Invoicing is a vital part of a business. You deliver your services in the hope of getting paid your due amount on time. Sales invoice is the most important financial tool that is issued by the seller to the client requesting the payment. It includes various information related to the business transaction. In this article, we will discuss the sales invoice and other details related to it. Scroll down to learn more!
What is Sales Invoicing?
Sales invoicing is a significant accounting document in a business transaction. This maintains a detailed record of the services or products delivered and the money the customer owes to the vendor. A sales invoice states the services provided along with the respective cost. This is a crucial accounting document for small businesses to record the transaction to avoid any legal issues.
This article will guide you to generate a perfect sales invoice for small business enterprises.
Why is it important to small businesses?
A sales invoice is an important document for small businesses to keep a record of every transaction. But there are other significances as well. Some of them are:
1. For Accurate Bookkeeping
Accurate bookkeeping is one of the major reasons for maintaining sales invoices for small businesses. If you are a small business owner you must ensure that you maintain your sales invoice properly. These not just keep track of your transaction but also monitor your cash flow.
2. For Documenting Tax Return
Proper documentation is highly necessary while verifying the claims of your tax return. According to the IRS, the sales invoice is a vital financial tool for making the taxation process easier. The sales invoices record all the essential information related to your business revenue and expenses. Hence, this is an important supporting document while claiming your tax return.
3. Offers Legal Protection
To keep your business secured from unsubstantiated lawsuits brought against your enterprise, a sales invoice is needed. Sales invoice documents the mutual agreement between the seller and the client upon a particular service or product. The signature of both parties authenticates that the business details were sanctioned upon mutual terms. This way you can get saved in some instances where your business faces serious legal issues.
4. Inventory Management Tool
Besides authenticating business transactions and safeguarding from legal issues, this financial document is a vital inventory management tool. This financial document monitors your inventory. If your business involves supplying physical products, then this sales invoice can help you to keep track of the product requirements for your future orders.
5. Required for Business Planning
Sales invoice serves as an important document for your business planning. This accounting document demonstrates the incoming revenue that helps in budgetary planning for the future. The information in the sales invoice forecasts the products that are highly in demand. This makes it easier to decide on which service to invest in and what will bring in more revenue. Depending upon your decision you can attract more clients just by maintaining a proper sales invoice.
What is the purpose of the Sales Invoice and how to make it?
As already discussed earlier, the sole purpose of generating sales invoices is to remind your clients to settle the payments. Besides, it has a significant role to play in various other business processes. But before that, it is important to learn how to make an accurate sales invoice.
1. Business Logo:
Start with the word “Invoice” and add your business name and logo to personalize the invoice more. This reflects your professionalism and gives a better impression to the clients.
2. Assign an invoice number
A sales invoice without an invoice number can easily get missed out. Moreover, the client also refers to the invoice number for further communication regarding the service provided or for payment purposes. Also to track the transaction for future use, the sales invoice must have a proper invoice number.
3. Include business details
A sales invoice without business details has no meaning. Your company logo, business name, address, contact details must be included in the sales invoice. This is something that validates the business transaction. Without these vital details, the invoice becomes incomplete.
4. Add Client’s contact information
Adding client’s information is equally important as your business details. Contact details of your client should be mentioned in the invoice so that you can get back to your client for any kind of issue. Moreover, in case your client is a company, they might have a separate department that deals with the invoices. In that case, you need to mention that accordingly while creating the sales invoice.
5. Mention the services provided
Sales invoice is created after the project completion. Hence, mentioning the service offered or the product supplied is essential. Do mention the quantity for the physical product or the number of working hours served in case of services provided. This helps your client to have clarity and avoids unnecessary complications.
6. List the total amount owing with tax rates
Specifying the total amount owing in the sales invoice is a must. You may have mentioned the price per product but it is essential to state the subtotal in bolds at the end. Also mention the tax amount (if applicable) for better clarity.
7. Include the payment due date with payment terms
Payment due date and payment terms are some of the vital information of a sales invoice. The sole purpose of the sales invoice is to speed up the payment procedure. Missing out on any of these points can delay your payment. Mention clearly, in bold the payment due date so that clients can understand the urgency. Also, payment mode and late fee consequences should be notified so that you can avoid any unexpected delay.
Types of a sales invoice
Sales invoices are segregated into four main types depending upon their purposes.
It is the simplest form of sales invoice that is preferred by most business owners. It includes all the details as mentioned earlier.
Unlike most sales invoices, this is sent to the clients prior to the task completion. It does not request payment, rather it informs the customer about the amount they will have to pay after the work is done.
Sales invoices that are sent at a regular interval and include the same details is known as a recurring invoice. Transactions like memberships or subscriptions involve the usage of recurring invoices.
Sales invoices for international clients is commonly referred as a commercial invoice. This includes a few additional data like country of manufacturer, freight cost, product weight, and various others.
How are sales invoices different from other accounting documents?
Both the sales invoice and sales order are accounting documents. Sales order is issued by the seller to the customer after receiving the purchase order. It confirms that the transaction can be made for the mentioned products or services. It also includes the quantity and respective prices. Whereas, sales invoices request payment from the customer after the task completion.
A purchase order is the purchase request sent by the customer with a list of required products or services. Whereas, a sales invoice is issued by the business owner to confirm that the sales process for the order has been completed.
Bill and sales invoices are synonymous and carry almost the same information. Sales invoice request for the payment and bill shows how much money the client owes to the vendor.
|Sales Invoice||Purchase Order||Bill|
|What is a-||A written document presenting the details about the business transaction and informing the client about the payment due date.||A commercial document presenting the required details before placing an order.||It is the same financial document that is issued as an invoice but received by the client as a bill.|
|What is the purpose-||Request payment after completing the task or supplying the order.||Used to place orders for the required material.||This shows what the client owes to the supplier, but does not request payment.|
|Who issues a-||Seller/Vendor||Customer(Individual or another business owner)||Customer|
|When issued-||After completing the task||Before actually starting with the project. Issued while placing order.||Issued after task completion for business or after receiving the order.|
|What is included in-||1. Header- ‘Invoice’|
2. Issuing date
3. Invoice number
4. Company and client address and contact details
5. Itemized list of tasks or materials with price for each
6. Total amount
7. Payment terms and due date
|1. Header- ‘Purchase order’|
2. Date issued
3. Validity date
4. PO number
5. Buyer and seller contact details
6. Itemized list of goods or services with detailed description and prices
7. Additional note
|Contains almost the same information as the invoice.|
FAQs related to sales invoice
No, both are not the same. Sales invoice requests payment after the completion of the task. Whereas, a receipt is issued after receiving the due payment.
It is vital to assign a specific number to the sales invoice to track the business transactions throughout the project as well as in the future. You can choose any of the invoice numbering systems that suit your business. It can be sequential, chronological, by a customer or project number.
As an immediate action, you can send a reminder to the customer through email or a phone call. You can even implement invoicing software to send reminders for delayed payments.
Whether small or large business enterprises, accounting for business finances is a tedious task. Creating invoices for different clients may become confusing. But with Billbooks customized templates you can create your sales invoices at any instant and can send them to your client immediately. Billbooks software makes your financial documentation easier and keeps you stress-free.