If you’re in business and you want to be paid for some goods or services you have supplied, you need to issue a document called an invoice. This will provide details of your business, what you have supplied, the amount, any other charges, and any Value Added Tax. The bottom line of this invoice will show what you are owed.
Your customer may pay the invoice at once, or they may sit on it for a while, in which case you are said to be giving credit. If your customer loses the invoice, then you will need to give them a replacement document. This is normally labelled copy invoice to draw attention to the fact that an original invoice has been issued and you do not wish to be paid twice, which merely causes other complications.
If you send several invoices to a customer, then you may be asked to send a statement showing all outstanding invoices due, and giving a total, so that your customer can settle them all with a single payment. These statements are normally sent on the first day of each new month.
If a customer queries your invoice, and you agree to reduce the amount shown or even to cancel it, then you need to send a document called a credit note to show the amount of the reduction. Credit notes are traditionally printed in bright red.
Sometimes we can have a big sophisticated customer and relatively unsophisticated suppliers. The customer may start issued self-billing invoices on behalf of the suppliers. These are like invoices from the customer to himself or herself, but they represent the invoice that the supplier should have sent. If the customer then requires a credit note, he or she will instead issue a debit note. Sometimes buyers with plenty of clout issue debit notes as an expression of opinion that they ought to receive a credit note even when the supplier is perfectly competent in the production of commercial documents.
When goods are supplied, it used to be the case that the invoice travelled with them. However this often got lost in the warehouse or the excitement of delivery, so modern practice is to send the invoice separately and include a delivery note with the goods.
Value Added Tax can only be claimed as a deductible input on the evidence of an invoice, and it should be adjusted on receipt of a credit note or an accepted debit note. VAT cannot be claimed on the evidence of a statement or a delivery note.