Businesses need to write invoices to their customers , known as sales invoices . In return, the companies receive invoices from their suppliers and service providers for the products and services they purchase. These invoices go to the company, they are called incoming invoices . In order for the incoming invoices of companies to be paid, they must meet certain requirements, they must contain minimum information.
Definition – what is an incoming invoice?
According to gradinmath.com, an incoming invoice is the opposite of an outgoing invoice; it is sent by suppliers and service providers to companies in order to be settled by the companies. The incoming invoice is a request for payment. The incoming invoice follows a delivery of goods or a service; in accounting , the incoming invoice increases the liabilities to creditors, who are also referred to as creditors . The incoming invoice is settled by transferring the invoice amount. When the incoming invoice is cleared, the liabilities decrease again. Before the incoming invoice can be paid, it must be checked. An incoming invoice is a legal accounting document.
Post and account for incoming invoices
An incoming invoice indicates that you have an obligation to your creditor, supplier or similar. Proof of this is your paper invoice or your electronic incoming invoice. Always remember: no booking without receipt !
The same thing to keep in mind when creating an invoice for your customers. As long as the invoice has not yet been paid, the invoice shows you an open claim. Every incoming invoice increases your liabilities and every outgoing invoice increases your receivables.
Example: Incoming invoice posting record
You receive your ordered goods and the supplier sends you the corresponding invoice. So there are two accounts addressed: the incoming invoice & your liabilities.
Your booking record is therefore: Incoming invoice to liabilities.
But it is also possible that your incoming invoice affects several accounts. Normally, every time the incoming invoice is posted, your input tax account is also affected.
Post the incoming invoice with a discount
Your business partners will be happy if you pay the incoming invoice particularly quickly. The quick payment is worth a lot to them and they give you a discount . Your business partner grants you to deduct a 3% discount from the purchase price for your quick payment. However, you have to enter this discount for accounting purposes. You shouldn’t forget input tax either. For example, you will receive an incoming invoice for € 1000 for the goods you have ordered. The booking rate is:
- Expenses for goods 1000 €
- Input tax € 190
- of liabilities 1190 €
You will receive a 3% discount for your quick payment. The booking record is now called:
- Liabilities € 1190
- at a discount of € 30
- at input tax € 5.70
- to bank € 1154.30
Retention period – manage incoming invoices
The retention period begins at the end of the calendar year. Regardless of whether an incoming or outgoing invoice is concerned, invoices must be archived for 10 years. It is important here that the invoices are archived in such a way that they can still be read in 10 years.
Check the incoming invoice factually and mathematically
In order for an incoming invoice to be paid, it must be checked; it is checked factually and mathematically. The factual examination includes a comparison of the invoice with the delivery noteor, if there is no delivery note, with the delivered goods. If the invoice was issued for a service, a check is carried out to determine whether the service has been carried out properly. In addition, the incoming invoice is checked mathematically. If the incoming invoice is factually and mathematically correct, it can be released for payment. The issuer of the incoming invoice gives the recipient a period for payment, usually four weeks or 14 days. The issuer of the incoming invoice can grant the recipient a discount for short-term payment of the incoming invoice; in this case the discount amount or the percentage for the discount must be shown on the invoice.
- Factual check: comparison of the incoming invoice with the delivery note, comparison of the incoming invoice with the goods delivered.
- Mathematical test: checking the amounts for arithmetic errors.
- Legal check: Check whether all mandatory information according to §§14, 14a UStG is included and check whether further legal aspects (offsetting with other claims, statute of limitations, etc.) have been observed.
What must be included in an incoming invoice
The incoming invoice must contain certain information so that it can be paid and entitled to input tax deduction. If an incoming invoice is incorrect, it cannot be corrected by the invoice recipient, but only by the issuer. The invoice recipient must send the invoice back to the exhibitor and ask him to correct the incoming invoice. The sales tax law regulates which mandatory information must be included in an incoming invoice. The following information must be included in an incoming invoice:
- Name and address of the exhibitor
- Name and address of the recipient
- Date of invoice
- bill number
- Time of delivery or service provision
- Number and description of the goods delivered or the type and scope of the service provided
- Net invoice amount
- value added tax
- Total amount
- Tax number or sales tax identification number
- Biller’s bank details
In addition, the payment deadline can be specified in the incoming invoice. If the invoice can be paid with a discount, the invoice issuer must indicate this in the incoming invoice. He must indicate the percentage of the discount. The invoice number may only be assigned once, for tax reasons it must be consecutive.
The incoming invoice as a partial invoice
In the case of large projects, for example the provision of construction work, the incoming invoice can be issued as an advance invoice, it is then marked as an advance invoice. This partial invoice is created when part of the service has been provided. The total amount of the service already provided must be listed in the cumulative advance invoice; if partial invoices have already been paid, the amount that the customer has already paid is listed. If the entire service has been provided, the customer receives a final invoice. This lists all previous installment invoices.
Missing incoming invoice?
As an entrepreneur, you are obliged to properly prepare outgoing invoices. Conversely, as an entrepreneur, you also have the right to receive a proper incoming invoice. For this reason, every incoming invoice should be checked to see to what extent it contains all the necessary information. Otherwise, there may be conflicts with the tax office due to missing mandatory information, as a single missing mandatory information can lead to an increase in the sales tax burden.
Importance of the incoming invoice for accounting
In accounting, the incoming invoice is of great importance; the incoming invoice must show which account is affected. It is therefore important that it is stated what kind of goods or services are involved. An incoming invoice can affect several accounts. The incoming invoice is recorded in an incoming invoice journal; it is also posted to the relevant account. Incoming invoices are recorded in the balance sheet as liabilities to the vendors. The value added tax, called input tax in accounting, is shown on a special account, the input tax account, which is important for the input tax deduction.