What Is the Purpose of an Invoice?

An invoice does three jobs. It asks the customer to pay a set amount by a set date; it records the sale in your books, as the document behind the amount the customer owes you; and it backs up the income on your tax return. Each job is a reason to send the invoice promptly, number it, and keep a copy.

Billed publishes this page. Quotes are from the open textbook Principles of Accounting, Volume 1: Financial Accounting (OpenStax), sections 7.1 and 9.1, and from the IRS's Publication 583 (revised December 2024), which covers US federal tax; all were opened on October 30, 2026. For how to put an invoice together, see how to create a professional invoice; for how it differs from a receipt, invoice vs. receipt.

1. It asks for payment, on stated terms

When you deliver first and get paid later, the customer owes you money until they pay. OpenStax says: "Accounts receivable is an outstanding customer debt on a credit sale." It adds that, in that case, "The customer would then be sent an invoice with credit payment terms."

The invoice is where the amount and the terms are written down: what's owed, by when, and how to pay. OpenStax's sample invoice in section 7.1 shows this: "Note the terms (agreements about payments) are listed at the top." For the terms themselves, see invoice payment terms explained and net 30 payment terms.

2. It records the sale in your books

An invoice is a source document. OpenStax says: "A source document is the original document that provides evidence that a transaction occurred." Your bookkeeping starts from it: the invoice is what supports the amount you record as owed to you, and as a sale.

It also helps you apply payments correctly. OpenStax describes the remittance advice, the part of a bill a customer returns with a payment: "A remittance advice is a document that customers send along with checks and informs the recipient as to which invoice the customer is paying for." That only works if each invoice has its own number, so a payment can name it. For keeping track of what's still unpaid, see what is accounts receivable and how to track invoices.

3. It backs up your income for tax (US)

From IRS Publication 583, for US federal tax:

• "Gross receipts are the income you receive from your business. You should keep supporting documents that show the amounts and sources of your gross receipts."
• Its list of "Documents that show gross receipts" includes invoices, alongside items such as bank deposit slips and receipt books.

So a copy of each invoice you send is part of your tax records. Ask your accountant how long to keep them and in what form.

Sample: one invoice from sending to paid

The business and figures here are a sample, invented for this example.

A copywriter sends invoice #1042 on March 3, 2026, for $1,500, net 30. March 3 + 30 days = April 2, 2026, the due date.

1. Sent, March 3: the customer owes $1,500. That's the accounts receivable balance for #1042.
2. Part payment, March 20: the customer pays $500 and names #1042 with the payment. $1,500 − $500 = $1,000 still owed.
3. Final payment, April 2: the customer pays $1,000. $1,000 − $1,000 = $0 owed, on the due date.

Check: $500 + $1,000 = $1,500, the invoice total. The invoice and the two deposit records together show where the $1,500 of income came from.

Where Billed fits

Billed's invoice software page says: "Set a due date on each invoice so your client knows when to pay." It also says: "Made a mistake while creating an invoice? Void it in Billed for better accounting." For other kinds of invoice, see what is a proforma invoice and invoice payment; to make one in Word, see how to make an invoice with Word.

Related Articles

• What Is an Invoice?
• How to Create a Professional Invoice
• Invoice vs. Receipt: Key Differences for Businesses
• Invoice Payment Terms Explained

Frequently Asked Questions

What is the main purpose of an invoice?

To ask the customer to pay a set amount by a set date. It also records the sale in your books and supports the income on your tax return.

Why does an invoice need a number?

So each payment can be matched to the invoice it pays. OpenStax says a remittance advice "informs the recipient as to which invoice the customer is paying for," which only works if every invoice can be named.

Why should I keep copies of my invoices?

In the US, IRS Publication 583 says: "You should keep supporting documents that show the amounts and sources of your gross receipts." Invoices are on its list of documents that show gross receipts. Ask your accountant how long to keep them.

Is an invoice the same as a receipt?

No. An invoice asks for payment; a receipt confirms that a payment was made.