Invoice
/ˈɪnvɔɪs/
An invoice is a document businesses issue to request payment for goods or services supplied, detailing quantities, prices, and terms whilst serving as proof of sale for accounting records.
An invoice is a document businesses issue to request payment for goods or services supplied, detailing quantities, prices, and terms whilst serving as proof of sale for accounting records.
An invoice is a commercial document that businesses issue to their customers requesting payment for goods or services provided. It itemises the products or services delivered, specifies quantities and unit prices, calculates the total amount due, and outlines payment terms such as due dates and accepted methods. This document forms the foundation of your accounts receivable process and ensures clear communication between buyer and seller.
Beyond serving as a payment request, an invoice acts as a critical accounting record. It captures essential transaction details needed for preparing your financial statements, tracking revenue, and complying with VAT regulations. Irish businesses must retain invoices for six years to support Revenue audits and corporation tax computations.
Invoices come in various formats tailored to specific needs. A standard commercial invoice supports everyday sales, whilst proforma invoices preview costs for potential orders. Each type helps maintain accurate records whilst facilitating smooth cash flow management.
The key distinction between an invoice and a receipt lies in their purpose and timing. You issue an invoice before or upon delivery to request payment, detailing what is owed. A receipt confirms payment has been received, serving as proof of transaction completion.
In practice, businesses often combine both on one document for small transactions. However, for formal accounting and VAT compliance, separating them ensures clarity. Revenue requires invoices for input VAT claims, whilst receipts validate expense deductions in your income statement.
Irish VAT law mandates specific details on every taxable invoice exceeding €40. This includes your business name, address, and VAT number, alongside the customer's details, unique invoice number, issue date, clear description of goods or services, quantities, unit prices, VAT rate and amount, and total payable.
Sequential numbering prevents duplication, whilst payment terms like 'net 30 days' set expectations. Failure to include these elements risks Revenue rejecting VAT reclaim or imposing penalties during compliance checks.
Sequential numbering creates an unbroken audit trail essential for Revenue compliance and internal controls. It prevents gaps that could suggest missing transactions or fraud, whilst simplifying reconciliation with bank statements and cash flow statements.
Digital accounting software automates this, assigning numbers chronologically. Manual systems require diligent record-keeping to maintain continuity across accounting periods.
Invoices are central to Ireland's VAT system. As a seller, you charge output VAT on your invoice, reclaimable by customers against their input VAT. Summary details feed your periodic VAT returns, ensuring accurate net payments to Revenue.
Valid invoices enable legitimate VAT recovery, whilst invalid ones block claims. Retain copies securely, as Revenue may request them during interventions verifying your accounting period filings.
Cloud-based tools like Xero, QuickBooks, or FreeAgent automate invoice creation, tracking, and payments. They integrate with banks for real-time reconciliation, generate reminders for overdue accounts, and produce VAT-compliant reports aligned with your financial year end.
These platforms reduce errors, save time, and provide insights into receivables ageing, helping you forecast cash flow and avoid liquidity issues.
