What is a Purchase Invoice? 7 Simple Steps to Create Purchase Invoice Easily

If you are running a small business, a purchase invoice is something you need to know. Without the purchase invoice record, keeping track of business expense finances is next to impossible.

Moreover, purchase invoices help your business avoid fraudulent payments.

Therefore, here we are with a complete guide on what is a purchase invoice and a simple 7-step modus operandi to create a purchase invoice.

So, let’s dive right in.

What is a Purchase Invoice?

The purchase invoice is the invoice used for recording a purchase of the business. It is used to show all the relevant details about a particular expense. Whenever a business buys a product or service, they receive an invoice from the supplier. This invoice is called the purchase invoice for the buyer company.

Did you get it?

If not, let us give you an example.

Suppose Gunther owns a coffeehouse. He buys dairy products as raw materials from the local dairy to run his business. Now, the dairy will issue Gunther an invoice for the products he purchased. Therefore, this invoice will be a purchase invoice for Gunther.

Now don’t get it confused with a purchase order.

A purchase order is generated when a buyer requests goods/services from a supplier. It is generated by the purchaser to let the supplier know about the quantity and the quality of the goods or services they need.

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Purchase Order vs Invoice

Most of the time, new beginners get confused between the purchase order and invoice.

So, let’s discuss the main difference between a purchase order and an invoice.

Purchase Order Purchase Invoice
Issued by the purchaser Issued by the vendor
Shows details about a trade to happen in future Shows details about an ongoing/completed trade
Does not show the final cost Show the final cost
Request goods/services Requests payments

We guess you must be thinking, “if we have the purchase order, then what is the need to create a purchase invoice?”

So, to answer your curiosity, let’s talk about purchase invoice purposes.

What is the Purpose of Purchase Invoice?

What is the purpose of purchase invoice?

  • Bookkeeping

    Bookkeeping is a never-ending task. And when you do a task every day, it surely gets mundane. Thus, purchase invoices are a great way to automate the record-keeping of your business’s expenses. It automatically saves all the details such as goods or services purchased, supplier name, and date of purchase, and for how much money did you purchase the items.

  • Transparency

    The purchase invoice helps modern businesses to keep transactions transparent. By matching a purchase invoice with the purchase order, the purchaser ensures the accuracy of the invoice. Moreover, the authority can anytime check the records for auditing.

  • Tax Purpose

    Taxing is inarguably one of the most complex processes in accounting if you are not prepared well. Your business expenses are as important as business revenues in calculating accurate tax. Keeping track of your expenses can help you save some tax. And as they say, “money saved is money earned.”

  • Legal

    Most of the small businesses can not afford a lawsuit or a fraudulent payment. Thus, a purchase invoice guards the business against all such scenarios. The business sends the purchase invoice to the invoice processing department before paying to ensure the security and legitimacy of the invoice.

    Other than that, the details such as invoice date, due dates, and supplier signature on the purchase invoice help businesses to use the document as a legal agreement between the supplier and the buyer.

Now that we understand the importance of purchase invoices let’s start by gathering the ingredients for a perfect purchase invoice.

Important Elements to Include in a Purchase Invoice

Important elements to include in a purchase invoice

  • Unique Invoice Number

    Assigning a unique invoice number to the purchase invoice is as important as naming your child. This helps you in managing and sorting your purchase invoices. If the invoice number is not mentioned, distinguishing between two similar trades would be a huge task and can lead to confusion, especially in recurring bills.

  • Date of Invoice

    The invoice date is inarguably one of the most important elements of an invoice. It holds great significance in any kind of invoice. It shows you the date of the purchase. If the date is not mentioned on the invoice, it would be a hectic task to figure out the financial year of the invoice.

    Moreover, the invoice date plays a crucial role in legal proceedings too.

  • Vendor Details

    When a company does business with multiple vendors and suppliers, the vendor details on the purchase invoice make the job of the accounting authorities a lot easier. This is not just the industry standard, but the companies are bound by the law to mention vendor details such as supplier company name, logo, and contact details.

  • Customer Details

    If seller details show who issued this invoice, the customer details to whom it was issued. Customer details like customer business name, customer id, logo, and contact details. These details make sure that the invoice is sent to the correct address and keeps away any confusion.

  • Applied Taxes and Discounts

    The purchase invoice should mention the applied taxes and discounts considered as previously agreed. These details should be mentioned to keep the transaction transparent. Not showing the tax and discount calculations might lead to doubts on the client’s end and delay the payment.

    The more precise and straightforward your invoice is, the quicker the customer pays the supplier.

  • The Total Amount

    The total amount is the element most of the customers see first. The fundamental of issuing an invoice is to convey the grand total to be paid for the goods or services rendered. Thus, if the total amount is not stated, the invoice does not serve any purpose. So, make sure your purchase invoice highlights the total amount to be paid.

  • Payment Terms & Conditions

    How is the customer supposed to pay the supplier if they do not know the right channel for paying the due? Therefore a purchase invoice must guide the customers by stating the preferred payment method, due date, currency, account number, and other related information.

    Okay!

    We have all the elements to generate an adequate purchase invoice.

So, what are we waiting for?

Let’s get started.

How to Create a Purchase Invoice?

Creating a purchase invoice can take a lot of time and energy. In addition, by starting from scratch, you have to do the same tasks again and again. Also, if you create purchase bills manually, it might hamper your consistency in layout, which does not leave a professional impression among your business partners.

Therefore, we have come up with a simple yet effective alternative — ”InvoiceOwl”. InvoiceOwl is complete accounting software that helps you generate unlimited bills effortlessly.

Isn’t that exciting news?

So, let’s give you simple steps to create amazing purchase bills with InvoiceOwl.

First of all, to begin with, create a purchase invoice with the InvoiceOwl app, go to the Invoices tab in the left menu bar, click on the “Create an Invoice” button in the upper right corner.

How to create purchase invoice

Alright!

You are all set to create a new invoice. Now, all you have to do is follow the below-mentioned simple steps.

Create purchase invoice

  1. Add Client Details

    To add client details such as client business name, phone number, shipping address, and email id, you must select the client from your client directory. Then, all the related details are automatically inserted while maintaining your invoice theme.

    This automation cuts out significant time and eliminates the room for the ‘fat finger error’.

  2. Add Items

    The next step is to add the details about goods or services purchased with their descriptions, price, and quantity. The best way is to itemize the list and add all the items one by one. And for that, click on the ‘+ Add an item’ button.

    Having said that, you must be thinking adding one item at a time will take a lot of time, right? Well, it could, but not with InvoiceOwl. This app remembers your products and services, and you can add unlimited items only with one click.

  3. Assign Invoice Number

    As discussed above, assigning a unique number to the purchase invoice is essential, and hence it highlights the invoice number category so that it never gets skipped by mistake.

    Furthermore, it automatically assigns all the bills you create in series. However, if you want to number manually, it lets you do that effortlessly.

  4. Mention Invoice Date

    Mentioning the invoice date

    Mentioning the invoice date is a step that can not be skipped, and hence the InvoiceOwl auto-fills the invoice date of the present day. However, just in case if you are creating a pre/post-dated invoice, you may change the date manually and with the help of a virtual calendar.

  5. Mention Invoice Terms and Payment Instruction

    Once you have mentioned the invoice date, you need to mention the invoice terms and the due date. Generally, it depends on the nature of the trade and payment agreements made in the purchase order. Therefore, these details should again be mentioned in the payment instructions. Furthermore, the payment instructions include mode of payment, currency, account number, and similar relative information.

  6. State Subtotal, Discounts, Shipping, and Applied Tax

    The subtotal is the total cost of all the line items. When this is calculated manually, it leaves a big door open for human error. Therefore the subtotal is automatically filled by the app.

    The other columns, such as discounts and applied tax, are mostly consistent. Therefore, you do not have to fill it in every time you create a new purchase invoice. The InvoiceOwl app lets you predefine discounts and applied tax, and it calculates the final figure accordingly.

  7. Highlight the Total Balance

    If you are working with the InvoiceOwl, the total balance due is automatically calculated and highlighted. You just have to confirm the figure and approve the invoice to be sent.

    Hurray! You are done.

    Yes, you read it right.

    Your unique and new invoice is ready to be issued. Now you can preview the created invoice within the app and send it directly via mail. Or, the app lets you download the invoice as a PDF file for printing.

Download Purchase Invoice Template for Free

If you don’t want to start from scratch, you need to download the free purchase invoice template by InvoiceOwl. This invoicing app provides you with a highly customizable invoice template and helps you speed up the entire invoicing process.

Purchase Invoice Template

Word Doc of Purchase invoice template

Purchase Invoice Template

Excel of Purchase invoice template

Purchase Invoice Template

PDF of Purchase invoice template

Frequently Asked Questions

What is a purchase invoice document?

The purchase invoice document is to show the details of a purchase made by the business. It is the opposite of the sales invoice. A sales invoice records revenue, and the purchase invoice records expenses of a business.


What is a purchase invoice in accounting?

The organization that buys a product or service as its raw materials receives a purchase invoice. It tracks the inventory outflow of an organization. For accounting a purchase invoice, debit the accounts payable and credit the inventory.


What is a purchase invoice number?

A purchase invoice number is a reference id of the particular purchase invoice. Every purchase invoice has a unique invoice number. It helps in sorting, managing, and auditing a business transaction.


What is a purchase invoice reserve?

The product or service which is delivered but not invoiced yet is called purchase invoice reserve.


What is a late purchase invoice?

A late purchase invoice is another name for the overdue purchase invoice. A late purchase invoice is an invoice yet to be paid.

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Conclusion

Creating a purchase invoice needs a lot of attention and coordination from multiple departments of an organization. Being a small business, it might be tough for many organizations to invest so much time. Thus, InvoiceOwl is here to help you win the invoicing game in 7 simple steps.