What Is a Purchase Invoice?

A purchase invoice is a formal document that includes precise details on the products and services purchased by the customer. It includes the costs of the items, the terms of the purchase agreement, and any discounts offered to the customers. This document also mentions the costs corresponding to the products and services. It is sent to the buyer after they have bought the products and services. The aim is to ensure that the invoice matches the purchase incurred by the customer.

The purchase invoice must include elements like:

• Brief descriptions of products and services purchased by the buyer.

• The quantity of the items mentioned alongside the respective goods.

• Unit costs of each product.

• Overall costs of the purchase.

• Date of purchase.

• Name, contact details, and address of the seller

What Is a Purchase Invoice Used For?

Purchase invoices also called purchase statements are crucial in relation to the purchase order. The purpose of a purchase invoice is to provide a record of the purchase for both the buyer and the seller.

It is used for the following:

• It is critical for small businesses to track expenses and revenue.

• It ensures a written record of the goods and services provided to the consumers and tracks the transactions.

• It tracks the amounts charged to the customers and maintains the records for completed and pending orders or payments.

• Purchase invoices are used to document the transactions between buyers and sellers and keep the purchase operations visible.

• Purchase invoices include details such as the date of the transaction, the names and addresses of the buyer and seller, a description of the goods or services purchased, the quantity, the price, any applicable taxes, and the total amount due.

• Keeping track of purchase invoices simplifies the auditing process, allows businesses to settle accounts fast, and expedites the taxation process.

Components of Purchase Invoice Format

Purchase invoice includes details on a specific buy transaction incurred between the buyer and the seller. The important components of the purchase invoice format are listed below:

• Title - The invoice must be labeled properly as "Purchase Invoice".

• Invoice Number - The invoice number uniquely identifies the purchase transaction agreement for future reference.

• Date of Issuance - It includes the date when the purchase invoice was issued and sent to the customer.

• Vendor Details - Includes information on the business providing the goods and services. Information like name, address, email, and other contact details are presented here.

• Description of Items - The invoice must contain detailed and easy-to-understand information on the goods provided by the business.

• Quantity and Total Value - The quantity and the value of the goods with the unit price and total price must be mentioned in the invoice.

• Currency - Denomination must be mentioned in the transaction along with the specification of the legal medium of exchange involved for the goods and services.

How to Create a Purchase Invoice Format?

It is important to understand how to construct the purchase invoice to track the costs of purchases and track the payments made by the business. Here is how you can create a purchase invoice:

• Choose the software or invoice tool of your choice. In the software, you will find an option for "New", "Add", or a "Plus" sign to add a new purchase invoice.

• Choose the supplier or vendor, you can choose the existing vendor or add a new vendor. Enter the details of the vendor to register it on the portal.

• The next step is to add the details of the date and time of the issue of the invoice. You must recheck the data input in the checkboxes and ensures it is error-free.

• Enter brief descriptions of the products and services.

• Fill in the remaining fields of the invoice, if applicable like the due date, unit cost, quantity of the products, and other details.

• You can also add details on the discounts offered by the supplier and update the information, as required.

• Save the invoice details and click submit. The invoice is saved.

• The purchase will automatically be saved in the resource ledgers, financial records, vendor payments columns, and inventory for enhanced accessibility.

FAQs on Purchase Invoice Format

Why is a purchase invoice important?

A purchase invoice format is important for SMEs to keep a record of goods and services purchased by the buyer and keep a tab on the payments completed by them.

What is the difference between a purchase invoice and a sales invoice?

The main difference between a purchase invoice and a sales invoice is the direction of the transaction from the buyer or seller's perspective. A purchase invoice will be the term used for invoices received by the buyer for goods purchased by him from a supplier. On the other hand, a sales invoice is a term used by a seller when he has sold goods and services to his customer and requests payment for the same.

Can I customize my purchase invoice format?

Yes, it is possible to make custom invoices format based on the software or program chosen by your business. You can also use ready-to-use purchase invoice formats and add additional details to them.

What should a purchase invoice format include?

A purchase invoice format must include elements like a header, invoice number, business location, contact details, a brief description of goods and services, and payment terms.

What is the difference between a purchase order and an invoice?

The key difference between a purchase order and a purchase invoice is in terms of fulfillment of necessary actions. A purchase order is published by a buyer when they request goods or services from a vendor, whereas a purchase invoice is received by the buyer after the order is fulfilled and they have received the goods.