An outgoing invoice is any invoice issued by companies, self-employed persons or freelancers for services rendered. It establishes the claim against the customer. According to the law, outgoing invoices must always be issued in writing, either digitally or in paper form.
The basic concept of the outgoing invoice
Outgoing invoices are recorded in the accounts. They represent receivables from customers. Open invoices from these customers, also called debtors, are shown in the balance sheet as open receivables. In order for companies to receive the agreed money from the customer for services rendered or goods delivered, they write outgoing invoices. In order for these to be legally binding and not objectionable under tax law, the invoices must meet certain criteria. Settled invoices are already taken into account by the receipt of payment within the liquid assets (bank, cash, etc.). In the profit and loss account, in turn, all invoices flow into the turnover.
Entrepreneurial relevance: Balance sheet and turnover tax
The written form of the outgoing invoice has an important function for both the invoice issuer and the invoice recipient:
- The service provider/invoice issuer:in proves its claim to the client for payment with the outgoing invoice. If the client defaults on payment, the invoice serves as the basis for the dunning procedure.
- The service recipient/invoice recipient can use the invoice to check whether the service has been invoiced correctly, for example whether the correct quantities or working hours are listed.
- Last but not least, the invoice is also a central communication medium with the customer and should therefore be designed with appropriate care (design, wording, etc.).
Mandatory information: This is the only way to make the outgoing invoice legally valid
In order for an outgoing invoice to be legally valid, it must contain certain mandatory information according to the VAT Act (§14, §14a UStG):
- Full name and address of the invoicing party (supplying company)
- Full name and address of the recipient of the service
- Tax number or VAT ID of the invoicing party
- Unique invoice number, not yet issued
- Invoice date
- Delivery date or time of performance
- Type and quantity of goods supplied or Type and scope of service
- Invoice amount (net)
- Value added tax amount and rates or reference to a VAT exemption (e.g. in the course of the reverse charge procedure in the case of delivery to another country with which Germany has a double taxation agreement and the VAT is to be paid by the recipient of the service in the country where the recipient of the service is domiciled).
- Invoice amount (gross)
Special rules for the outgoing invoice:
Special case : Smallest amounts of up to 250 euros gross
For invoices for small amounts of up to 250 euros gross, the legislator:in has reduced the number of mandatory details in order to minimize the administrative burden for small entrepreneurs:in. Small value invoices are fully legally binding if they contain the following mandatory information:
- Full name and address of the invoicing party
- Date of invoice
- Number and type of goods or type and scope of service
- Invoice total (gross)
- Value added tax rate (7% or 19%) or reference to tax exemption
Depending on their legal form, companies that are registered in the commercial register may have to include additional information on their invoices, such as legal form, managing director, personally liable partners, registration court and registration number.Further information on special cases can be found in §14a UstG. To ensure that no tax problems arise later, the invoices must also be created and managed according to the standards of the GoB or GoBD as part of the bookkeeping.
2. Special case: The partial invoice
In some industries, it is common to invoice when the company has only provided part of the goods or services or before the service provision has started. Partial invoices are used especially for large projects. In principle, companies and customers can agree at any time to handle payment by installments. In most cases, both sides benefit from being able to split larger amounts into smaller installments. The contracting parties are free to determine how high the respective installments should be. The legislator is less strict in its requirements - unlike with a partial invoice. However, the normal obligations that apply to outgoing invoices also apply to progress invoices.For practical reasons, a progress invoice should also always be numbered as such, show the project name and the progress amount (net) as well as the amount already paid, the amount still due and the original total amount.If the service is paid in full over several progress payments, the company must issue a final invoice that is also named as such.
For practical reasons, a progress invoice should also always be numbered as such, show the project name and the progress amount (net) as well as the amount already paid, the amount still due and the original total amount.If the service has been paid in full over several progress payments, the company must issue a final invoice which is also named as such.
Digital outgoing invoices
Companies that do not send their invoices exclusively by post must ensure that they are sent digitally in a legally valid format.In many countries, electronic invoicing is already common practice in business transactions. In Germany, this is not yet the case across the board, but the trend towards sending invoices digitally is gaining ground in this country as well. The advantages of digital invoice creation and processing are convincing more and more entrepreneurs. In particular, the elimination of postage costs and the effort required for subsequent digitisation are the main factors to be mentioned here. Looking to the future, it is therefore worthwhile to implement compliance with international standards in domestic business transactions today.
Those who use digital invoicing tools are usually on the safe side. The applications not only make dispatch and administration much more efficient, but are also configured in such a way that, when used correctly, all legal accounting requirements, for example the immutability of invoices and archiving modalities, are safely fulfilled.
Those who create and save their invoices with Word and Excel, for example, cannot guarantee the immutability of the documents in a legally compliant manner. Even simple PDF invoices created from manual pre-systems (e.g. Word or Excel) do not meet the requirements for a digital outgoing invoice according to EU Directive 204/55/EU, as the files are not machine-readable. Legally compliant digital formats are, for example, PDF/A3 or ZUGFeRD, where the formats are combined with a machine-readable XML file.
Digital invoice management
The more successful business operations are, the more invoices are issued during the year. Companies that have not implemented a reliable workflow for handling incoming and outgoing invoices run the risk of making mistakes. To prevent this, choosing the right tools is crucial.
For larger companies that use an ERP system, accounts payable and accounts receivable should be integrated as a module. However, especially for smaller businesses, freelancers and self-employed people, investing in such a system is rarely worthwhile. In these cases, it is important to ensure that the number of applications used in connection with incoming and outgoing invoices is kept as manageable as possible and that problem-free communication between the tools is possible. Only in this way can the accounting software also be used as a reliable single point of truth in controlling, for example.
For outgoing invoices: As soon as a company does not only send postal invoices, an invoicing tool is highly recommended. When selecting an application, companies should check that it complies with the applicable legal provisions, but good applications go even further and offer additional useful functions, for example for dunning. The basic prerequisite for this is an identification within the system that recognises which outgoing invoices have not been paid and for how long. An interface to various banks is therefore essential. The necessary steps in the dunning process can then be initiated with a few clicks or automatically. When choosing an invoicing tool, companies should also make sure that it can be easily integrated with the invoice receipt, the expense report and the accounting software via interfaces. The applications are often supplemented with time recording tools, statistical overviews and functions for processing incoming payments. It is therefore worthwhile to invest time beforehand when choosing a solution and to select and set up the software that is right for the company.
Important to know:
Incoming and outgoing invoices between business partners must be archived for 10 years. These requirements also apply to receipts and vouchers. This storage must always take place in the form in which the document was sent or received. Digital invoices must therefore be archived digitally; a printout is not legally valid proof of archiving.
In order for companies to be paid for the services they provide, they have to write outgoing invoices. This is not particularly difficult, but still requires a lot of time and tact. Companies can optimize and automate this tedious process by using invoicing software. This can minimize errors, save costs and relieve employees.
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