An invoice is one of the most common commercial documents. It won’t be wrong if we say that It is the most common commercial document one comes across in their daily life.  You don’t need to be doing some kind of business to invoice or to get invoiced. Almost all of us, work with invoices during our daily activities. In the following paragraphs, we will see why you should care about invoicing.

Let’s take a look at the basics of an invoice.

An invoice is a document between two parties drawn on account of some goods or services. In common words, an invoice is a bill of goods and/or services that are drawn by the provider of these goods/services and is drawn upon the receiver of the same.

The most common format of the invoice contains the following information

• Name of the vendor/drawer of the invoice
• Name of the customer/drawee of the invoice
• Date
• Description of the products/services
• Quantity of the products/services
• Unit price and the total amount of the invoice
• The amount received/balance

In addition to that, it may contain the terms like payment, duration, warranty, and execution. An invoice becomes valid only after the receiver has accepted it. An invoice can either be cash or credit (deferred payment) according to the mutually decided terms.

An important aspect of the invoice is that it carries a date as chronological evidence of the transaction.

From the above elaboration, it is established that an invoice is an important document. Its importance is same for both commercial and non-commercial entities.

A valid invoice establishes the following points

• A transaction has taken place
• The relevant parties are declared
• Some goods/services are exchanged between the parties
• Some amount has become due through this transaction
• Some terms and conditions are agreed upon for this transaction

Importance of Invoicing:

Invoice is important for both the seller and the buyer in a transaction. Let’s see how;

For the Seller

The seller is the person who draws an invoice as the provider of goods/services against an agreed-upon amount in a particular transaction. The invoice becomes more important if it is a credit invoice (partial or full).

From a seller’s point of view an invoice serves as;

• Chronological evidence of the transaction
• Consent of the receiver to pay the amount drawn upon them according to the accepted terms and conditions.
• Supporting the claim of due payment and the agreed-upon terms in case of a dispute
• Evidence of the income in the tax filing
• Important accounting document to record the income accurately.
• Evidence of business health/financial status while dealing with financial institutions
• An important document to get short-term borrowing against your accounts receivable
  (invoice financing or invoice factoring)
• Evidence to the agreed-upon warranty period
• A bill, delivery challan, warranty card, and receipt for most small businesses and individuals

In short, an invoice is a very vital document from the drawer’s point of view. So it is very important to have proper invoicing of the goods and/or services one provides.

For the Buyer

In the scenario of an invoice, a buyer is a person who has acquired some goods/services and has agreed to pay a certain amount  (in cash or deferred payment) against the same through his acceptance of the invoice drawn upon him. The invoice is equally important for the buyer in the following ways;

• Acts as proof of purchase of the said goods/services
• As an accounting document to record the transaction
• As evidence of the payment/expense for tax filing
• As a supportive document in case of any legal dispute
• For warranty/after-sale services agreed in the transaction

It is very important to record the drawn upon invoices to avoid any duplication, forgery, errors, and omissions. 

By now we’ve been able to see why you should care about invoicing. It is an important instrument required by most of the commercial transactions.

Irrespective of the payment and other terms and conditions, It is important to have a proper invoicing system in place for both the sender and the receiver of invoices. An effective invoice management system can save a lot in terms of money and time for all the relevant parties.

To learn more about an efficient invoice management system, please visit:

invoicemate

InvoiceMate is the world’s first blockchain based invoice management system by MateSol. It is the next-generation invoice management system that extends trust and efficiency at each point of invoice processing. The blockchain and AI-powered system ensure transparency across the whole invoice journey from invoice creation, approval, payment, and financing.