How to create an Invoice? Everything You Need To Know

Invoices form a crucial base for an effective payment system. For any company, invoices or bills enable faster payments and growth. They assist in the accounting or bookkeeping process for businesses across industries. Bills allow both customers and suppliers to maintain track of the transactions on any particular day during the financial year. The article helps you know the steps to create an invoice.

How to create an invoice?

A business owner can use invoicing software or a spreadsheet or manually create an invoice. The choice primarily depends upon the scale of business, the depth of invoicing knowledge or complexities, the volume of invoices created during a period, cost factor, to mention a few. The steps mostly remain the same across the various modes of creating invoices but get automated and faster if carried out using the invoicing software.

More commonly, one must follow the below steps to create an invoice-

• Choose a professional template

Designing the layout of an invoice is relatively easy in today’s world, with various tools and software available over the internet. Business owners can customise invoices like a piece of cake since readily available templates can be effortlessly edited. The motive must be to choose an invoice template that is both professional and unique. It is because invoices can provide an impression to the customers about the kind of establishment they are partnering with for their supplies.

• Enter the supplier or vendor details

The business owner must enter the crucial details of its business, such as the name, address, and contact details. The supplier contact details and their GSTIN must also be added. Further, they must add the buyer name and GSTIN as well. It is always a good practice to add the supplier or company’s logo on the top of the invoice. It becomes convenient to identify the supplier and ensures a lasting impression in the customers’ minds.

• Mention the particulars of the goods or services provided

An exhaustive description of the goods or services supplied, the fare or rate per unit, relevant Harmonised System of Nomenclature (HSN) code, GST rate if applicable and the quantities supplied must be mentioned on the invoice. 

It ensures that the bill is processed quickly and the invoice payment is received or collected on or before the due date. If the customer knows what they are paying for in advance, they may release the payment sooner or even immediately. Hence, it helps both the customer and the supplier or vendor identify the invoice swiftly. Also, it allows the GST registered buyer or customer to accurately and conveniently record the HSN-wise product or service in their accounts. It ultimately avoids any type of disputes between the customer and the supplier.

• Fill in the necessary dates

The invoice dates have an important role in processing an invoice or bill and enabling both the suppliers and their customers to track the payment dues to note down the overdue ones. These dates automatically develop a sense of responsibility on the customer’s part to assure that prompt payment is made. Further, it develops responsibility on the supplier’s part to follow up for any non-payment of the overdue. Accordingly, the following dates are essential for an effective invoice-

• Date of the invoice which is the date of issuing the invoice
• Date of supply of goods or services or the delivery date as a confirmation
• The due date for payment or popular as the invoice due date

 

• Enter the invoice number

Every invoice or bill must have a unique serial number allocated to track the invoices or bills easily. The unique number becomes an essential prerequisite for completing proper documentation of the invoices, including for accounting and Goods and Services Tax (GST) purposes. It ensures the customer and the supplier can easily identify and track a particular bill. The GST law has dedicated provisions for allocating unique invoice numbers to invoices issued by the GST registered businesses. Such invoice number series must be unique for every financial year.

• Calculate and provide detailed invoice value break up

Together with the description of the goods or services, the quantity, fare or rate per unit and the amount of each type of goods supplied must be computed and mentioned. The total sum of the items also must be depicted. Further, the breakup of the applicable GST or any other taxes and cess must also be displayed for clarity. When the total gross amount of the items are added to all the applicable taxes, GST and cess, it provides the total taxable value of the invoice. Note that if the supplier is providing services or goods subject to a reverse charge mechanism as per the rules, then the GST does not form part of the invoice.

• Set the terms of payment in the invoice

The terms of payment mentioned for the supply of goods or services could have been previously agreed upon by both parties. However, it is advised to include those details in the invoice or bill for documentation since the invoice itself acts as evidence for the sale transaction. The mode of invoice payment may be cited, whether it is in cash, cheque, bank transfer or any other mode of payment acceptable to the supplier. In case of bank transfers, details such as the bank account number, type of the bank account as either savings or current, bank name, details of the account payee, the branch IFSC Code, and so on have to be mandatorily mentioned. The terms of payment, such as discount rates for early payments and penalties for delayed payments, have also to be added, in any case.

• Add a note in the comments section of the invoice.

It is not compulsory to keep a comments section in the invoice. However, the invoice is a means of communication between the customer and the supplier. Hence, it becomes easy to mention any special instruction or provide information that could be useful. A few sentences that could be mentioned in the invoice comments section are as follows-

• We are grateful to you for choosing our products/services. We hope to hear from you soon.
• For attractive offers and discounts, please contact <name> at <phone number>.
• Early payments are much appreciated.

 

• Authorisation by way of signatures

The authorised person’s signature on the invoice or bill document further enhances its legal position as evidence of a sale transaction. Invoices or bills issued under the GST law must mandatorily bear a valid signature on them, either physically or as a digital signature. It accordingly confirms the document sender’s authenticity. The signatures of the customer and the supplier demonstrate that the terms of sale were agreed upon and accepted by both parties.