What Is an Invoice and Why Is It Important?

Did you know that a whopping 82% of failed businesses claimed that cash flow issues factored into their failure?

Crunching the numbers can be a trying task, especially if you’re building a new brand with limited experience. Fortunately, that’s where the right business tools come in!

If you’ve ever wondered how to stay on top of your company’s billing, you won’t want to skip sending out regular invoices. Not sure what invoices are, or why you should use them? Here’s what you should know about these crucial business documents.

What Is an Invoice?

An invoice is essentially a bill. It’s a document that provides an itemized list of any products or services you provided to a client, including your pricing for all of these items. At the bottom, the invoice will also list the total amount of payment requested, and it may also include other information like the payment terms and payment options.

Why Are Invoices Important?

As you might expect, the primary reason why invoices are a crucial part of your business strategy is that they help ensure you get paid!

Because invoices are an official record of services rendered and what your client owes, as well as information about repayment, it’s an easy way to provide your clients with everything they need to pay you.

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Invoices are also a great way to maintain business records. Most invoices list the date and the invoice number, making it easy to keep track of your billing. You can also use your invoices to track which clients have outstanding payments.

This easy tracking, in turn, makes it easy for you to provide details about your business finances when tax season rolls around. Because your invoices can essentially act as both bills and receipts, you won’t have to struggle to remember the details of your past year as you file.

Last, but not least, invoices are an important way to protect your business from legal repercussions. If you find that a client refuses to pay for all or part of an invoice, or if they make false claims about the number of business services you provided, an invoice can be an essential form of evidence.

How Do You Create an Invoice?

Given that these tools are an essential part of any business’s operations, you’re probably wondering how to make your own. The good news is that invoices are easy to create with a few simple tools!

You can create a basic invoice using tools like Word or Excel, or you can upgrade the look by using an invoice template customized for your brand. From there, you can send a digital copy to your clients requesting payment as needed.

Make the Most of This Crucial Business Tool

It’s safe to say that the humble invoice is one of the most essential business tools your brand will ever use. Invoices are a great way to track your company’s finances and keep your clients up to date about your payment expectations. Create your own template and start sending out invoices today!

Want more of the business tips and financial tools you need? Be sure to take a look at our other content for materials to help you build your brand.

Annika Bansal

Annika "The Chick Geek" is the founder of AnnikaBansal.com. Small Business Sense shares small business ideas, tips and resources for independent Entrepreneurs and Small Business owners.