The A/R invoice

If companies want to claim money from their customers for delivered goods or services, they write invoices. In order to be binding in the general sense, and valid in the case of taxation, invoices must meet certain re­quire­ments. One of the most important invoice types for any company is the accounts re­ceiv­able (A/R) invoice. But what is the defin­i­tion of an outgoing invoice? What in­form­a­tion should be included in the document, and what else does the issuer of an A/R invoice have to keep in mind?

An invoice is referred to as an A/R invoice from the per­spect­ive of an invoicing party and as an A/P invoice from the per­spect­ive of the invoice recipient. The basis for such an invoice is usually a contract concluded between two trading partners in which the delivery and re­mu­ner­a­tion to be paid for were agreed. The invoice has a different function for each of the two con­tract­ing parties:

• It is used by the issuing company to request payment from the customer for goods and/or services that have been delivered. It is therefore a written request for payment.
• It enables the customer to check the services, for example, whether quant­it­ies of goods or working hours are listed correctly.

Outgoing invoices must, by defin­i­tion, be made out in writing. They should therefore be printed out and mailed or sent digitally by e-mail. An oral invoice is not legally binding.

A/R invoices have an important function in ac­count­ing. They are used to create re­ceiv­ables from customers that appear on the assets side of the balance sheet. If the invoices are then paid (you can also record this as revenue when the service has been provided and billed, but not yet paid) the amounts appear as revenues in the profit and loss account – accounted for in double entry book­keep­ing. If a customer is in arrears with their payment, outgoing invoices also serve as a basis for reminders.

The outgoing invoice is also of central im­port­ance for VAT. On the one hand, it is used to determine the amount of VAT that the issuing company may owe the tax office for the relevant delivery or service. For this purpose, it must also show the tax in the invoice. When it must actually pay this tax depends on various factors (advance VAT returns, target or actual taxation, as well as special cases). On the other hand, the invoice may serve the recipient as a basis for claiming the VAT paid to the supplier as input tax from the tax office and re­cov­er­ing it.

For an A/R invoice to be legally binding, companies must provide certain in­form­a­tion in the document. The following in­form­a­tion is required:

• Name and address of the invoicing party (including the type of company, if ap­plic­able)
• Name and address of the invoice recipient
• Tax number or sales iden­ti­fic­a­tion number
• Invoice date
• Con­sec­ut­ive invoice number
• Time of delivery or period of service provision
• The quantity and de­scrip­tion of the goods or services supplied (in­di­vidu­ally and broken down by quantity or volume)
• Net invoice amounts, broken down by VAT rate
• VAT rate
• Gross invoice amount
• In­dic­a­tions of pre­vi­ously agreed discounts, bonuses or rebates (if offered)

For smaller invoices, less data is required. The mandatory data for these so-called small amount invoices include:

• Name and address of the invoicing party
• Invoice date
• The de­scrip­tion of the goods and services supplied (in­di­vidu­ally and broken down by quantity or volume)
• Gross invoice amount
• VAT rate

Companies re­gistered in a pro­fes­sion­al register or as­so­ci­ation may be required to provide ad­di­tion­al in­form­a­tion, depending on their legal form:

• Legal form
• Re­gis­tra­tion number
• Per­son­ally liable partners
• Managing director

Ad­di­tion­al in­form­a­tion is also practical for com­mer­cial trans­ac­tions and should be included in the A/R invoice. This in­form­a­tion includes:

• Customer number
• Order number
• Term of payment
• Phone number
• Fax number
• E-mail address
• Website
• Biller’s bank details
• Iden­ti­fi­er to be used when making payment

The latter in­form­a­tion is common, par­tic­u­larly for companies that send invoices and receive payments in large numbers. It helps them to record incoming payments correctly.

Of course, it is not forbidden to specify further in­form­a­tion on invoices for smaller amounts. They ensure clarity, make it easier for both sides to assign the invoice and serve as a service for the customer.

Par­tic­u­larly in the case of larger projects or longer-term service provision, issuing several partial invoices instead of a single outgoing invoice offers a number of ad­vant­ages – both for the exhibitor and for the recipient of the invoice.

The partial invoice refers only to a part of a good or service, in contrast to an A/R invoice, in which goods and/or services provided are recorded in their entirety. In practice, the partial invoice is used, for example, for elec­tri­city and gas de­liv­er­ies, con­struc­tion projects, or factory con­struc­tion.

• The service provider has the option of pre-financing the project on an ongoing basis, by means of partial invoices and at the same time, which reduces the risk of payment defaults.
• The customer benefits from a financial burden that can be planned over the period of service provision and can check the com­ple­tion of the project in phases.

The in­form­a­tion required for interim invoices is the same as that required for outgoing invoices. In addition, however, a partial invoice must be marked as such, and, if necessary, have a se­quen­tial invoice number.

Please note the legal dis­claim­er relating to this article.