An invoice is a formal request for payment that you send to a customer after providing goods or services. It details what was delivered, how much it costs, and when payment is due.
Invoices are how you get paid. Without them, customers have no obligation to pay and you have no proof of what you delivered or what was agreed. Invoices are also legal documents - they're evidence in disputes and are required for tax and accounting purposes.
For business cash flow, invoicing speed matters. The faster you invoice, the faster you get paid. Studies show invoicing same-day increases payment speed by 5 - 7 days on average. Delayed invoicing is delayed cash. For growing businesses, the difference between invoicing on day 1 of delivery versus day 5 can be the difference between cash flow problems and healthy cash reserves.
For accountants, invoices are the proof of revenue. Every pound of revenue claimed in the P&L must be backed by an invoice. HMRC expects invoices to be numbered sequentially and kept for 6 years. Missing or late invoices flag a business as higher-risk for audit.
For customers, invoices are their accounting requirement. Their bookkeepers use your invoice to record an expense. Large companies often won't process payment until they receive an invoice - it's their requirement to document every outflow.
Invoicing follows a simple lifecycle: Create, Send, Track, Pay, Record.
Step 1: Create
Build your invoice template with your branding, standard terms, and payment information. Include itemized lines for what was delivered (by hour, by unit, by project). Calculate the total, add VAT if registered, and set payment terms (typically 30 days, but negotiable).
Step 2: Send
Send the invoice immediately upon delivery. Digital delivery (email, portal) is faster than post. Include clear payment instructions - bank details, card payment link, etc. The sooner the customer receives it, the sooner they can process payment.
Step 3: Track
Monitor which invoices are paid, which are outstanding, which are overdue. A typical business might invoice on the 1st and chase unpaid invoices on the 15th and again on the 31st if not paid by terms. Tracking prevents money from being missed - it's common for invoices to get lost in the customer's inbox.
Step 4: Pay (Customer Side)
Customer receives invoice, processes it through their accounting system, and pays on terms (or early). Payment is made via bank transfer, card, or other method specified on the invoice.
Step 5: Record
The invoice is recorded in your accounting as revenue (accrual) when issued, and the payment is recorded as a reduction of accounts receivable when received. This matches the invoice to the payment and completes the transaction in your accounts.
Real example:
You provide consulting services to a client for 40 hours at £150/hour = £6,000 + VAT. You send an invoice on delivery (day 1) with terms Net 30 (due day 30). The customer receives it day 2, processes it day 5, and pays day 20. You record £6,000 revenue on day 1 (accrual), and when payment arrives day 20, you record the cash and reconcile the invoice as paid. Your cash balance improves day 20, but your accounts showed the revenue day 1. This is accrual accounting - profit is recorded when earned, not when cash arrives.
Common mistakes:
Best practices:
Aarvo lets you create and send invoices directly from the platform. You set up your invoice template once, then generate new invoices in seconds. As payments land in your bank account, Aarvo matches them to outstanding invoices and marks them as paid.
Your outstanding and overdue invoices show on the dashboard so you can chase them before cash flow becomes a problem. Aarvo also tracks your days sales outstanding (DSO) - how long on average it takes customers to pay. Sign up free and manage invoices in one place.
An invoice is a legal document asking a customer to pay for work you've done or goods you've sold. You send it after delivery, and it becomes a record of the sale in your accounts. It includes your business details, the customer's details, what was delivered (itemized), the amount due, payment terms (when it's due), and how to pay. Invoices are the paperwork that turns a sale into cash-in-the-bank.
Essential items: Your name, address, and business registration number. Customer name and address. Invoice number and date. Due date (payment terms). Itemized list of what was provided (product name, quantity, unit price, total). Total amount due. Payment instructions (bank details, payment methods accepted). VAT number if registered. Your invoice number should be unique and sequential so you can track it. Many businesses also include reference numbers or project codes to match the invoice to their internal records.
An invoice is sent before or at the time of delivery, asking for payment. A receipt is given after payment, confirming the transaction is complete. An invoice is a request; a receipt is proof. For accounting purposes, an invoice is recorded when issued (accrual accounting), even if not paid. A receipt confirms payment. Most businesses send both: invoice at delivery, receipt after payment clears.
Use accounting software (Aarvo, FreeAgent, Xero) which generates invoices automatically. Most software lets you set a template, choose payment terms, and send invoices to customers in seconds. If manual, include the items above: business details, customer details, items with prices, total, due date, payment instructions. Number each invoice sequentially. Send immediately after delivery. For late payment, include a note about payment terms and late payment fees if applicable.
A purchase order (PO) is sent by the customer before delivery, saying 'please provide these items at this price.' An invoice is sent by you after delivery, saying 'you received these items, now pay.' PO is a request to supply; invoice is a request for payment. Large companies often require a PO before you do the work. The invoice should reference the PO number so the customer's accounts can match it to their records.
Yes. Aarvo lets you create, send, and track invoices from the dashboard. You build an invoice template, issue it to a customer, and Aarvo tracks whether it's paid, overdue, or outstanding. You can see all outstanding invoices at a glance and get reminded about overdue payments. As invoices are paid via your bank account, Aarvo matches the payment to the invoice automatically. Sign up at aarvo.com/signup to start automating invoices.
Accounts receivable is the money customers owe you for goods or services you've already delivered but haven't yet been paid for. It's an asset on your balance sheet because it represents cash you're entitled to collect. Every unpaid invoice is part of your accounts receivable balance.
Bookkeeping is the practice of recording every business transaction in a systematic way so that you have an accurate record of money in and out. It's the foundation of every company's financial records.