Are invoices legally binding?

If invoicing is an integral part of your business processes, then you need to understand any legal implications they can carry when issued, this article will answer whether invoices are legally binding, and detail some of the advantages of this

Author: Euan Aitken | Published: 12/08/2022

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Are Invoices Legally Binding?

Whether you're a small start-up business or a Google-sized corporation, the likelihood is that you couldn't function without invoices. While they may be considered one of the mundane aspects of a workplace or business, invoices play a vital role in a company's cash flow and have many other useful advantages. But is an invoice a legally binding document?

In this article, we'll be discussing:

  • The definition of an invoice 
  • The different types of invoices 
  • The advantages of using invoices 
  • Whether or not invoices are legally binding

What is an invoice?

The Cambridge Academic Content Dictionary defines an invoice as "a statement listing goods or services provided and their prices, used in business as a record of sale. Invoices are a way of physically or electronically providing a record of a transaction to request payment from the customer within a certain timeframe. The main purpose of this process is to declare in writing exactly what the customer purchased, when they purchased it, the price that was agreed and any other important terms and conditions.

What are the different types of invoices? Here are just a few.

A standard invoice is a demand for payment by the seller which keeps a physical record of the transaction for future reference.

A recurring invoice is used to make or request payments that happen on a regular basis. They are very useful for contracts which involve scheduled payments or customers who have ongoing subscriptions for your services.

A commercial invoice is a bill issued before a payment is made, which contains details of the products or services sold. Commercial invoices are often recorded in the Accounts books.

A proforma invoice is used somewhat similarly to a quotation. This is typically issued before the placement of an order as a preliminary bill to a committed buyer of your products. Essentially, this can be seen as an agreement of good faith between a vendor and potential customers. This shows consumers what to expect ahead of time when considering you as a supplier.

What are the advantages of using invoices? 

Invoices come with many great benefits for your business or brand, but we've narrowed down some of the most important. When used correctly, invoices can do all of the following:

  • Initiate prompt payments from customers ensuring their orders are fulfilled in a timely manner
  • Keep track of sales and payments to protect your business cash flow 
  • Display written evidence of a mutual agreement between your business and the customer, and when the agreement took place
  • Provide evidence when taking legal action if a customer hasn't paid, for example

Are invoices legally binding?

From that last point, you might think that our main question (Are invoices legally binding?) has just been answered. If you can use an invoice as evidence with which you can take someone to court, surely it can be considered a legally binding document, right? Well, not quite. An invoice, by itself, is not enough to create a legal contract between a buyer and a business. However, in order to create a legally binding agreement in the eyes of the law, an invoice must be accompanied by an official contract stating the terms and agreements of the sale or payment.

Do you spend far too long writing invoices, quotations and purchase orders? At Zigaflow, we might be able to help with that. Why not book a demo with our team and see what we can do for your business?

Euan Aitken

Euan Aitken

Sales & Marketing Director

Having started his journey with Zigaflow as a customer who took a keen interest in what the software could become, Euan joined us to lead our Sales & Marketing. Euan loves all things Business, Sales & Tech.

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