Money Matters

How to write an invoice and what to include

Learn how to create invoices to get paid on time. Discover what to include, invoice types, common payment terms, and tips to avoid overdue invoices.

Getting paid for your hard work is a great feeling and it’s what keeps a business in business.

However, you don’t just need to send invoices, you also need to know how to format them correctly.

Whether you’re a one-person small business owner, medium-sized company, or a nonprofit organization, knowing how to create an invoice the right way may lead to you getting paid quicker and maintaining a healthy cash flow.

In this guide, you’ll learn everything you need to know about invoices, including what they are and what they should include.

We’ll also go over different invoice types and different payment terms and wrap it up with how to get paid on time.

Here’s what we’ll cover

What is an invoice?

What to include on a standard invoice

Different types of invoices

Example invoices

Common invoice payment terms

Common invoice payment methods

Sending your invoice

How to get paid on time

What is an invoice?

An invoice is a document that a business sends to a client or customer to outline the products or services sold.

The invoice includes the total amount the customer owes and acts as a payment request.

The invoice also includes critical information such as:

  • your location
  • the customer location
  • the date the goods or services were delivered.

A standard invoice must show:

What to include on a standard invoice

Whether your business operates as a sole proprietorship, limited liability company (LLC), S-corporation, or a nonprofit organization, a standard invoice should include certain features:

  1. ‘Invoice’
  2. Your company name and contact details
  3. Customer’s name and address
  4. Invoice date
  5. Invoice number
  6. PO number (if applicable)
  7. Invoice due date
  8. Description of items sold, or services provided
  9. Total amount due
  10. Sales tax (if applicable)
  11. Accepted payment methods
  12. Payment terms
  13. Notes

1. The word ‘invoice’

Include the word ‘invoice’ near the top of the document to differentiate it from a receipt, an order, or a quote.

2. Your company name and contact details

An invoice should include your company’s name, business address, and contact details, including phone number and email address.

This allows your customer to contact you if they have questions.

3. Your customer’s name and contact details

Address the invoice to your customer and include their contact details.

4. Invoice date

The invoice date is the date it was created, not when the goods or services were provided.

Payment terms (discussed later) are based on the invoice date. It helps you and your customer know when payment is due. 

5. Invoice number

The invoices you issue should have a unique numbering system.

This ensures there are no unnecessary and confusing duplicates.

It’s best to use sequential numbering, so each invoice can be accurately tracked and accounted for.

The invoice number can contain letters and numbers.

6. PO number (if applicable)

Your customer may use purchase orders to approve and track their purchases. But not all companies do.

If your customer provides you with their purchase order number (PO number), include it on the invoice. This allows them to match the invoice with their approved purchase and can speed up the payment process.

7. Invoice due date

The invoice due date is the latest date the customer should pay. This date is based on the payment terms (discussed later).

For example, if the customer has 30-day payment terms and the invoice date is July 1, then the invoice due date is July 31.

8. Description of items sold, including quantity and per unit price

An invoice should include a brief but meaningful description of:

  • Items or services sold
  • Quantity of items or services
  • Price per unit

This helps the customer verify that what was ordered matches what was invoiced.

9. Date good supplied

If the goods are supplied on a different date to the actual invoice date, this can be noted to show the date the goods were delivered to the customer.

The date would usually be inserted on the row relating to goods description.

This helps the customer to keep track of which goods are being invoiced.

10. Total amount due

Aside from the price per unit, an invoice should include the total amount due for all items or services shown on the invoice.

11. Sales tax amount (if applicable)

If your company is registered in a state with a sales tax, and your goods or services are liable for sales tax, you must include it on the invoice and collect it from the customer.

Five states don’t charge sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.

Although, local jurisdictions (towns, cities, counties, etc) are permitted to charge a sales tax.

Sales tax is a complex topic depending on the state you live in and what you are invoicing for.

It’s too complicated a topic to cover here, so you should consult with your tax professional to understand how sales tax affects your business.

12. Accepted payment methods/how to pay the invoice

An invoice should include the different ways a buyer can pay it.

Commonly accepted payment methods include:

  • Cash
  • Check
  • Credit card
  • Bank transfer (ACH)
  • Online payment (PayPal or Zelle)
  • Mobile payments (Apple Pay)
  • E-wallets (Venmo)

As a note, some online accountancy software providers, such as Sage, offer integrated payment solutions that allow you to add a ‘pay now’ button in the invoice, making payment easy for the customer.

13. Payment terms

Add details of your late payment policy to an invoice.

Although this isn’t a requirement, it reminds the customer to pay on time.

14. Notes

The bottom of an invoice can include any additional information you’d like. This could include:

  • Thank you note
  • Terms and conditions of the sale
  • Return and refund procedures

Different types of invoices

So far, we’ve looked at the standard invoice, but there are other types with subtle differences.

Pro forma invoice

A pro forma invoice is the type of invoice a business sends to a client before delivering goods or providing services.

It provides a client tentative costs involved in the transaction.

Pro forma invoices are often used for:

  • International shipments for customs clearance
  • Quotes for potential orders
  • Custom orders
  • Insurance coverage for shipping of valuable goods

A pro forma invoice is often marked with the words ‘Pro forma invoice’ to let the customer know it’s preliminary and doesn’t require payment.

Interim/progress invoice

Companies engaged in long-term projects may agree with a customer to issue interim invoices after mutually agreed-upon milestones. 

For example, large-scale construction projects or computer system implementations.

These long-term projects need cash for day-to-day operations and without interim or progress invoices, a company may need to rely on financing to fund payroll and purchase supplies.

With progress invoicing, companies can collect payment throughout the project’s lifecycle.

Final invoice

A final invoice is sent to the customer once a transaction is complete. It’s most common on long-term projects using interim or progress invoicing.

The final invoice will summarize all previous interim invoices and any remaining balance due.

Credit memo

A credit memo is a type of invoice that reduces the original amount billed to a customer.

Perhaps you overcharged a customer by mistake. Or a customer may complain about damaged or expired items or that the items supplied are different from the ones ordered.

In all these situations, it is standard practice to provide a credit memo, or credit invoice, that your customer will use to offset the original invoice.

Debit memo

Unlike a credit memo, a debit memo raises the original amount billed to a customer.

This could be because of:

  • Interest or late fees for overdue invoices
  • Additional freight or shipping charges excluded from the original invoice
  • Variable cost adjustments based on usage or consumption

Recurring invoice

Businesses use recurring invoices when they have to bill the same amount to clients at regular intervals.

Recurring invoices are common for:

  • Subscription-based services
  • Retainers
  • Membership fees
  • Software licenses
  • Accounting services

Technology has helped automate recurring invoices.

Cloud-based invoicing software can create recurring invoices, send them to the client, and remind the client that an invoice is past due.

Past due invoice

You can send a past due invoice when a customer has missed the payment due date on the original invoice.

Include the term ‘Past Due Invoice’ near the top of the invoice.

You can add late payment penalties to this invoice instead of issuing a debit memo.

Note: A past due invoice is not the same as an outstanding invoice.

An outstanding invoice remains unpaid but is not overdue. A past due invoice, however, remains unpaid past the invoice due date.

Electronic invoicing

Sending invoices electronically can speed up your collections process by avoiding delays from mailing a physical invoice.

Invoices arrive immediately at your client’s inbox and can be accessed from anywhere.

Electronic invoices may lead to receiving payments faster and improving your cash flow.

Example invoices

Service-based LLC

Goods-based LLC

Service-based small business

Common invoice payment terms

Clearly stated payment terms should use simple easy-to-understand language to avoid misunderstandings with your customers. Always specify the invoice due date to avoid confusion.

Here are the common invoice payment terms you should know.

Due upon receipt

When an invoice is due upon receipt, it means the customers should pay the bill when it’s received. Typically, this means by the next business day.

Due upon receipt invoices help companies improve cash flow and reduce the risk of not getting paid for work.

Due upon receipt invoices are commonly used for:

  • One-time services
  • New customers without an established payment history
  • Custom or specialty orders
  • High-risk transactions

Net payments

A Net payment term means the invoice is due in a set amount of days from the date the invoice is sent.

For a Net 30, the buyer counts 30 days from the date they received the invoice.

For example, if the invoice was sent on the 1st of the Month, the invoice would be due for payment on the 31st of the month.

Common net terms include:

  • Net 15: gives customers 15 days to pay the invoice
  • Net 30 gives customers 30 days to pay the invoice
  • Net 45 gives customers 45 days to pay the invoice
  • Net 60 gives customers 60 days to pay the invoice

As a note, you should be careful about Net 60 terms, as they can starve your business of cash.

Waiting two months to receive cash is a practice that can negatively affect the cash flow needed for day-to-day operations.

2/10, Net 30

With 2/10, net 30 terms, the customer gets a 2% discount if they pay the invoice within 10 days. Otherwise, full payment is due after 10 days.

Similar payment terms include:

  • 1/15, net 30: 1% discount if customers pay within 15 days
  • 1/10 net 30: 1% discount if customers pay within 10 days

COD (cash on delivery)

COD, or cash on delivery, means customers pay for the goods when delivered, not before the products are shipped.

Common invoice payment methods

Determining what payment methods your company will accept depends on a variety of factors, from the type of customers you have, the type of business you have, to how quickly you want to get paid.

Electronic payments are fast and efficient, whereas some companies still prefer good old paper payment by check.

Common invoice payment methods include:

Credit/debit card

To accept credit card payments, you’ll need a merchant account and a card reader (for in-person payments) or payment gateway (for online payments).

The cost of accepting credit card payments varies depending on transaction volume and card types. But expect to pay between 2.0% and 3.0% of the transaction amount.

Credit card payments are fast and you’ll usually receive the funds in your business account in one to three days.


Accepting checks is slower than other electronic payment methods and there is a risk of losing the payment in the mail or receiving a check that’s returned non-sufficient funds.

All of which can slow down getting cash in the bank.

Typically, banks don’t charge a fee to deposit checks.

Automated Clearing House (ACH)

ACH is an electronic, bank-to-bank money transfer handled in batches.

ACH is suitable for large or frequent payments where cash is not a good fit.

ACH payments are typically free to receive and arrive in your bank account one or two days after your customer starts payment.

Wire transfer

While wire transfers and ACH are both electronic payments, wire transfers are quicker because they don’t pass through the Automated Clearing House.

Wire transfers are usually received the same day, but can come with fees ranging from $0 to $25.

Zelle or PayPal

A fast and convenient money transfer service that eliminates the need for cash or checks.

Zelle is available with most major US banks for free.

It allows users to send and receive money directly from their bank accounts within minutes.

PayPal is convenient for anyone wanting to receive payments from outside the US.

Direct debit

For subscription services or regular payments, a direct debit allows a company to continue to take payments from their customers ongoing.

To set up a Direct Debit requires authorization from your customer, usually through a Direct Debit form that informs their bank that they allow the company (your business) to take funds from their bank account.

The benefit of setting up a Direct Debit for the business and the customer is that payments are automated and regular where you can set them and forget them.

To ensure that your cash flow runs smoothly, send your invoices as soon as possible after services are completed or goods sent infographic.

Sending your invoice

To ensure that your cash flow runs smoothly, send your invoices as soon as possible after services are completed or goods sent.

Depending on your business, that might mean sending invoices daily, weekly, or monthly.

When selling goods, you’ll likely invoice immediately when the items ship if you didn’t collect payment in advance (pro forma).

For service-based companies, you’ll likely invoice at the end of a project or the end of the month, based on the invoicing time frame included in your contract with the customer.

Don’t forget – because people can easily edit Word and Excel files, it’s always best to send invoices in PDF.

If emailing an invoice, ensure the subject line is clear by including your company name, the details of the invoice, and the period to which the invoice relates.

The body of the email should also be clear, concise, and simple.

Also, it’s good to have the phone number and email address of the person at your customer’s business who’s responsible for payments.

This way, it’s easy to follow up on late payments. You can also CC this person when emailing the invoice.

Finally, for companies structured as sole proprietorships or partnerships, send a completed Form W-9Request for Taxpayer Identification Number and Certification when you send your first invoice to a customer.

Your customer will need information on this form for tax reporting purposes.

Sending it along with the initial invoice illustrates your professionalism and shows you’re organized and proactive.

Running a business is time consuming enough. It pays to make sure you get paid! infographic

Chasing late payments is no fun. To help you get paid on time a few simple steps can make a difference:

  • Lay out simple terms and conditions
  • Agree on your payment terms in advance
  • Request a purchase order number
  • Request new customers to pay their first invoice in advance
  • For large or long-term projects, request to be paid based on agreed-upon milestones
  • Choose a payment method that’s convenient and easy for your customer
  • Monitor your invoices and quickly follow up when due dates pass

If you do need to follow up on overdue invoices, follow these steps:

1. Verify that the invoice is unpaid

It’s possible that payment was received but recorded in another customer’s account. Ensure your customer hasn’t already paid.

2. Send a friendly reminder

Call or email the client with a polite reminder and resend the original invoice.

3. Send a formal reminder

If the friendly reminder didn’t work, send a formal reminder via email or mail.

Use a professional tone and state the overdue amount, including late fees.

4. Offer a payment plan

Consider offering a payment arrangement if your client is having financial struggles.

5. Escalate the matter

If your invoice remains unpaid, send a final note explaining the possible next steps that may include using a collection agency.

Don’t worry that chasing payments is seen as aggressive.

Being on top of your invoices makes you look professional and sends a message that you want to be treated in a professional manner.

As you know, running a business is time consuming enough and it pays to make sure you get paid!

For smaller businesses, you can use our invoice templates like these.

For businesses that want to save time, or if you’re issuing over 5-10 invoices a month, it’s a good idea to consider a financial management or automated electronic billing software that can customize invoices and schedule payment reminders for you.

Editor’s note: This article was verified by an active US-based Certified Public Accountant (CPA).