A self-billing invoice is used when a purchaser issues an invoice to the seller along with payment instead of waiting for the seller to send an invoice.
Self-Billing Invoice Meaning
The process of self-billing allows a customer to prepare an invoice and issue payment quickly to the seller. In a normal business relationship between a buyer and seller, the seller sends an invoice to the buyer after goods have been delivered. In a business relationship where the quantity of goods is different upon every delivery, it’s sometimes easier for the buyer to issue the invoice. Self-billing is also commonly used in business relationships that lack physical deliveries.
For example, let’s take a look at how a self-billing invoice would work for a restaurant business. As restaurants can be inconsistent with purchase orders, it’s impossible for produce suppliers to know what to deliver on each and every delivery. It’s better for the restaurant to provide an invoice detailing the quantity of produce they need in their next order. By writing up their own self-billing invoice, the restaurant can fill in the order without delay.
Self-Billing Invoice Format
A self-billing relationship must be agreed upon between the buyer and the seller before a self-billing invoice can be activated. The format of a self-billing invoice should not deviate from how a standard invoice is used. A self-billing invoice should include:
- Seller and buyer’s shipping address
- Name of the Seller (company)
- Tax ID/VAT number
- Details and price of all items
- Include attachments (such as a purchase order)
VAT (Value Added Tax)
If there is a VAT involved with the shipped goods, the invoice needs to clearly detail the descriptions of each item and the exact cost in order for the government to calculate the VAT.