You need an invoice, which is a detailed record of your business transactions, for business and legal reasons. Business reasons include requesting payments and business analysis. The legal reasons include filing taxes and settling business claims. Read on to learn more about why you need an invoice.
You Can Use an Invoice to Analyze Your Business
An invoice is the best way to record the sales made, status of payments, and dates the transactions happened. Such records are invaluable when evaluating your business and your employees’ performance.
You can use invoices to determine the goods or services with the highest sales volume, and those that bring in the highest revenue.
Invoices can also help you identify the top-performing employees, the sales they bring, their top clients, and the times they most of their sales. As a business owner, you can then use that information to grow your business.
You Need an Invoice When Filing Taxes
An invoice provides the best source of data when filing taxes or even carrying out an internal audit. The IRS recommends that all businesses should keep a running record of all business transactions. With a proper invoicing system, it is easy to pay the IRS what you owe.
Without proper invoicing, it is hard to carry out internal audits, which can result in failure to pay all taxes. Worst of all, it can lead to an audit from the IRS and massive penalties if the audit reveals any irregularities or fraud. Moreover, invoices also make it easy to claim tax refunds.
Invoices Offer Legal Proof
Invoices can help both the merchant and the customer prove that they have fulfilled their end of the business. The invoice and the purchase order can prove to the customer what they owe you. It can also help you to explain to the customer why they have to pay what you are asking them to pay.
On their side, a customer can use the invoice and Purchase order to prove they paid what they owe. It is not unheard of for businesses and their customers to disagree when there is no proper record keeping of business transactions.
In such cases, the merchant can lose if they have not been issuing proper invoices that tally with the customer’s purchase orders.
You Need an Invoice to Get Timely Payments
Invoices are crucial in getting paid on time or collecting payments. Most companies can only make payments when they receive invoices for goods and services delivered. Moreover, an invoice allows you to set payment terms and penalties for late payment.
You can then use these payments to make a follow-up. A good practice is to say payment is due upon receipt, after a week, or even after 30 days. However, the terms you agreed on when making the sale, can also influence how you create your invoice.
Why Do You Need an Invoice to Run A Business?
You need an invoice to run your business professionally, and avoid making costly business mistakes, when collecting payment or filing your taxes. While creating invoices can be labor-intensive, there are invoicing tools that make the whole process simple and efficient.
Do you need an invoicing tool that can help you automate the process? Contact us now, and we can help you get an invoicing solution that fits your business.