An invoice is an indispensable and essential part of your business process, as it reflects the transactions within your company in detail. It provides an accurate overview of the goods or services delivered, including all relevant information. Furthermore, an invoice gives a detailed breakdown of the costs, including any taxes and additional charges.
Why Are Invoices Important?
Invoices are very important for business as they facilitate communication between the seller and the buyer. There are various parameters that showcase the main functions of an invoice, such as:
- Legal documentation: An invoice helps in recording the details of a transaction and can also serve as evidence in case of a dispute.
- Payment overview: seller and buyer can see what has been delivered and at what price.
- Tracking revenue: a business keeps invoices to manage internal processes. This helps in tracking sales, tax management, and financial analysis.
In general, an invoice acts as a guarantee that the seller will provide the goods and services and that the buyer will pay for them.
What Should Be on an Invoice?
It’s very important to know what should be included in an invoice. The main components are:
- Full (company) name and address: it’s essential to list the full (company) name and the address of your business on an invoice.
- Customer’s name and address: of course, it’s also important to include details of the other party, namely the name and address of the customer, on the invoice.
- VAT number: when it comes to your VAT identification number, you will have received this when registering your business with the tax authorities. This number can easily be found on the tax authority’s website.
- Chamber of Commerce number: this is the unique number you will have received when registering your business with the Chamber of Commerce. If you have forgotten this number, you can find it on your Chamber of Commerce extract or via the online Business Register.
- Invoice date: the invoice date is also relevant. This is the date on which you sent the invoice. It can help ensure that payment is made within a specified period.
- Unique invoice number: to distinguish invoices from one another, it’s also important to list a unique invoice number.
- Description of goods/services provided: the invoice contains a detailed description of the products or services provided, including features such as the model, brand, color, and more.
- Quantity of goods/services provided: the invoice should contain information about the exact quantity of goods delivered or the volume of services rendered.
- Delivery date: the delivery date is the date on which the goods or services were provided.
- Amount excluding VAT: the total invoice amount, excluding Value Added Tax (VAT), clarifies the net price of goods or services.
- VAT rate: the VAT rate is the percentage of tax applied to the net invoice amount.
- VAT amount: this is calculated by applying the VAT rate to the amount excluding VAT. This helps in accurately determining the total costs, ensuring both seller and buyer understand their tax obligations.
Sometimes it is necessary to include additional information on the invoice, for example, when you do business with other countries.
Explanation Of The Amount
When it comes to selling goods and services in the Netherlands, you can distinguish between three different VAT rates. The standard rate of 21% is applied to most goods and services, and the reduced rate of 9% can be applied to essential items such as medicines and food. The 0% rate applies to certain international trade activities. On the tax authority’s website, you can find exactly what these rates apply to.
What Different Types Of Invoices Are There?
There are various types of invoices. These include:
- Purchase invoice: this is the invoice that the buyer receives from the supplier. It describes the goods or services received, including quantities, prices, and other relevant information.
- Sales invoice: this is the invoice that the seller sends to the buyer, and it contains important details. It is used to request payments.
- Credit note: this is a document issued by the seller to the buyer, reducing the amount the buyer owes to the seller. Typically, it is used in cases of returns, discounts, or errors in the original invoice.
- Pro forma invoice: this is a preliminary invoice sent to customers before the shipment or delivery of goods. It is often used to declare the value of a transaction at customs.
How Do You Create An Invoice?
The billing process varies. First of all, invoices are issued in two ways:
- Manually: this is an older method of creating invoices. The documents are created entirely by hand or using conventional spreadsheets, like paper invoices. The manual method usually takes longer, and errors can occur in the invoices.
- Automated: this process uses specialized software to generate invoices. It is typically more efficient and accurate because the software can pull information from other systems. It also takes less time and offers some additional features, such as online invoicing and the use of invoice templates.
The choice between manual and automated invoicing depends on the specific needs and capabilities of the business.
It should be noted that many businesses use modern invoicing software. It can be integrated into other systems to speed up the process. Typically, it includes additional features.
The software also has invoice templates. By using them, you can save a lot of time when issuing multiple repetitive invoices.
Invoices are sent in two ways:
- By email or via specialized digital portals: these are delivered quickly and can be integrated into other systems, meaning that digital invoices simplify accounting.
- Regular mail: it takes a long time for these invoices to arrive, but some companies consider them more formal.
Simplify The Process With Finom
With Finom, you can create an invoice easily and within seconds, both on PC and smartphone. You can use the desktop version or a handy application for iOS or Android. If needed, you can use the additional feature of automatic field filling and use pre-installed templates.
Creating an invoice usually takes no longer than one minute. Once it’s done, the document can be sent with a single click by mail or via a digital messenger. One advantage is the integration with banking systems; Finom checks all receipts to ensure all payments are completed.
What Are The Legal Aspects Of Invoices?
In this section, we will discuss the legal requirements for invoices in the Netherlands. These include:
- Legal requirements for invoices: these are the rules according to which invoices must be prepared. For instance, the document should contain information such as the company’s name, address, VAT number, and other specific details. Adherence to these rules ensures legal transparency and minimizes the risk of disputes.
- Law on payment terms: this sets the minimum and maximum periods for payment. Adhering to these terms is essential for maintaining cash flow and trust between business partners.
- Invoice retention obligation: companies must keep copies of issued invoices for a specific period, usually for a duration of 7 years. This retention obligation supports both tax compliance and potential future audits or legal proceedings.
- Late payments and consequences: this governs the actions and penalties if an invoice is not paid. A clear understanding of these rules can help both sellers and buyers avoid unnecessary costs and legal complications.
The Netherlands has a clear legal framework for issuing, paying, and retaining invoices. This includes specific requirements for the content of the invoice, payment terms, and obligations for storage.
Conclusion
An invoice is a key element in business processes that facilitates the sale of goods and services and assists in analyzing financial aspects. For both the seller and the buyer, it guarantees the delivery of goods and services, as well as their payment. Generally, the proper management of invoices and their issuance is necessary to comply with Dutch legislation.
