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What is an Itemized Bill and Why You Should Use It?

As a business owner, you must know the importance of invoicing. You also know the requirements of the error-free invoicing process. This way you should also know what is an itemized bill and why your clients will need an itemized invoice for the products or services you have offered? This blog is going to explain everything you should know about itemized bills.

Whether you are a freelance designer or running a small business, most of you have thought about what is an itemized bill or itemized invoice? Let us discuss what is the itemized bill definition and other aspects of invoicing.

Definition of Itemized Bill

As per the itemized bill definition, “An itemized bill/invoice is a kind of document which the clients are given before they pay for goods or services, listing out the details including the cost of each item purchased rather than just the total cost.”

An itemized invoice is an important element of your success. Without an efficient invoicing method, your chances of getting the payment on time get lower than you think.

The overall motive of sending an itemized bill is to get paid faster, which is the backbone of any successful business. Let’s understand the purpose, key elements, and how to create itemized invoices for your business in detail.

The Purpose of an Itemized Bill

Invoices serve important purposes of both the seller and buyer. For the seller, it is the ideal way to accelerate the payment by informing the buyer about a due amount. For the buyer, they reflect costs in an organized and itemized way. The itemized invoices are also important for record-keeping for both seller and the buyer.

The purpose of creating an itemized bill is to collect a payment that you owe. You can send the itemized bill to a client or a vendor when there is a balance due for the products you have sold or for the services you have provided. 

Let’s understand this by an example. If you are admitted to the hospital. The hospital’s billing department will request an itemized bill for you or the health insurance company. The health-care industry is very particular about an itemized hospital bill and credit bills for the hospital stay.

What You Should Have in an Itemized Bill?

Business owners create invoices to provide all the details of what exactly the client has purchased and to guide them on how they can make a payment and what is the deadline to pay. However, there are certain key elements that business owners can use while making an invoice. For that, they must follow appropriate guidelines for the header, body, and footer. Here is the list of elements that every business can include for the most effective itemized bill.      

What You Should Have in an Itemized Bill

The header is the most appealing element of any invoice which includes seller and customer’s contact details. You can also include the exact details about the invoice itself in the header i.e., Title as “Invoice” which shows what type of document it is?

Invoice Number: This is a number that a seller needs to assign as a unique number to differentiate the invoice from all others who might send an invoice to the same client. It should be included at the top of the header section.

Invoice Date: Include the date you are creating an invoice. Mentioning this date will help customers in calculating the remaining days to make a payment.

Billing Company Details: In this section, you should include the name of the business, contact person’s name, and phone number. You can also use the details you use for your business letterhead. In some cases, you might need to include the business’ tax ID.  

Client’s Information: Just like the billing company details you also need to include the person’s information including contact details who is going to receive your invoice and liable to make a payment. This section of the invoice helps customers in understanding the services or products they have opted for in detail.      

Line Items: You need to include a detailed list of line items in this section. Add product name, description of the product, the cost per product or rate per hour, the number of units or hours worked and the total due for the particular product.

Billable Expenses Including Taxes: If you have had to pay for some material that the customer needs to cover, this space where you can include the miscellaneous expenses. You can also include sales tax, shipping charges, and other applicable charges.     

Total Charges: In this section, you should have a summary of all the charges associated with the services being invoiced below the line items, you can also include this in the header and footer section both.

Lastly, the footer section of an invoice is a summary of the invoice along with all the detailing and the charges. It includes payment terms, payment instructions, and/or special notes for the client.  

Payment Terms: Payment terms are the term agreed between the client and the seller about when a payment is expected.Special Note: It will be a good idea to include a small thank you note for your client to make them feel special. You can also offer them a little discount as a good gesture for their next purchase or service.

Conclusion

The invoice is an important part of the business document with lots of different elements, but it should not be difficult for the customer to understand. While creating invoices you need to consider what your business’ invoicing needs and based on that you need to include the details that work best for you. 

MixBit offers exclusively designed itemized billing templates and invoicing procedures that help every type of business in creating professional invoices. There are also templates available that businesses can download and customize for each product or service.


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