

If you were registered for VAT, the invoice would also show your VAT registration number, VAT at 20% on the line, the VAT amount and a total including VAT, and a VAT-registered bakery could reclaim that VAT with your invoice. A designer in Germany would write almost the same invoice in euros, and one in the US would write it in dollars on US Letter paper, adding sales tax only if their state taxes that kind of work.

To make an invoice like this, open the maker from the button on this page, enter your business details once, add the client and the line, and download the PDF or print it, all without an account. A free account also saves your invoices on all your devices and lets you send them by email or as a link, while the maker works out the line totals and the VAT or sales tax for you, which leaves you free to get the description and the payment terms right.