Why Is It Necesaary To Raise An Invoice? How Is It Beneficial To The Business?

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Somewhat a promissory note issued by the seller to the customer/buyer, an invoice is a billing document that stands legal in the court of law. In simpler terms, it conveys the total amount that a customer has to pay to the maker/seller for the product or service that he/she has availed. Needless to say that raising the invoice can be done before or after the transaction solely depending on the nature of the business.

Usually, in most service and product industries, a certain percentage is promised to pay before the undertaken job and the remnant after the product/service has been delivered. Irrespective of the industry, the act of raising an invoice is imperative to the smooth functioning of the business. But before moving to its advantages, let us know a bit more about the usual contents of an invoice.

The top of the invoice generally contains the name or logo of your business along with its address (both shipping and billing) and the contact details. The next important part is the tenure or duration of the services offered compulsorily having the Invoice date and the due date. Under the new goods and services tax (GST) regime, an invoice reference number should also be appended to the invoice. It will also make it easy to keep track of the payments. Now comes the billing part.

A table can be constructed for easy comprehension. The names of the service or the product(s) are mentioned. They are followed by the quantity (if applicable). Next comes the price per unit, and following that comes to the total amount. Below the table, you may mention the modes of payments and your account number. Also, it has now become mandatory for businesses to have a GSTIN number as per Government of India directives. Do add that too.

Make sure that all the invoices leaving from your end are duly verified and signed. Unlike the previous times where bills were signed by a pen, nowadays the provision of a digital signature is also available. Indeed, this technology is safer and does away with the tediousness of printing and then signing the paper. You can download emsigner for GST for digitally signing even GST and GST return forms.

There are a lot of apps and software for creating invoices online. You can also use something as simple as Microsoft Excel to create an invoice template. Now that we’re clear with what an invoice entails, let us move to the ‘why’ part. Let’s see how raising an invoice will benefit your business:

  1. Reduce Turnaround Time

Imagine sending the bill amount to your customer on mail. Now, the next question he’ll be asking is quite obvious: “How come this much?” And now you’ll be explaining the whole invoice on a phone call or a mail. Later you’ll also be sending him your account number where the amount has to be transferred. Phew! Way too much work.

Now you might be getting a faint idea as to why raising an invoice is so important. Therefore, having a well-organized invoice system will not only help you to save your and your customer’s time but also reduce everyone’s work. The duration prescribed by the government for issuing an invoice to the customer varies for goods and services. For goods, the issuance can be done at any point in time before its delivery. For services though, it should be done within a 30-day period from the date of initiation of the service.

  1. Simplifies Bookkeeping

Having the record of invoices always simplifies the already complex job of accounting. Keeping track of all the payments (done and due) with the help of the reference number of your invoices would definitely be a help for you at the end of the month when the billing time enters.

Not only this, but it will also make it easier to track any old bills or their details just by looking up the reference number. And God forbid, but if your accountant leaves and you have to replace him, the new employee will not have a problem at deciphering his handover.

  1. Legal Purposes

If a client is consistently avoiding you after completion of his work or if someone is wrongly accusing your company of a civil problem, then the invoice records can come in handy for solving these litigation issues. Remember that the invoice is the document that puts the deal done between you and your customers on paper, which is very important.

  1. For a Professional Look

Although GST invoice raising is mandatory as per the government norms, if you’re still evading it, we have another reason that might change your mind: For a better brand image in the eyes of your customer. Any business that is issuing a well-designed invoice with its logo on the top automatically receives slightly more attention than its non-invoicing counterpart.

Invoicing is something that has been followed long before the modern era of running a business, even before electronics came to the fore of calculations and business accounting. There used to be chits of paper, with similar details as present invoices, written for the reference of customers and businesses. What the modern invoicing process does well is, it makes the document legal. This means that it can be submitted in a court of law, when the need arises. The digital signatures make invoices a credible source of evidence for any matters that are applicable.

We hope that the importance of raising and recording invoices for your business is quite clear to you. Like all other small tasks that have some advantages in running a business, keeping invoices will definitely be advantageous to your setup when done right.

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