What is Invoicing | A Guide for Small & Medium Businesses in 2024

An invoice is an important document that records a sale or supply of goods from a seller to a buyer. The GST (Goods and Services Tax) law in India has set some rules and guidelines for creating a tax invoice, using an invoice, and sharing an invoice. This page will make you aware of the key elements of invoicing and billing. 

Whether you’re an aspiring businessman, an entrepreneur, or an established business owner, having the right knowledge about billing and invoicing is crucial. 

If you are thorough with the fundamental aspects of invoicing, you can ensure that your business is following the right billing practices, compliant with regulatory requirements, and generating accurate and efficient invoices. 

This page with the invoicing guide will help you understand the basics of invoicing, types of invoices, invoice format, legal requirements, invoice management, common challenges in invoicing, upgrading to automation, future trends, and much more. 

Format & Contents of an Invoice

In this page we will predominantly talk about the regular invoice, also called as sales invoice. This section explains about invoice format, GST invoice format and contents of a sales invoice. 

Standard Invoice Format

Standard invoices should have a common format for all the transactions as per the industry standards. Following a consistent format makes it easy for businesses to generate invoices and also create a brand image. An invoice must contain all the information a customer requires to make payments and should also provide an opportunity to address any questions.

How to Create an Invoice

An invoice can be created in different ways. Some of the most common ways to create invoices are listed below – 

• Manual – Pen & Paper-based Invoices
• Online Invoice Templates
• Online Invoice Generator 
• Word Processing Tools – Word, Excel, Docs
• Billing Software

How to Create Invoices Manually 

Manual invoices are handwritten paper bills. Despite the advancement of technology, some businesses still rely on pen-and-paper methods to create bills. This method might seem easy and convenient, but just entering the product names, prices, and the total amount on a blank paper does not make it a valid bill. It might act as a reference document for the customer to know the prices, but for accounting purposes, it is of no use. Hence, it is highly recommended not to create paper bills. 

Creating Invoices Using Word, Excel, and Docs

Instead of using paper bills, you can use word processing software like Word, Excel, and Google Docs to create invoice templates of your choice. This method provides you with an option to tailor your invoices to your needs. You can create invoice formats in Word, invoice templates in Excel, invoice formats in PDF, and bill formats in Docs. Once you create a template using any of these tools, you can either fill the templates online or take a printout of them and fill them out manually. 

Creating Invoices Using Invoice Templates

If you don’t want to take the hassle of creating invoice formats from scratch, you can use ready-to-use invoice templates available online. You can download such invoice templates, take a printout of the same and use them to create bills. However, even while using the templates, you need to enter the information manually using a pen and hand it over to your customers. 

Creating Invoices Using Online Invoice Generators

To completely avoid pen and paper-based invoice creation, you can rely on free online invoice generators. These free tools help businesses to generate printed invoices. Choose a reliable online bill generator, pick a template that suits your needs, enter the required information in the bill, and print or download the invoice. Online-generated invoices look professional compared to hand-written invoices and paper bills. 

Invoice Creation Using Billing Software

All the methods mentioned above have their own drawbacks. While manual bill generation is not possible in a hectic billing environment, relying on free resources with your business information is not a secure option. One solution that can effectively overcome all the challenges posed by all the invoice generation methods is to have billing software in place. 

A billing software, preferably cloud-based, is a very handy tool for businesses to generate invoices without much trouble. With auto-populated data options, the software significantly minimises data entry and other billing errors. As in cloud software, the data is end-to-end encrypted and is securely stored in remote servers, you don’t have to worry about the safety and security of your business information.

The cloud-based setup also makes it an affordable billing solution for businesses of all sizes, especially small and medium enterprises. 

Using Automation to Avoid Billing Errors & Streamline Your Billing Process

If you are still using manual billing or any other method that is inconsistent with the current regulatory requirements and the market standards, it’s high time you consider upgrading your billing system. 

One of the best billing solutions that could resolve most of the billing challenges, especially those with manual billing, is to use an automated system like billing or invoicing software. 

An efficient billing system significantly reduces billing errors, making billing faster and more accurate. It also helps you streamline your billing operations by providing prompt invoice delivery options, enabling efficient payment methods, invoice tracking, auto-reminders, dispute resolutions, report generation, etc.