What is an invoice? A plain-English guide for founders

Tax compliance vs. getting paid

The invoice has to satisfy two audiences at once: the tax authority in each country involved, and the AP clerk who approves the payment. Their requirements overlap in places and differ in others.

A tax authority wants to see VAT or GST handled correctly. An AP team wants clear banking details and a purchase order number to match against. If you optimize only for tax compliance, you might omit the PO number the AP team needs, and the invoice sits in a queue. This happens most often when you copy a domestic template and add an international address without adjusting for the AP workflow.

When to send an invoice

Send an invoice when:

• You complete a project milestone or deliver the final work product
• You ship goods, if you are selling physical products
• You reach the end of a billing period for ongoing services like monthly retainers

Don't send an invoice before work begins unless you have a specific contractual arrangement for prepayment. In that case, raise a proforma invoice first, then send a standard invoice upon delivery.

Send to the contact who processes payments, which is often not your day-to-day contact. Make the invoice the only attachment in the email and use a subject line that includes your company name and the invoice number. AP teams process high volumes of documents and a buried invoice gets missed.

Essential invoice fields for compliance

Use a sequential numbering system with no gaps. A format like INV-2026-001 works for most businesses. Tax authorities will flag skipped numbers as potential unreported revenue.

The invoice date is when you issue the document, which may be after the work was delivered, and your payment terms run from this date. Include your full legal business name, registered address, and contact details. If you have a VAT or GST registration number, add it here.

For your buyer, include their full legal name and billing address. For cross-border B2B invoices within the EU, include their VAT ID when they're VAT-registered. Make sure the name on your invoice matches the name on the customer's purchase order. If the PO shows "Company A" and your invoice shows "Company A Holdings Ltd.", the AP team can't match them and the invoice stalls.

Write a clear description of each service or product. "Consulting services" is too vague. "Software development: user authentication module, October 2026" gives the AP team and tax authority what they need. Show the subtotal, any VAT or GST applied, and the total. If the customer is outside your jurisdiction and you're not charging tax, state the reason: "VAT reverse charge applies" or "Export of services, zero-rated."

Additional fields for cross-border invoices

Cross-border invoices often need extra data points that domestic invoices lack:

• Supplier tax ID: Include your VAT, GST, or ABN number, depending on your jurisdiction, to prove you are registered to charge tax.
• Customer tax ID: You need the customer's VAT ID to zero-rate B2B supplies in the EU and UK (see Setting invoice currency and tax rates below). Without it, you may have to charge your local VAT rate instead. EU VAT numbers follow a country-specific format, like DE123456789 for Germany, FR12345678901 for France, so verify the format before you submit, as an invalid format triggers manual review.
• Banking details: For international payments, provide the codes your customer's bank needs to route the payment. For SEPA transfers within the EU and EEA, your IBAN alone is enough. For payments outside SEPA (USD wires, GBP transfers, non-EEA destinations), include both your IBAN and SWIFT/BIC code. U.S. banks don't use IBANs, so for USD payments to a U.S. account, provide your SWIFT/BIC code and account number. Some countries require additional routing codes: Sort codes (UK bank routing codes) for the UK, CLABE (Clave Bancaria Estandarizada, the standardized bank code) for Mexico. Missing these codes is a common cause of payment rejection. Altitude supports SEPA, Faster Payments, Pix, and SPEI payouts from one account. Review the supported payment routes to confirm which routing codes apply to your corridors.

Setting invoice currency and tax rates

Name the currency on the invoice. If you invoice in EUR, use the € symbol or EUR code throughout. Don't switch between currency symbols and codes on the same document.

For tax rates, follow the place-of-supply rules. For most B2B cross-border services, the place of supply is the customer's location. When you sell qualifying services to a VAT-registered business in the EU or UK, you zero-rate the invoice and add a reverse charge note. The customer then accounts for VAT in their own jurisdiction. B2C services usually require you to charge your local rate or register in the customer's country if you exceed thresholds. When in doubt, state the tax treatment explicitly on the invoice.

Invoices vs. receipts: key differences

An invoice requests payment before money changes hands. A receipt confirms that payment has already been made. In accounting terms, the invoice creates accounts receivable, while the receipt clears it. Never issue a receipt before you have the funds, and never treat an invoice as proof of income for tax purposes until it's paid.

Distinguishing invoices from bills

A bill typically demands immediate payment. You receive a bill at a restaurant or from a utility company, and payment is due now. An invoice offers payment terms: Net 15, Net 30, or a specific due date. You see bills in B2C or cash-basis transactions, while B2B services use invoices.

When to use a proforma invoice

Use a proforma invoice when a customer needs to secure funding or internal approval before committing. It looks like a standard invoice but is labeled "Proforma." You send it for approval only and don't record it as revenue. Once the customer approves, you submit a standard invoice with a real invoice number. Proforma invoices can't be used for VAT reclaims or tax filing.

Breaking down a cross-border invoice

Start with the core fields, then add the cross-border layer. Your invoice must show the currency code (USD, EUR, GBP). If you converted from your base currency, you can include the exchange rate as a reference.

Include the statutory tax statement. For EU B2B sales, this is "VAT reverse charge." For exports outside the EU, it might be "Zero-rated export." This tells the customer's AP team why no VAT appears on the total.

Three mistakes that delay your payments

Most cross-border payment holds trace back to the invoice: a missing ID, a vague line item, or a currency mismatch the AP team can't reconcile without contacting you.

1. Missing or incorrect tax IDs: SWIFT's G20 cross-border payments materials identify incorrect or incomplete beneficiary data as a primary source of payment friction. See Additional fields for cross-border invoices above for the formats to check before you submit.
2. Vague descriptions: a generic line item like "Marketing services" gives the AP team nothing to match against a contract or PO. See Essential invoice fields for compliance above for how to write one that does.
3. Currency mismatches: if you invoice in USD but the customer pays in EUR, an unstated exchange rate is why the AP team can't reconcile the payment against the invoice total. See How to invoice in multiple currencies above for how to state it.

Structuring your global invoice IDs

Use a consistent alphanumeric format. You can add prefixes to indicate the market, such as EU-INV-2026-001 or US-INV-2026-001, though this is optional. This approach helps you distinguish between entities or regions.

Never restart numbering mid-year. If you issue invoice 001 in January and invoice 500 in June, a tax auditor will flag the gap as potentially missing invoices.

How to invoice in multiple currencies

Choose one currency per invoice. Don't mix currencies on a single line item. If you must show a converted amount for reference, place it in parentheses or a separate column labeled "Approximate EUR equivalent."

State the exchange rate on the invoice itself, for example: "Rate: 1 USD = 0.92 EUR (illustrative rate, for reference only)." This locks the rate for the customer's AP team and prevents disputes about which rate applies. Whether your agreement uses an invoice-date rate or a payment-date rate comes from the contract, the invoice only states the rate. Confirm it in writing before you issue the invoice.

When the payment arrives, match it in the original currency first. If you invoiced €1,000 and received €1,000, match it directly. Post any difference between the invoice rate and the settlement rate as a foreign exchange gain or loss.

Defining terms for international pay

Define what "Net 30" means. State whether banking days or calendar days apply, and include the specific calendar due date on the invoice itself, for example, "Due date: November 1, 2026", rather than relying on the customer to calculate it from the term. For cross-border payments, allow buffer time for intermediary banks. When wires cross multiple jurisdictions, your Net 30 often becomes Net 35 in practice.

Include late payment terms. "1.5% monthly interest on overdue balances" is standard in many jurisdictions and gives you leverage if the AP team delays.

Matching invoices to incoming payments

When a payment lands, the deposit needs to match the open invoice amount. If it doesn't, you create a reconciliation exception. Common causes include partial payments, bank fees deducted from the principal, or FX rate differences. If you send payments through Altitude, the account shows the exchange rate and both currency amounts before you approve, so the figures on your invoice and the payment record stay aligned.

Do I need different invoices for different countries?

No, but you need different fields. The core structure stays the same: invoice number, date, seller and buyer details, and itemized amounts. Cross-border invoices add tax IDs, currency codes, and payment routing details such as IBAN or SWIFT/BIC. Use one consistent template and add jurisdiction-specific fields as required.

What happens if I forget a required field?

Your invoice enters manual review. Depending on the customer's AP workflow and the jurisdiction involved, that can delay payment until a corrected document is resubmitted and reprocessed. Automated systems may reject invoices outright if a tax ID or banking code is missing, requiring you to resubmit a corrected document before the clock restarts.

Can I send an invoice before delivering the service?

Only with a contractual prepayment arrangement. See When to send an invoice above for the proforma process. Invoicing before work is complete without that prior agreement gives the customer grounds to dispute the obligation.

How long do I need to keep invoices?

Retention periods vary by jurisdiction. IRS recordkeeping guidance under IRC 6501 sets three windows: 3 years in standard cases, 6 years if you underreported income by more than 25%, and 7 years for bad-debt or worthless-securities claims. The IRS accepts electronic records that meet Rev. Proc. 97-22. State and local rules vary and some may still require paper originals. In the UK, HMRC Notice 700/21 requires VAT-registered businesses to keep VAT records for 6 years. Non-VAT-registered sole traders face a shorter period, so confirm the rule that applies to your registration status. For EU businesses, retention periods vary by member state.