A self-billing invoice is used when a purchaser issues an invoice to a seller along with payment, as opposed to the more common practice of the seller issuing the invoice to the buyer to request payment.
Self-Billing Invoice Meaning
The process of self-billing allows a customer to prepare an invoice and issue payment quickly to the seller. Generally, a seller sends an invoice to a buyer after they have delivered their goods or services. If a buyer is a regular customer of the seller and their orders vary in amount, it’s sometimes better for them to issue the invoice to the seller.
Self-billing is also commonly used in business relationships that lack physical deliveries.
For example, let’s look at how a self-billing invoice would work for a restaurant business. As restaurants can be inconsistent with purchase orders, produce suppliers can’t know what to deliver on every delivery. The restaurant should provide an invoice detailing the amounts 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
The buyer and the seller must agree upon a self-billing relationship before they can activate a self-billing invoice. The format of a self-billing invoice should not change from the standard format of an invoice. The structure of 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 – 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 for the government to calculate the VAT tax.