Last updated: April 27, 2022
What is an invoice?
An invoice is a form that a business, proprietor, or service provider uses to request payment from a
customer or client. Some businesses use the terms sales invoice or purchase
invoice. Generally, invoices are for commercial use and list the products or services that a customer
or client has received, the itemized prices, and the total owing amount.
If a seller ships products to a customer, they usually send the invoice with the delivery. Alternatively, a
seller or service provider may send an invoice by mail or email or deliver it in person.
Why should I use an invoice or invoice template?
If you are a commercial seller or independent service provider, you should use an invoice for the following
reasons:
- Conveys professionalism: Whether you are operating a business or you are an independent
contractor, using invoices helps show customers and clients that you are a professional who they can trust.
Building trust with customers and clients helps with growth and retention.
- Provides clarity: Invoices present customers and clients with a breakdown of the pricing so
they can understand exactly what they are paying for. Without a breakdown of pricing, customers and clients may
have to email or phone, which can be a hassle for both them and you.
- Keeps you organized: Creating invoices is essential for keeping your financial files
organized. Having organized files can help during tax season. Also, invoices help you track outstanding
payments.
- Encourages timely payment: By providing customers and clients with invoices, you give them
the opportunity to pay you without you having to reach out for payment. Invoices can serve as a reminder to them
that payment is outstanding.
- May provide legal protection: If a client or customer does not pay you and you have to take
legal action, having a paper trail can be very helpful. By having a record of the date that you requested
payment, you can better present your case.
Using an invoice template is a great option because it makes your invoices consistent and
professional. Also, invoice templates are incredibly easy to use.
Our simple invoice template is perfect for small business owners, freelancers, contractors, consultants, service
providers, and more. It is customized to Canadian currency and allows you to create a single invoice or a reusable
template. A reusable template gives you a blank invoice you can fill in repeatedly for new transactions.
Invoices versus receipts
Invoices are different from receipts. Invoices allow you to make payment requests.
Alternatively, a sales receipt acts as proof of payment.
If you need to create a proof of payment when selling or buying an item, consider using a Bill of Sale.
How do I make an invoice?
When you create an invoice you may include some or all of the following information:
- Invoice number
- Purchase order number (PO number)
- Purchase order date (the date the customer creates the purchase order)
- Shipping information, including the shipping address, mode of transport, the weight of the package, and the
number of pieces being shipped
- Seller and buyer details, such as their names and addresses
- Sales tax information
- Item details, including the item’s name, description, price, and quantity
- Shipping and handling information (if applicable)
- Insurance information
If you are a service provider or contractor, your invoices may be simple and not include things like purchase
order numbers. If you are a supplier that sells or ships goods, your invoices may include things like purchase
order numbers and shipping information.
What is an invoice number?
An invoice number is a unique, identifying number that you designate to an invoice. Invoice
numbers help you track transactions and payments for a specific order. Invoice numbers should
contain numbers, letters, or a combination of both.
Invoice numbers are an extremely important part of an invoice because they identify a specific purchase with its
corresponding payment from the client or customer.
How do I assign invoice numbers?
There are two ways you can assign invoice numbers. Generally, contractors and small businesses will number
invoices sequentially or chronologically.
- Sequentially: If you choose to number invoices sequentially, assign your first invoice with a
number, such as 1000000. The next invoice’s number would then follow in the numerical sequence. In this
case, the next invoice number would be 1000001.
- Chronologically: If you choose to number invoices chronologically, insert an invoice’s
date into the invoice number along with a sequential number. For example, if you made an invoice for a customer
on September 5, 2021, the invoice number could be 20210905-01.
Regardless of whether you assign invoice numbers sequentially or chronologically, it’s important to make
every invoice number unique.
Additionally, you may choose to include an assigned customer number at the beginning of an invoice number and
separate it by a hyphen. Including customer numbers can help you easily identify invoices for your different
customers.
You may include letters in an invoice number to help you further organize and identify customers, orders, and
projects.
Which tax do I collect in an invoice?
In Canada, the taxation rate depends on the place of supply, which is the province
or territory where you make your sale or sell your services. Therefore, if you own an Albertan retail
store and sell to a customer in Ontario, you should charge Ontario’s tax rate.
The current rates for taxable goods and services are:
- 5% (GST) in Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec,
Saskatchewan, and Yukon
- 13% (HST) in Ontario
- 15% (HST) in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island
GST stands for goods and services tax. HST stands for harmonized sales tax
which means that the GST has been combined with the provincial sales tax. Most goods and services supplied in or
imported into Canada are subject to GST or HST.
How long should I keep and store paid invoices?
The Government of Canada states that you must keep all required records
and supporting documents for a period of six years from the end of the last tax year they relate to. Blue-Pencil.ca reiterates this recommendation by stating that standard practice is for
businesses to keep all important business documents for six to seven years.
