For business owners who own and run an online store, you probably already know that invoices must be sent to your customers for the services you provide or the goods you sell, as a form of purchase proof. Invoices act as official transaction documents that are both important for you and your customer in case there are any disputes in the transaction.
Read on to find out what an invoice is, why you should always prepare invoices, what should be included in an e-invoice and the difference between e-invoices and traditional invoices.
By the way, if you use Amazon, Carousell, Shopify or any e-commerce platforms and want to stay on top of your accounting documents, our expert accountants specialised in e-commerce can help you with your questions. Otherwise, read on for the basics of creating an invoice for e-commerce businesses.
What Is An Invoice?
Invoices play a paramount part in your accounting and tax purposes. It is also the main reason why you, as a business owner, should not be careless or haphazard in dealing with invoices, be it for a brick-and-mortar or e-commerce business. An invoice is used to keep track of all items or services you sold and monitor every transaction record accurately.
Well, traditional invoices or receipts are relatively simpler and straightforward because they are issued by a retail store. Customers walk into the store and purchase a service or product, and are given proof of transaction for their purchase. The retail store will be issuing a receipt that is based in a fixed territory.
E-invoices are a bit different, as taxation is always territory-specific. An e-commerce store is operated on the world wide web, which means that your customers can come from a variety of different countries. You may be based in Singapore, but your customers can be living in Japan, Korea or the United States.
In the following points, we will include some important pieces of information that you should include when designing an invoice for your e-commerce business.
What Kind Of E-commerce Invoice Should You Prepare?
Firstly, look at what type of online business you are running. These can include but are not limited to:
- Business to Business (B2B)
- Business to Consumer (B2C)
- Consumer to Consumer (C2C)
- Consumer to Business (C2B)
When it comes to invoices, you should have firm policies in place that are stated clearly on your e-commerce website or invoice. Some common policies that you can state in your invoice are:
- Is payment required up front?
- Do you offer instalment payment options?
- When is the deadline for payment to be made?
- Are you implementing any late charges?
- What type of payments do you accept?
- What are your refund and return policies?
A refund and return policy are important when it comes to goods. You can choose to include these terms and conditions in your invoice.
- No refunds or exchanges once the item is delivered successfully.
- No refunds or exchanges unless the item is defective.
- Partial refund for defective goods.
- One to one exchange within seven days.
- Strictly no refunds or exchanges.
- Change of mind is not applicable as a reason for refund or exchange.
Why It’s So Important To Prepare Invoices
If you're just getting started with bookkeeping, here's what you need to know.
Apart from keeping track of all items and services sold, invoices also play an essential role in your business’ bookkeeping. Bookkeeping is pivotal to small businesses - having an accurate and well-maintained set of books can help your business, especially when you’re just starting.
The more transactions you need to record, the more complicated your bookkeeping system will be. Nonetheless, bookkeeping is essential if you want your business to survive and thrive, despite it being a tedious activity. Not to worry though, Osome’s software provides you with the service you need to keep your bookkeeping in check.
No matter where you are, talk to us if you have a business and are struggling with bookkeeping matters, or are simply interested to know how we can help you.
What Should You Include In An E-commerce Invoice?
When designing an e-commerce invoice, you want to be as clear as possible and include all relevant pieces of information. If you are going the minimal route, be sure that your e-commerce invoice still includes a certain minimum level of information.
Here is some information you can consider adding to your invoice based on your business:
- Include the word “invoice” prominently
- Unique Invoice Serial Number (invoice number)
- Your Official Business Name, and Any Secondary Names (Supplier Information)
- Contact Information
- Date of Invoice
- Taxation and Other Business Registration Codes
- Client Details (Customer Information)
- Item Description
- Additions and Deductions to Costs
- Details and Modes of Payment
- Sales Tax
- Total Amount Due
- Terms and Conditions
In some ways, an e-commerce invoice is similar to a normal invoice. A digital invoice will be in the form of a PDF or Word file that can be sent through electronic means, such as an email. In some less common cases, invoices will come as a scanned image.
Take Note of Tax Rules When Selling Outside Your Country
Selling within your country is somewhat less intimidating, as you are certain and used to the tax rules and what you need in the invoice itself. The question is, what if you are selling internationally? Do the same rules apply when issuing invoices?
When you start an e-commerce business online, you may want to expand out of your country and sell your products and services internationally. Keep in mind that tax authorities are usually more strict on overseas sales, which is also why you should always issue a proper tax invoice with international shipments. In some countries, your business must issue proper invoices, with many e-commerce businesses choosing to add invoices into their shipment packages together with return forms and packing slips.
Here are some tips to take note of before you start selling in a particular country that is out of your home country.
- What tax rules apply in that country or jurisdiction?
- Do you need to charge taxes to your customer?
- Is your invoice design compliant with that country’s tax legislation?
- What language should your invoices be in?
- What mandatory information do you have to include when you sell internationally?
Remember that because each country’s legislation and tax rules are different, you may need to customise your invoice design to suit each country to stay compliant. This can be a tedious process if you do not know how and where to get started.
If in doubt, leave it to the professionals. At Osome, we have a dedicated and professional team to assist you and answer all questions you have about how to stay a compliant company in Hong Kong by getting on top of taxes and accounting. All you have to do is to focus on growing your business.