Purchase Invoice for Businesses
What is a Purchase Invoice?
A purchase invoice is a document provided by a supplier. It includes details of the goods or services purchased, including the date, amount, purchase order number, invoice number, and payment terms.
When you receive a purchase invoice from your supplier, check the details carefully to ensure no errors. It is much easier to get an invoice corrected before payment is due. Mistakes may include the wrong amount or quantity and no purchase order number quoted or contact name.
A purchase invoice can be any receipt for goods or services, including rent and utility bills.
Payment of a purchase invoice
Try to pay your supplier invoices on time. If there is a problem with cash flow, suggest a short-term payment plan. They will likely take further action if you continually refuse supplier phone calls. The last resort is claiming the money back through the county courts. If this were to happen, you would then need to pay all the costs and interest incurred by your supplier.
If cash flow is tight, you could try a few things to delay payments. The first is only to make payments when they are requested from the supplier.
You could also introduce a cheque run date, such as once a week or once a month. Setting up a system will allow you to keep better control of your finances. Suppliers would then know when they would be paid and not expect a cheque the same day as their phone call.
Try to keep a good relationship with your suppliers. Nothing is worse than phoning up with an order to find your account is on hold. The supplier will only ship goods when payment is made for an outstanding amount, or they will only offer you cash with the order.
Supplier Statements
Your supplier should provide you with a monthly statement of account. Check to see if you have received all the purchase invoices. Also, check that the payments you have made are allocated correctly. If there are any discrepancies, contact them to try to resolve the problem.
Our section on supplier statement section explains how to reconcile them and provides a free Excel template to help. Below is an example of the statement reconciliation.
Credit notes
If you return goods or have agreed on credit with your supplier, it is worth ensuring that the credit note has been issued before you pay the purchase invoice. It is sometimes much easier to sort this out before you pay.
How can I record a purchase invoice in the accounts?
If you operate a computerised accounts system, you can enter the purchase invoice details into the supplier account. Post as much detail as you can: this will help if you need to trace an invoice or find out how much a product costs when you reorder.
If you are running a manual system, keep a list of all your supplier invoices received. Record the following: Invoice Date, Supplier Name, Net Amount, VAT, and Gross Amount. You may also require a short description to help you trace an invoice later.
If you total these up each month, it will inform you of your total monthly purchases.
Filing a purchase invoice
With modern technology, more and more businesses are storing their paperwork on a hard disk or in the cloud. Most accounting software packages allow you to store invoices on the package. Examples of online storage are QuickBooks and Xero. The only problem this may cause in the future is if you change accounting software and lose access to the files.
The other option is a paper-based filing system. The best way to make an invoice easier to find is to file supplier invoices alphabetically and by invoice number order. Filing the newest invoices on top will ensure that they are the easiest to find.
Some accounts departments like to have two files for purchase invoices: one for invoices paid and another for outstanding invoices.
It is legally required to keep all your paperwork for at least six years from the year-end date.
Return from Purchase Invoice to the Bookkeeping Basics page.
