An invoice as we know it today is a document containing a record of a transaction between a buyer and a seller. The transaction is about the trade of goods and/or services. The invoice is time-stamped and contains the amount of the transaction. It is drawn by the seller upon the buyer of goods/services. The date of an invoice can be of present or past (credit invoice).
Let’s take a look at some examples;
- A sells goods to B and generates the invoice of the agreed amount and gets paid by B for the same.
- B provides services to A, generates the invoice of the agreed amount, and gets paid by A for the same.
- A sells goods to B and generates the invoice of the agreed amount which is to be paid by A at a future date.
- B provides services to A, generates the invoice of the agreed amount which is to be paid by B at a future date.
Invoice can have multiple names like invoice, bill, debit note, sales invoice, receipt. It can be in a physical form as well as an electronic or digital format. Invoice Is among the most used commercial documents. The earliest traces of paper invoices can be found in the 16th century. The first form of paper invoices was more like a letter containing the transaction details.
Usually, an invoice will carry some typical information. Common components of an invoice can be;
- Name and Contact of the Seller/Service Provider (Usually Printed)
- Name and Contact of the Purchaser/Customer (filled mostly)
- Time (Mostly with digital invoice)
- Invoice Number
- Due Date (In Case of Credit Invoice)
- Item particulars
- Unit of Measurement
- Total Amount Due
- Tax, Freight, Shipment Charges, Discounts, Advance Payment (Whichever applicable)
- Terms and Conditions (If any)
Invoice becomes payable once the drawee receives and accepts one. The date is the most important component of an invoice. The date on the invoice is the timestamp that becomes very vital due to many reasons. i.e.
- It helps maintain the accounts record and documentation.
- For credit invoices, it determines the payment date based on the agreed credit terms.
- For many of the vendors especially at a small scale, the invoice works as a delivery challan as well as warranty slip.
- It works as proof of purchase in case of goods return.
Invoice can be categorized into two major types
- Manual Invoice
- E (Electronic) – Invoice
Let’s take a look at both
A manual invoice is an invoice generated manually. Even if an invoice is prepared on a computer and printed through a printer but it is dealt with through a manual accounting system, it is considered a manual invoice. A Manual invoicing system is inherently error-prone, tedious, slow, and unreliable. A separate article about manual invoice processing challenges can be found here.
e-Invoice, electronic invoice, or digital invoice are the same things. These are the invoices that are generated through a computerized invoice processing system with an effective database. Lately, e-Invoice has evolved a lot. From mere AP (Accounts Payable) automation to an invoice processing system (dealing with both Accounts Payable and Receivable), it has now evolved into an invoice management system (Invoice processing + Invoice financing/factoring).
InvoiceMate is the world’s first blockchain-based invoice management system. InvoiceMate offers a comprehensive invoice management solution that involves Invoice processing and invoice financing utilizing contemporary technologies like blockchain and AI (Artificial Intelligence). InvoiceMate offers an end-to-end solution that covers the whole journey of invoice processing on the blockchain.
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