What Information Needs to be on an Invoice?
If you’ve started a business and sold products or services to customers, you may realize that you’ll need to issue them an invoice at some point. But how do you write invoices and what information should be included on them?
Invoices are an official request for payment issued from a business to its customers. Since they are legal documents, invoices require specific details in order to be considered valid under US law. This article explores what an invoice is, what information needs to be on them, and how you can easily start creating professional, compliant invoices with invoicing software.
Before we dive into what needs to be included on an invoice, we’ll start by explaining what an invoice actually is:
An invoice is a document sent from a seller to a buyer when it’s time for the buyer to pay for the provided goods or services. In the US, businesses are required to keep a record of all of their sales and income, which can come in a variety of forms including invoices and receipts. Therefore, an invoice is important for a business owner to keep a detailed record of their sales for accounting purposes, but also for the buyer in the case of any disputes.
An invoice should include all of the details of the sale, including the products or services being sold and the total amount due.
Compared to other countries, the US is more relaxed with regulations on invoicing. An invoice is not mandatory for business-to-consumer (B2C) sales, so a payment receipt may be the only document you need to issue. However, if a customer (consumer) asks you to send them an invoice, you should issue one.
Invoices may be required for certain business-to-business (B2B) sales, and if your business imports or exports goods. You should check with your state government for your local invoicing requirements.
Additionally, invoices are highly recommended if you sell your products online or to foreign customers in another location.
If you’re selling to another business, or your customer requests an invoice be sent, you’ll need to include specific information in order for it to be valid, including:
The title “Invoice” clearly displayed
You and your customers’ full name and address
The invoice date
The payment due date
A unique invoice number
A description of the products or services sold
The quantity and price of each product/service
The date the products/services were delivered
The total amount due
If you import/export goods, you might also need to include the port of entry and country of origin. Additionally, you may need to include sales tax on your invoices. Each state and county has different tax rates and rules, so be sure to check the local requirements before sending an invoice.
Below, you'll find an invoice example created with SumUp Invoices. The software ensures that all of the legally required information is input for you.
Invoice numbers are unique identification numbers that you’ll need to assign to each invoice you issue. In the US, there are no specific requirements for how you format your invoice numbers. However for accounting purposes, the numbers should be sequential and not include any gaps. Some common invoice number formats are:
2021-001: This reflects the first invoice issued in the year 2021. The next invoice should include the number “2021-002”.
INV/2021/01/017: This reflects the document type (invoice), the year, the month, and the number of the invoice within that month. This format is beneficial if you create several invoices every month, but also issue different types of documents such as quotes or delivery notes.
Ultimately, it’s up to you to determine an invoice number format that works best for your business. You should also speak to your accountant to see if they have any input.
Each invoice you issue should include a due date which tells the customer that they need to pay the invoice by the date you specified. Although adding additional payment terms to your invoices is not essential, it helps your customer understand when the payment is due and how they should pay the balance. This could also help you get paid even quicker.
It’s up to your business to determine how you’d like to be paid, the payment due date, and if you’ll charge late fees for overdue payments. In the US, the amount you can charge as late fees is set at a state level, so you’ll need to check that you are not exceeding the maximum amount under your state regulations.
Payment terms can simply be input as: “Pay the balance within 30 days of the invoice date to the following bank account”. Alternatively, there’s codes you can input as payment terms to specify a due date. These should be reserved for business-to-business (B2B) invoices as consumers may not understand what the codes mean.
Some examples of payment terms codes are:
Net 30: Payment within 30 days of the invoice date
EOM: Payment by the end of the calendar month
17 MFI: 17th of the month following the invoice date
COD: Cash on delivery
There’s many different codes you can use as payment terms. However to avoid any confusion with your customers, it might be better to clearly write the date the payment is due and how to make the payment.
While some businesses prefer to write invoices by hand and send them in the mail, most businesses opt to use software to speed up the process, and stay organized. Word and Excel are excellent programs that can help you create invoices easily if you’re just starting out. However, these programs were not specifically designed for creating invoices, leaving room for mistakes.
Invoicing software, on the other hand, is designed specifically for creating invoices. This means that all of the local legal requirements will be automatically added for you, and you can email the invoice to your customer directly from the software.
With SumUp Invoices, you can create professional invoices for free. It takes less than a minute to create and send an invoice to your client. In addition, payment links are automatically added to your invoices, so your customers can pay instantly and securely online.