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What is an invoice? | What is invoicing used for? [Simple guide]

As a small business owner who’s just starting out or a freelancer and is about to spread their wings and fly, it’s important to have a firm grasp on all aspects of your business. Payments included.

This is due to the fact they are going to be the juice that keeps your business going. One aspect of payments, and not really a fun one, is invoicing.

So, if you’re wondering what is an invoice, why it is important and how you should apply this important document to your business, you’ve come to the right place.

What is an invoice?

First things first – let’s start with the invoice’s meaning. Essentially, it is a document – whether in print or digital format, which contains a set of specific characteristics which enable a seller to specify the items or service that they have sold, at which price, with a due date for the payment. The merchant sends it to a customer so that they can get paid for these items. 

How does an invoice work?

Unlike a bill that you receive at a restaurant or at a grocery store, an invoice is different, with more details and with different terms for payment.

First, it starts out with the business in question ensuring that the customer receives the relevant set of goods or services, setting out the payment amount and payment terms that need to be fulfilled, as well as the due date for the payment.

You can send invoices via email, post, fax, or any other communication method that you may have available at your disposal.

Why is invoicing required?

Invoicing is required because it serves as a legal document that indicates that goods or services were actually delivered and that the amount on the invoice is owing or has been paid.

Money is still owing? You, as a merchant, can issue a claim against the customer based on the unpaid amount in a court of law to seek redress and receive the payment that’s due.

If an invoice has been paid, it can serve as proof of payment that goods have been delivered or that merchants have rendered services, thereby reducing liability for a claim against them for undelivered goods/services. 

How can you use one?

It’s a means of recording a service provided or a product sold legally, enabling better tracking, analytics, and reporting, as well as ensuring that a business can undertake a historical analysis to predict or expect projected future sales. 

What are the key features of an invoice?

Now that you know how to use it, it’s also important to know what an invoice looks like.

How does an invoice looks like

Here are some requirements in terms of what to include on an invoice:

  1. It needs to indicate what type of document it is
  2. The issue date
  3. Some form of identification number
  4. The merchant’s VAT number
  5. The customer’s VAT number
  6. The customer’s full name and address
  7. The quantity and type of goods which were supplied or services rendered
  8. The date when goods/services were supplied 
  9. The payment date
  10. Taxable amounts
  11. The applicable VAT rate
  12. The VAT amount payable
  13. Discounts, if these are applicable
  14. Shipping
  15. Payment terms 
  16. Unit costs
  17. Any other terms that may have been agreed upon during the transaction

What types of invoices are there?

Here are 5 most common ones:


This type of invoice notes the sale between the merchant and the customer. It is a requirement for payment to be made on a certain date and is the most common type. 


Usually used for international shipments, it is generally a requirement by customs officials and contains a cost description that is relatively detailed. Remember that every shipment in EU and UK customs procedures must also contain an EORI number


As the name implies, this is an invoice that is usually sent to a customer for recurring services/products delivered, as well as the need for recurring payments. Subscriptions are good examples. 

Pro forma

A pro forma invoice is a “bill of sale” that is sent before delivery or a shipment. It will typically include the delivery items, shipping weight, and transport charges, excluding the cross-border fees for sellers.

These types of invoices are generally used for international shipments and can serve in front of customs. Its terms of sale can usually be subject to change. 


Merchants typically use these invoices when a merchant wishes to charge VAT on a sale or when they seek to reclaim the VAT charged on the goods or services that are purchased by a customer.

These usually only apply to businesses that are VAT registered.

What are the legal impacts of an invoice?

The submission of an invoice is a request for payment to be made by a certain date. It has legal ramifications, as a merchant can sue a customer for an unpaid product or service.

In addition, invoices are important for auditing as well as accounting reasons. 

How to send an invoice?

How to issue and send an invoice

One way is to create an invoice from scratch each time you need to bill a customer. Another way is to create a template, which will be consistently used and applied to all future invoices. 

However, the two points just mentioned can be time-consuming and can cause chaos rather than help you stay organised. 

Therefore, myPOS has developed a value-added invoicing service to help you stay on top of your needs and keep your business “in cadence”. With myPOS Invoicing, you can let your customers pay you directly and instantly online via card or by bank transfer. 

Some of the benefits you can enjoy with this service include:

  • Customise your invoices with your logo and brand colours
  • Automatically calculate taxes and discounts
  • Track status in real-time and get instant notifications

And the best part? There are three payment plans for you to choose from – Free, Annual Unlimited plan, or Monthly Unlimited Plan. This is ideal for your business as you can choose the most affordable plan to suit your needs best. 


As mentioned above, invoicing is not exactly the most exciting part of doing business, but it’s quite necessary if you would like to keep track of all your payments due and comply with the law.

There are several types of invoices that you can send, but the fundamental characteristics remain the same. Ultimately, this is a document that records when a payment is due in the future, how much is owed, for what, and by whom.

If you’re struggling to navigate the world of invoicing, let myPOS help ease this pain point for you! With the Invoicing service described above, you can quickly and smoothly create and send your invoices, allowing your customers to pay you in ways that are convenient for them.

Disclaimer: Please be aware that the contents of this article and the myPOS Blog, in general, should not be interpreted as legal, monetary, tax, or any other kind of professional advice. You should always seek to consult with a professional before taking action, since the particulars of your situation may materially differ from other cases.

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