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Invoices: What You NEED TO KNOW - YouTube
Channel: Accounting Stuff
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what's an invoice why is it important
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what does it even look like you'll find
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the answers to all of these questions in
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this video hey viewers I'm James and
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welcome to accounting stuff the channel
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out the playlist up here for more
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accounting basics in today's video we're
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going to talk invoices you'll find out
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what invoices are why they're important
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and I'll talk you through the key
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features with an example don't forget to
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watch this video through until the end
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because I'll be answering some common
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questions that'll made this whole topic
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seem a lot clearer invoicing is an
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essential part of any business whether
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you're working for yourself for a
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corporation if you want to get paid
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you've got to know what invoices and how
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to use it so what is an invoice let me
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explain a normal business transaction
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involves two parties a buyer and a
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seller the seller provides goods or
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services to the buyer and in return they
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want to get paid this is a transaction
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so that's the whole point so the buyer
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owes money to the seller how much
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exactly and what specifically are they
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paying for and how long do they have to
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make the payment to answer all of these
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questions the seller sends them an
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invoice which sets out all of this
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information so the buyer knows what they
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owe
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they've gone itemized list of all of the
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goods and services that they're paying
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for and they know the terms of the
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transaction they're happy so they send
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the money to the supplier and the
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transactions complete I've got bills
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I've got to pay bills and invoices are
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actually the same thing they relate to
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the document that is sent to the buyer
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to request the payment for the goods and
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services that have been provided by the
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seller right so now I've got a feel for
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invoices are but why are they important
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well for starters and we've touched on
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this already sellers want to get paid so
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it's important to them that invoices are
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sent out as early as possible so they're
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not waiting around for that cash the
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government is also keen on invoices most
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countries charge some form of sales tax
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on transactions involving taxable goods
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and services GST v80 state or provincial
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tax you might have heard of some of
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these an invoice
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a record of the transaction that splits
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out and identifies the sales tax so
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they're actually required by law for
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transactions involving registered
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businesses if you'd like to know the
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specifics then I recommend you check out
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your local tax authorities website from
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an accounting point of view invoices are
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also important because they trigger the
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accounting entries in the books of both
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the buyer and the seller they're used to
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track accounts receivable and accounts
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payable so we know what invoices are and
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we know that they're important but what
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it actually look like let's create one
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and find out there are plenty of ways to
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make invoices Google sheets actually has
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a built-in invoice template if you need
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to fire one off quickly but if you want
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to be more organized and have the
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ability to track payments and make
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reports then I recommend use some sort
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of cloud accounting software like
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QuickBooks Online Xero or FreshBooks
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I'll link to all of these down below
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here we've got an invoice that I've
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thrown together using the sample company
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from QuickBooks Online this is a very
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typical invoice layout so it's a great
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place for us to start and run through
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all of the key features first of all
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we've got the names and addresses of
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both the buyer and the seller who's this
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transaction between well in this example
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we've got Craig's design and landscaping
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services selling two cool cars and on
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the other side we've got the invoice
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number 103 8 this is a unique number
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that identifies the invoice usually
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invoice numbers are sequential so the
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next invoice raised by this company
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would most likely be 103 9 below that we
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have the invoice date in this case it's
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the 17th of Jan this is the day that the
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invoice was created and it's critical to
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include it because it starts the
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countdown when the payment is due from
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the buyer and how long have they got
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well that's determined by the sale terms
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which in this case is net 30 days so the
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whole payment is due within 30 days of
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the invoice date that's a common wait
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time but terms can vary depending on
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what's been agreed 30 days after the
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17th of Jan is the 16th of February day
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that we can also see here next we have
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the description of the goods and
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services that this invoice relates to in
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this case it appears to be some kind of
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custom design work it's best to be as
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specific as possible in the invoice
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description because you don't want to
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cause any confusion and delay that
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payment to the right of the description
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we have the quantity rate and amount
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here the service has been provided just
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once and the amount
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per-unit was for 350 dollars so in this
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case both the amount and the subtotal
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are for 350 dollars below that we've
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tacked on a sales tax of 8% because the
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taxable service has been provided that
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comes out to $28 and that leads us with
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an invoice total inclusive of tags of
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378 dollars before we wrap up this video
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I'd like to answer four common questions
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that people tend to have when it comes
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to invoices question 1
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when should I invoice invoices are most
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commonly sent out after the goods and
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services have been provided however they
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can also get sent out before depending
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on what's been agreed between the two
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parties however the accounting treatment
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in each situation is different question
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2 our invoices and sales receipts the
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same thing the short answer is no
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however this is confusing because there
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are a few similarities both serve as
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evidence of a transaction and both are
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produced by the seller and given to the
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buyer however the key difference is then
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invoiced as a request for a payment so
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it's issued before the payments be made
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where is a receipt that's issued after
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question 3 what's the difference between
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a sales invoice and a supplier or a
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purchase invoice well they're actually
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the same thing they're both invoices the
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difference in their names depends on
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your perspective if you're the seller
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then you call it the sales invoice and
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if you're the buyer you'd call it a
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supplier or a purchase invoice finally
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question 4 is an invoice legally-binding
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in general no they're not an invoice by
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itself isn't legally binding if they
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were then what would stop me from just
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making all the money by just pouring out
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invoices to whoever you want in order
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for them to become legally binding both
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the buyer and the seller have to agree
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on the terms I can't speak for the
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specifics of your country but in general
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it's important that both sides have
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evidence of the agreement at least an
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email or better yet in a signed contract
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you don't want to be that person that
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gets in a situation where the client or
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customer is refusing to pay because that
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sucks
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pretty bad I hope that helps clear up
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some of your questions about invoices if
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you've got any more let me know down in
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the comments below and thanks for
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watching today's video if you found it
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