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5 Min. Read

What Is a PayPal Invoice & How Does It Work: A Guide

What Is a PayPal Invoice & How Does It Work: A Guide

PayPal is a payment processor but it also has invoicing software! In this guide, learn how to use PayPal invoicing for your business.

PayPal is a powerful payment processor. It accepts international payments in a flash. It’s a worldwide household name. It supports many businesses large and small.

In today’s guide, we’re going to talk about their invoicing software. How does it work? Is it right for you? How can you start creating invoices on PayPal?

For the ultimate guide on PayPal invoicing, you’re in the right place!

Here’s What We’ll Cover:

What Is a PayPal Invoice?

Benefits of Using PayPal Invoicing

Drawbacks of Using PayPal Invoices

How to Send an Invoice on PayPal Step-by-Step

Key Takeaways

What Is a PayPal Invoice?

A PayPal invoice is an invoice sent via the PayPal platform. There are invoice templates on PayPal that you can use to start sending business invoices. The recipient will receive your invoice via email and can pay using PayPal.

If you receive payments primarily from PayPal, it’s not a bad option. If you receive payments from multiple sources like Stripe and bank transfer, PayPal won't work well. You may be better off with broader accounting software that covers all bases.

Benefits of Using PayPal Invoicing

  • It's quick and easy to send professional invoices.
  • You can receive payments directly to your PayPal account.
  • You can save invoices as templates. This is particularly useful if you frequently bill the same client. You can save an invoice template with their billing details. It will automatically populate every time you use the template.
  • It calculates taxes and shipping reliably so you don’t have to.
  • It’s much much easier to use than an Excel spreadsheet.
  • Your customer can use any payment method to pay you. They can use their bank account, credit card or PayPal balance. In some countries, they can also use PayPal Credit.
  • You can send invoices via the mobile app.
  • You can create highly customized invoices.

Drawbacks of Using PayPal Invoices

  • PayPal fees can be quite high. (However, you don’t get charged PayPal fees if you receive the money via another channel).
  • It can be confusing to recipients who don’t habitually use PayPal.
  • It isn’t a complete accounting software with tax projections and expense management. You will have to use other third-party apps for that. With FreshBooks, you can integrate your invoicing with the rest of your accounting! You can even accept payments through PayPal.

How to Send an Invoice on PayPal Step-by-Step

Step 1: Log into your PayPal business account.

Step 2: On your dashboard, your quick links may have an “invoicing” icon. Click that.

If you can’t see the “invoicing” icon on your quick links dashboard, you can find it on the top dropdown menu.

Step 3: Hover your mouse over “Pay & Get Paid”. Go to “Invoicing”. Click “Create & Manage invoices.”

Step 4: Click the blue-button in the top right corner that says “Create Invoice”.

Step 5: Decide whether you want to use a template. As standard, PayPal has three different invoice templates available:

  • Amounts Only - Work for invoicing products with no tax or quantity measurements. This is a very flexible template to use
  • Quantity - Works well for products with sales tax and quantities
  • Hours - Best for services that are billed per hour

You can customize any of the templates to suit whatever you’re invoicing for.

Step 6: Enter the customer's email address. You can save their details for later if you want.

Step 7: Add your customer’s address using the link underneath the email address field. The link says “Add address”. This will take you to a mini window where you can enter the customer’s billing address, shipping address, telephone number and tax IDs.

Step 8: If you are shipping a physical product, check “ship order”. Checking this box will allow you to add your shipping fees or rate. If you are not, you can uncheck this box.

Step 9: Enter the item details. This includes the item name, quantity, tax rate and description. You can add as many details as you want.

Step 10: Enter a message to your customer. This could be billing information and payment terms. You could include your bank details if you don’t want them to pay you using PayPal. Or it could be a simple “Thank you”.

Step 11: Enter optional details if needed. PayPal allows you to attach pictures and PDF documents to your invoices. You can also add a “memo to self” which is an internal note that the customer can’t see.

Step 12: Now draw your attention to the right side of the screen where your invoice final details lie. This contains the calculations from your shipping rates and tax. You can insert a discount amount if you want to. You can also change the due date for the invoice. The default is “on receipt” but you can change this to any of the options on the dropdown menu.

Step 13: Check the final amount and invoice details. Underneath the full amount, there is the option to allow tipping or partial payments. Partial payments work well for deposits.

Step 14: Preview your invoice and send it. If you send via email, your customer will get an email notification. Alternatively, you can send invoice links in any way you choose.

Key Takeaways

Using PayPal for invoicing is a good option if you use it as a primary way of accepting payments. It’s fast, simple and flexible.

For more guides on PayPal and invoicing, head to our resource hub.