Self-billing
An arrangement where the customer, not the supplier, prepares the invoice for a supply and sends a copy to the supplier.
In short
- It works when the buyer knows the quantities better than the seller, such as with growers, drivers or content creators.
- Both parties need a written agreement, and tax rules often set conditions.
- The supplier must not issue its own invoice for the same supply, or it will be billed twice.
Self-billing reverses the usual order of invoicing. Instead of waiting for a supplier's invoice, the customer works out what it owes, creates the invoice in the supplier's name and sends the supplier a copy with the payment.
When it makes sense
It suits relationships where the buyer holds the data. A dairy knows how many litres each farm delivered. A delivery platform knows every trip its drivers completed. A marketplace knows each seller's sales and fees. Asking hundreds of small suppliers to produce invoices from data they don't have is slow and error-prone. The buyer does it for them.
What the rules require
Because an invoice is a tax document, self-billing usually comes with conditions. In the UK, HMRC requires a written self-billing agreement, and the supplier must agree not to issue its own VAT invoices for the same supplies. Australia calls the documents recipient-created tax invoices and sets similar rules. Where sales tax applies, the self-billed invoice must still show the supplier's tax registration number, which means the buyer's vendor records have to be accurate and up to date.
The main risk is duplication. If a supplier also sends its own invoice, both may be paid unless the process makes clear which document counts.
Worked example
A produce co-operative
A co-op buys apples from 60 orchards. At the end of each week, its system multiplies each orchard's delivered weight by the agreed price and issues a self-billed invoice in the orchard's name. One orchard delivered 2,400 kg at $1.10 per kg. Its invoice is $2,640. It receives the invoice and the payment on the same day, and issues nothing itself.