Understanding Invoices
What is an Invoice?
An invoice is an official document that a business sends to a customer to request payment for goods or services provided. It serves as a record of a transaction with the information of what was sold, how much is owed, and when the payment is due. An invoice typically includes key information such as the seller’s details, the customer’s details, a unique invoice number, the date of issue, and a breakdown of the items or services. It also shows pricing, applicable taxes or discounts, the total amount payable, and the payment terms. This structured format ensures transparency and helps avoid confusion about charges to customers.
How does Invoices module work in Zoho ERP?
In Zoho ERP, you can create an invoice by selecting a customer, adding the required items, and defining the payment terms. Depending on your workflow, you can save an invoice as a draft to review later or send it immediately to your customer via email.
Once created, invoices follow a clear lifecycle reflected through their statuses. An invoice begins as a draft, moves to sent once shared with the customer, and updates automatically as payments are received. If payment is not made by the due date, the invoice is marked as overdue. For payments received outside the system, such as cash, bank transfers, or external gateways, you can manually record the payment to ensure your records remain accurate.
All invoices created in Zoho ERP are automatically reflected in your sales and accounting reports. This gives you visibility into revenue, unpaid invoices, and customer balances. Throughout an invoice’s lifecycle, you can perform various actions such as editing invoice details, sharing them as links, printing or downloading invoices and more.
Types of Invoices in Zoho ERP
Regular Invoice: A regular invoice is a one-time invoice used to record the sale of goods or services to a customer, specifying the payment details and amount due.
Subscription Invoice: A subscription invoice is an invoice generated for a subscription based on its billing cycle. It is created automatically when a subscription is renewed and includes charges for the associated plan and addons. Learn More
Retail Invoice: A retail invoice allows you to quickly record immediate sales, especially for cash or walk-in transactions. Customer details are optional, and payments are recorded automatically at the time of invoice creation.
Progress Invoice: A progress invoice lets you bill customers in stages as work progresses. This is commonly used for long-term or milestone-based projects, helping you manage cash flow while keeping customers informed of ongoing charges.
Retainer Invoice: This invoice is used to collect advance payments from your customer. It is usually issued before the actual work or delivery begins. Learn how retainer invoices work.
Project Invoice: A project invoice refers to an invoice created specifically for work completed on a project, allowing you to bill clients for time spent, expenses incurred, or fixed project costs, and more. Learn how Projects work in Zoho ERP.
Let’s understand how businesses use these invoices with the help of a scenario.
Scenario:
Zylker Inc. offers subscription-based services that customers purchase on a recurring basis, such as monthly support or maintenance. Using Zoho ERP, Zylker Inc. generates subscription invoices at regular intervals to bill customers for these recurring services.
In addition to subscriptions, Zylker Inc. also undertakes one-time project work for customers. Before starting a project, a retainer invoice is issued to collect an advance payment. As the project progresses, progress invoices are raised to bill the customer for completed phases of work. Once the project is completed, a project invoice is created for the remaining balance. All these invoices are recorded in Zoho ERP and serve as official records for payment tracking, revenue reporting, and audits.
Lifecycle of an Invoice
An invoice in Zoho ERP goes through different stages from the time it is created until the payment is fully received. Each stage reflects the status of the invoice and helps you track payments clearly.
An invoice moves through the following stages:
Draft – The invoice is created but not yet sent to the customer.
Sent – The invoice has been shared with the customer.
Unpaid – Payment is pending.
Overdue – The due date has passed without full payment.
Partially Paid – The customer has made a partial payment for the invoice.
Paid – The invoice is paid.
This lifecycle helps you monitor pending payments, identify overdue invoices, and keep your financial records accurate.
Scenario:
Zylker is a services company that provides IT support to its customers.
Zylker starts by creating an invoice for a customer after delivering a service. At this stage, the invoice is saved as a Draft, allowing Zylker to review and make changes before sharing it. Once the invoice is finalized and sent to the customer, its status changes to Sent.
After the invoice is sent, it moves to the Unpaid status, indicating that payment is yet to be received. If the customer does not pay the invoice by the due date, the status automatically changes to Overdue, helping Zylker identify invoices that require follow-up.
If the customer makes a partial payment, the invoice status updates to Partially Paid, showing that a balance is still outstanding. Once the customer completes the payment and the full amount is received, the invoice status changes to Paid, marking the end of the invoice lifecycle.
This lifecycle helps Zylker track every invoice from creation to payment, monitor overdue amounts, and maintain accurate financial records.