All the basics you need to know

Chances are you've encountered invoices before—most of us have received one at some point. But, in a world of bills, invoices, receipts, and sales orders do you truly understand what an invoice is and why you, as a retailer, need an app for generating invoices?

An invoice is a document that indicates the provider, customer, date of service, payment due date, and what services were provided for a particular order.

An invoice also aids in the establishment of a contract between the supplier and the client, requiring the consumer to pay the provider for the services or products according to the conditions stated in the document. In addition, retailers may use invoices for several purposes, including invoicing suppliers and processing online purchases.

Here’s everything you’d like to know about invoices and how to use them in your retail business:

What’s the difference between invoices and purchase orders?

The distinction between an invoice and a purchase order is in the context in which they are used.

Purchase orders are generated when an order is placed — or before a transaction is completed. These papers detail the specifics of the order. After the transaction is completed, an invoice is generated and delivered to the client or vendor for payment.

So, how can you determine whether your retail store needs purchase orders as well? Merchants frequently request purchase orders for large product quantities with high prices or custom orders. This helps establish a business approval process that specifies the conditions for accepting unusually large or time-consuming orders.

Why do I need an invoice for my Shopify store?

The simple answer is that you must keep track of all of the goods or services that you sell. What’s the long answer? This is a necessity for your company’s accounting. All companies should maintain accurate records of all transactions, and invoices are essential for tracking when, where, what, and to whom you sold something or provided a service.

Invoices also help ensure you receive payments. The way you word them can also aid in prompt collection from vendors, suppliers, and customers.

The bottom line is that invoices help you retain correct records but also assist you in maintaining consistent income and avoiding cash flow problems.

What do I include in an invoice?

Although there are many invoice templates available, it's important to remember that there's no one-size-fits-all solution for every business. Consider your accounting needs and business type before choosing the format that works best for you.

Here are some important points to consider adding to your invoice template:

Invoice terminology

This one is simple: make sure the term “invoice” appears at the top of the page. Knowing what the document is will assist your client in comprehending the purpose and help you differentiate the invoice from a purchase order if you have both on file.

Invoice numbers

You should assign each invoice a unique number depending on the customer and appropriate accounting procedures for record-keeping reasons. Create a naming convention to assist you in identifying one client from another, as well as one invoice from another for the same customer, to do this. Using a set of letters to represent a particular client is one approach. For example, if Shopify is a customer, you might use SHP, SHFY, or SPFY to help differentiate Shopify invoices from other customers. Then, at the conclusion, add a number value to assist in establishing a chronological order for the invoices – this also promotes excellent accounting practices for your company.

Here’s an illustration of what it could look like:

• SPFY-0001
• SPFY-0002
• SPFY-0003

Your naming convention should not be one-size-fits-all. Above all, you should choose something appropriate for your company’s record-keeping requirements.

Customer information

Depending on what your company needs to know about them, the kind of client information you provide in your invoice may vary. To guarantee that you don’t have to depend on just one means of communication, it’s ideal to have the following:

• Business name
• Contact at business (this is usually in an “Attn:” line)
• Mailing address
• Billing address, if different than mailing address
• Email address
• Phone number

Customer information is usually included at the top of the invoice.

Supplier information

Always put your company’s details on your invoice in the same manner as the customer’s, and double-check that it’s correct. However, bear in mind that if your billing information differs from your usual information, you must include it since your client will require it to complete payment. This information may also assist your client in maintaining accurate records.

Date of invoice

It’s critical to provide the date the invoice was generated since it tells your client how much time they have between the invoice’s production date and the due date.

This also helps you determine when you need to follow up on payments, particularly past-due bills.

Terms of payment

Instead of expecting your client to pay their invoice immediately after receiving it, add payment conditions in the invoice to make it clear when payment is due.

The most typical payment terms are “net 30 days,” which means that you have 30 days from the date of the invoice to pay. However, you don’t have to limit yourself to 30 days; this time frame may be tailored to your company’s requirements.

The following are the most frequent payment terms to think about:

• Net 7
• Net 10
• Net 30
• Net 60
• Net 90

Keep in mind that this is the number of days after the invoice date, and in many instances, the client will wait until the end of this date to pay.

Payment details

This isn’t required to be included in your invoice, but it may be beneficial if you’ve had problems with late payments or are often asked about acceptable payment methods.

Checks, PayPal, bank transfers, major credit cards, and cash are all acceptable payment methods. You may also specify how much you will charge if the payment is late. This might, for example, be a percentage added to the total amount owed that rises over time (i.e. the later the payment, the higher the late fee)

PRO TIP: Include a reduction on the total amount owed if payment is received within a specified time frame to promote early payments. If your payment terms are net 30 days, for example, you might offer a discount if payment is received within ten days.

Description of goods or services

The essential element of the invoice is the description of the products or services bought, divided into at least four columns: quantity, description, unit price, and line total.

Quantity

This is where you show how many of a particular product or service type’s products or services were bought by a single client. For example, if a client purchased five blue t-shirts, you should enter “5” here. Alternatively, if you charge per hour, provide the total number of hours worked.

Description

For each item on the invoice, be as detailed as possible to explain what was bought clearly. If necessary, you may go into more detail on the labor or any additional requirements from the client. This may contain both the product’s SKU number and a physical description.

Unit price

The price of a particular product or service is entered here. You’ll need to input the price of a single blue t-shirt using the same example as before. If you charge by the hour, provide your hourly fee.

Line Total

To calculate the total cost of a particular product or service bought, multiply the unit price by the quantity.

Remember that each item or service bought in a single order has its invoice line.

Shipping Terms

Do you deliver products to your clients? Include your shipping conditions in the invoice if this is the case. To begin, specify whether you or the buyer is liable for delivery expenses. If it’s the customer, make sure the shipping charges are included as a line item under the description of services, so they’re included in the overall amount owed. Consider adding information on the shipment method and the anticipated delivery date.

Tax

The kind of products or services you offer via your retail company will determine whether or not you should charge sales tax. If you decide to charge sales tax, be sure to add a space for it under the subtotal (sum of all line totals).

Total Amount Due

This number should stand out among the rest of the information on your invoice since it is the primary reason for sending one to your client.

Add all line totals together — and include sales tax, if applicable — to obtain the total amount owed.

How Do I Invoice a Customer?

So, how do you go about doing it? Well, you have a few choices, and they all rely on the kind of retail company you have and your particular requirements.

Consider utilizing an online invoice template if you’re a new shop with a low volume of orders. A simple Google search will turn up a slew of examples, and there are also online tools like Shopify’s free invoice generator that make generating invoices a breeze.

Still, whether you own a startup or a growing company with high sales volume, it's beneficial to use a professional invoicing application. Using an invoicing application for your Shopify store can help you keep track of records, automate invoice delivery, and receive payments efficiently. Additionally, it provides tools for customer recognition.