What is an invoice?

Invoices are important assets to your business for a number of reasons. Not only do they ensure you get paid what you’re owed, but they also create a record of your financial ins and outs that keep you legally compliant. That’s why we’ve taken the time to put together this handy guide you can use to get fully informed about all things invoices. Today, we’ll cover:

• What is an invoice?

• What are invoices used for?

• What should be included on an invoice?

• When to send invoices out

• Invoicing software that makes your life easier

Once you know all you need about the above, you’ll have no trouble implementing an effective invoicing system for your business that you can rely on time and again. So let’s get into it!

What is an invoice?

An invoice is a formal document sent to a person or business who has acquired or is acquiring goods and/or services requesting payment. Invoices are different to a receipt, which is a formal confirmation that payment has taken place; they are also different to quotes, which offer pricing for goods or services a client might purchase but has not done so just yet. Put simply, an invoice states who's billing whom, what was supplied to the buyer, how much they owe as a result, and when they’ll need to pay by.

While they used to be paper documents that businesses would keep files of, invoices have become digital in recent years. They’re now sent as PDFs or generated through invoicing software rather than handwritten or typed on paper.

We'll get into specifics, uses, and requirements shortly, but for now just think of an invoice as your business's formal way of saying: here's what we did and here’s what it’s going to cost you.

What are invoices used for?

• Requesting payment. this is the core function of any invoice. When money is owed, invoices are the formal and professional way to request it be paid. They set out exactly what your customer owes, breaks down how that figure was reached, and gives a clear deadline for payment, leaving little room for confusion, disagreement, or unnecessary delays.
• Legal and tax compliance. Because they are formal, invoices form an important part of your official financial records and are used to support GST returns, income declarations, and other tax filings. If your business is audited, your invoices are among the first documents you'll be asked to produce (so be sure to keep copies of them!).
• Bookkeeping and cash flow tracking. Invoices also offer a way of tracking how much money you owe, and how much you are owed in outstanding payments. This is often referred to as your accounts payable and accounts receivable. They're also essential for reconciling your accounts at the end of each period.
• Proof of transaction. Because invoices are dated and itemized, they act as a paper trail if a disagreement ever arises over pricing, quantities, or what was actually agreed and delivered. This protects both you and your client, and makes resolving disputes much easier.
• Inventory tracking. For businesses selling physical products, invoices can help track exactly what's left the warehouse and been sold, making it easier to manage stock levels and spot discrepancies.
• Professionalism and trust. A clear, consistent, well-branded invoice reflects positively on your business. It signals that you're organized, professional, and serious, which can encourage clients to pay more promptly and confidently.

What should be included on an invoice?

Getting the details right on your invoice isn't just about looking professional, it directly affects how smoothly your accounts receivable (AR) process runs, and how easily your client's accounts payable (AP) team can process and approve payment on their end. Missing or vague information is one of the most common reasons invoices get delayed, queried, or sent back. Here's what you need to include, and why each element matters:

Invoice number

Think of your invoice number as an ID for each invoice. It's a unique identifying reference that allows both you and your client to track the invoice through your respective systems, match it against purchase orders. It also allows you to locate it quickly and easily later on if there's a query or dispute.

Invoice numbers should follow a consistent, sequential format (for example, INV-0001, INV-0002, and so on) with no gaps in the sequence. This isn't just good practice; for GST-registered businesses, you'll need your invoice numbers to be unique and sequential as part of your GST record-keeping. Place it clearly at the top of the invoice, ideally near your business details, so it's the first thing anyone sees.

Your business's name and address

Your client needs to know exactly who they're paying. If you send them an invoice with an unfamiliar name on it, and they don’t recognize the address, you probably won’t get paid. Furthermore, if there's ever a query or a complaint, they need to know exactly who to contact. Include your full business name, address, and contact details (phone number and email at a minimum), removing any ambiguity about who issued the invoice. They’ll likely see this, know who you are, and what you provided them, and can then register the invoice as something they’ll need to pay.

If you're GST-registered, this is also where you'll include your GST registration number. This section typically sits at the top of the invoice, often alongside or opposite your logo, so it reads like a letterhead.

Client or customer's name and address

Just as important as your own details are theirs. Include the full legal name and address of the person or business you're billing, not just a trading name or a department, as this can cause issues with their internal AP processing. In the case of GST invoices, issues with their address can also affect their ability to reclaim GST.

This section usually sits just below or beside your own business details. Make sure you label it as "Bill To" or "Invoice To" so there's no confusion about who is invoicing whom.

Date of the invoice

The invoice date marks the official point at which you're requesting payment. It's used to calculate due dates, track how long invoices have been outstanding, and determine which accounting period the invoice falls into for tax and reporting purposes. All three of these purposes make the date a small but pivotal part of your invoice. Mistakes on the date might seem like nothing, but could wreak havoc further down the line.

Keep this separate from the "date of supply" or "tax point" (the date goods or services were actually provided), as the two can differ and both may be relevant for GST purposes. The invoice date is typically placed near the invoice number, at the top of the document.

Due date

The due date tells your client exactly when you expect payment to land. Without one, you're relying on vague or inconsistent standards: some businesses will assume 30 days by default, others might take even longer if you don't specify.

Be specific and set this out clearly, whether that's by using a fixed date ("Due: 14 August 2026") or something more general like "Net 30", which is a term accountants and businesses will know means 30 days from the invoice date. The due date should sit near the invoice date, ideally in a position that's easy to spot at a glance, since it's one of the most important pieces of information on the whole document.

Description and quantities of goods or services

While your client will likely know what you provided them if you issue the invoice immediately, they won’t necessarily remember the specifics further down the line. The description of goods and services is where you go into precise detail about what you provided, how much of each good or service they received, and how much it all costs. A clear, itemized breakdown, including the quantity, a short description, and the unit price of each item or service, helps your client understand precisely what they're paying for and reduces the likelihood of disputes or delayed approval.

Vague descriptions like "services rendered" are a common cause of payment delays, as they often trigger queries from the client's AP team (questions like “what service, exactly?”). This section usually forms the main body of the invoice and if often laid out as a table for clarity.

Sales tax or GST payable

If your business charges GST, this needs to be clearly itemized; this includes both the rate applied and the total amount charged. In Canada, GST is typically charged at the standard rate of 5%, though reduced and zero rates apply to certain goods and services.

This isn't optional for GST-registered businesses selling to other GST-registered businesses. It's actually legal requirement, and getting it wrong can cause real problems for your client if they try to reclaim it. This should sit directly beneath your itemized list, clearly broken out from the subtotal and amount payable lines.

Total amount payable

This is the bottom line … quite literally. It should bring together your subtotal, any tax or GST, and any discounts or adjustments you’re applying, arriving at one final, unmistakable figure your client needs to pay.

Make this stand out visually, whether through bold text, a larger font, or a highlighted box, so it can't be missed or misread. It should sit at the very end of your itemized breakdown, directly below the tax line. It will be the bottom number on your invoice, which is pretty much where the “bottom line” expression comes from.

Payment terms

Payment terms lay out exactly how and when you expect to be paid, including accepted payment methods (bank transfer, card, PayPal, etc.), any early payment discounts, mentioning any penalties or late fees for overdue payments.

Nailing down clear payment terms is generally one of the biggest factors determining how quickly you get paid. Ambiguity here creates room for excuses and delay, so be explicit and do not suppose your client already knows and will follow your expectations. This section usually appears near the bottom of the invoice, often alongside any additional notes or thank-you messages.

When to send invoices out

Invoices are sent and received in a variety of ways depending on the type of transaction and client relationship. For one-off B2B sales or completed projects, the standard approach is to invoice immediately upon delivery or completion: the sooner it's sent, the sooner the clock starts on payment. For B2C transactions, invoicing (where required at all) usually happens at the point of sale, often alongside or instead of a receipt.

For ongoing or rolling services, subscriptions, retainers, or maintenance contracts, invoices are typically sent at regular intervals, such as monthly or quarterly, ideally on a fixed, predictable date your client can plan around. For larger project-based work, milestone invoicing is common: you bill in stages as agreed phases of work are completed, rather than waiting until the entire project wraps up. Some businesses also request an upfront deposit before work begins, particularly for high-value or bespoke projects, to protect cash flow and ensure commitment on both sides.

Whichever schedule you use, consistency matters more than the specific approach. Clients respond well to predictability. Email (usually as an attached PDF) remains the most common method of sending invoices, though many businesses now use invoicing software that generates, sends, and tracks invoices automatically, often with built-in payment links and reminders.

Invoicing software that makes your life easier

Manually creating invoices in a word processor or spreadsheet can work when you're just starting out, but it quickly becomes inefficient and unreliable as your business grows. This is why so many accountants and business owners rely on dedicated invoicing and accounting software instead. It automates the repetitive parts of the process, as invoice templates are ready to go. They also cut out a lot of the human error as they can draw addresses, prices, other key data from an integrated POS system.

Good invoicing software can generate professional, branded invoices in seconds, automatically calculating totals and taxes, chasing up overdue payments with automatic reminders, and letting clients pay directly online.

If you're ready to move away from manual invoicing, businesses like yours are well served by tools like Xero, QuickBooks, and Sage, all of which handle invoicing alongside broader bookkeeping and MTD-compatible record keeping. Beyond the invoicing itself, these platforms typically offer reporting dashboards, multi-currency support, and integrations that pull data in from your POS system, if you integrate the two together, which removes the need for manual data entry and minimizing the risk of costly mistakes.

If you're already running Epos Now as your POS system, it integrates directly with Sage, Xero, and QuickBooks, so your sales data flows straight into your accounting software without any manual re-entry.