Sales invoicing is a significant accounting document in a business transaction. This keeps a record of the business transaction that took place between two parties. 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. Based on the description provided in the sales invoice you can refer to this in the future for any business purposes.
Sales invoicing is vital, but most of the time small business owners get confused to create a proper invoice. 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:
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.
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.
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.
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.
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 forecast 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.
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.
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.
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.
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.
List the total amount owing
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.
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.
Difference between sales invoice and the sales order
Both the sales invoice and sales order are accounting documents. The difference lies in their origin. The sales order is created by the customer that specifies the customer requirement. The sales invoice is generated by the seller after project completion to request payment.
Whether small or large business enterprises, accounting business finances is a tedious task. Creating invoices for different clients may become confusing. But with Billbooks customized templates you can create your invoices at any instant and can send them to your client immediately. Billbooks software makes your financial documentation easier and keeps you stress-free.