When we started out we were using PayPal to generate our invoices, it works well enough. As someone else has pointed out, it's best for tangable goods, but for selling an electronic item you really have no protection. We have since moved on to Freshbooks. They provide a free plan that does really nice invoice generation and tracking. You can also use it for recurring invoices which I don't think Paypal has yet. I know they allow you to accept payment via Paypal and most major gateways. 

Hello, first time post here (after reading for a while), if you are just starting off, then paypal may be an OK alternative for small sales, however the fees and charges incurred for using their service, especially for international sales are quite high and you will find that a standard merchant account (to accept your own credit cards) is going to be more economical. One other point to consider, as brought up in the posts above me, is the risk inherent with dealing with paypal. While they are registered as a financial institute, the have not signed the bank EFT code of conduct and as such are not required to adhere to the same standards as a bank and can and will hold your money for the most insignificant reasons, some reasons which include simply transferring your money from them to your own bank account. If you do not have good cash flow that can take losing large sums of money for extensive periods of time, I would definitely recommend against using the paypal service. Check with your local bank regarding setting up your own merchant facility, there is plenty of competition in that market place now so you should be able to find a good deal. Note that a lot of the above is based on first hand experience, I would be interested to hear other peoples opinion on this as well.