How to Read an Invoice: Every Field Explained

Start at the top: who, what number, when

The header of any invoice answers three questions. Who is billing you: the seller's legal name, address and tax number. Which document this is: the invoice number, which you will quote in every email and payment reference. When it matters: the issue date, and the due date or payment terms such as Net 30. If the due date is missing, count the terms from the issue date.

Below the header sits the Bill to block. Check that it names your company exactly as it appears on the contract or purchase order. An invoice addressed to the wrong entity should be sent back before anything else.

The line items

The table in the middle is the substance. Each row has a description, a quantity, a unit price or rate, and an amount (quantity times rate). Read the descriptions against what you ordered or approved: dates, hours, product codes, project names. Quantities and rates should match the quote or the contract; if the rate changed, there should be a written reason.

The totals block

• Subtotal is the sum of the line amounts before tax and discounts.
• Discount, if any, is applied to the subtotal and shown as a negative line.
• Tax is calculated on the discounted subtotal. The invoice should show the rate as well as the amount.
• Total due is what you pay. On partially paid invoices you may also see Amount paid and Balance due; pay the balance, not the total.

The footer: how to pay

Payment instructions come last: bank account and routing or IBAN and BIC, a card payment link, or accepted methods. Late-payment terms live here too. If the bank details differ from the ones you used last time, call the supplier on a known number before paying. Invoice fraud almost always works by swapping bank details.

How to read a shipping invoice

A shipping invoice, more precisely a commercial invoice, is the version that travels with goods across a border. Beyond the standard fields it carries lines customs officers rely on:

• Shipper and consignee instead of seller and bill-to. The consignee is who receives the goods; the bill-to may be a different company.
• Country of origin: where the goods were made, not where they were shipped from. Duty rates depend on it.
• HS code for each product: the international classification number (six digits worldwide, longer per country) that determines the duty rate.
• Incoterms such as EXW, FOB, DAP or DDP: who pays freight, insurance and import duties, and where risk passes from seller to buyer. DDP means the seller pays everything to your door; EXW means you arrange and pay for everything from the seller's warehouse.
• Reason for export: sale, sample, gift, repair and return.
• Declared value and currency: the basis for duty and tax.
• Weights and package count, often with the courier air waybill number.

When you read one, the two figures to check are the declared value (it should match the sale price) and the HS codes (a wrong code can double the duty). Our commercial invoice generator lays these fields out in the order customs expects, and the commercial invoice guide explains each one.

How to read a tax invoice

"Tax invoice" is the legal name for an invoice that lets the buyer reclaim VAT, GST or sales tax in countries that use those systems (Australia, India, the UK and the EU, among others). Look for:

• The words Tax invoice where required.
• The seller's tax registration number (VAT number, GSTIN, ABN).
• The buyer's tax number for business-to-business sales above a threshold.
• Tax shown per line or per rate, so that items taxed at different rates are separated.
• The tax-exclusive amount, the tax amount and the tax-inclusive total.

If any of those is missing, your accountant may not be able to claim the tax back, so ask for a corrected invoice before paying.

Five checks before you approve payment

1. The legal entity, invoice number and date are correct, and the number has not been paid already.
2. Line items match the order, contract or timesheet.
3. The arithmetic adds up: quantities times rates, subtotal, tax at the stated rate, total.
4. Tax details are complete enough for your accountant.
5. Bank details match the supplier's known details, confirmed by phone if anything changed.

When you are the one sending the invoice

Everything above is what your clients' accounts teams look for. Send invoices that pass those checks the first time and you get paid faster. The free invoice generator produces a complete, correctly structured invoice in a minute, and BillingOtter tracks which ones have been paid.