What Is a Sales Invoice

Chapter 27

What Is a Sales Invoice?

Author: Bhaval Patel

Basic Introduction of Sales Invoice

A sales invoice is a document that accounts for a transaction. It reflects the type of services provided to a company or buyer. It also shows what time the services were rendered and how much is required of the customer to pay with a payment deadline.

Basic Introduction of Sales Invoice

It always describes the types of services rendered and the total amount the customer is to pay. Sales invoices are helpful to small businesses as it helps them keep records for the sake of bookkeeping.

This aspect of the sales invoice guide will cover:

  • What is the Importance of Sales Invoices to Small Business Accounting?
  • The Purpose of a Sales invoice
  • How to Create a Sales Invoice
  • Sales Invoice Template
  • Difference between Sales Invoice and Sales Order

What is the Importance of Sales Invoices to Small Business Accounting?

Importance of Sales Invoices to Small Business Accounting

The major reason for creating a sales invoice is to request payment from a buyer for your services. Sales invoices are also useful for other functions including:

  • Bookkeeping Purposes

The foundation for every small business’s bookkeeping is a sales invoice. They are important for records purposes. With proper documentation of all sales invoices sent to customers,  you’ll have all information you need to track sales and payments as well as control the cash flow of the business to help create better financial reports.

  • Resources For Tax Returns

To verify your claims on tax returns, you are required to have a sales invoices as proof. It is required of small businesses to keep records of sales invoices in case there’s a need to confirm some information by the IRS, or by other tax authorities. With a well-kept record of sales invoices, it won’t be hard to defend a tax claim made on any sale. In the process of completing tax returns, a sales invoice makes it easier for you.

  • Tool For Managing Inventory

If your company sells physical products, for example, sales invoices will help you with inventory and also make sure the products in a customer’s order are available upon request. Sales invoices keep track of what products are left in their right quantities and help you predict what will be needed after some time.

  • Legal Proof

When you send a customer a sales invoice, your sales invoice protects from any lawsuit against your business. The sales invoices explain what service you have rendered the customer and the process of the whole job. If the invoice has been signed by the customer, it serves as genuine proof.

  • Data For Business Plans

While planning for the future of your company, sales invoices provide you with data on how you have done some jobs in the past; it also offers information on how many rounds have realized on the revenue side and how much profit you have made so far in the business.

Sales invoices can as well be useful for forecasting budgets, and the sales data can be used to determine how much is left for improving the business.

he details on a sales invoice define whatever services have been rendered and goods supplied at their right quantities and prices. With this, you can check what service you are profiting from and what service needs advertisement and promotions. A decision can easily be made with the sales invoices.

A sales invoice is one that helps you get paid when issued to a customer—there are other invoices types for different businesses and purposes.

Purpose of Sales Invoice

The purpose of a sales invoice is primarily to explain in detail the services provided by a vendor to their customers, the total amount expected from the customer, and the deadline for payment.

When the customer receives the invoice, it creates a burden to make payment in them. This means the invoice has to be paid to continue doing business with you. It also serves as documentation of transactions between the buyer and seller.

How to Create a Sales Invoice

To create a proper sales invoice for your customers, you need to go through these steps:

  • Add Your Contact Details

The first step is to create a header for the invoice. The header has to include your business logo, your business name, phone number, address, and email.

  • Add Your Customer’s Contact Details

The next important thing to do is adding your customer’s information to the invoice. A customer’s information must always appear below your contact details. The customer’s details should include the name, phone numbers, and address.

If the invoice is meant for a large firm, you have to address the contact responsible for receiving invoices in the company.

  • Add an Invoice Number

Every invoice you create should carry a number on it. The number assigned to one invoice should vary from another.  An invoice number is useful for tracking down and referencing payments. To assign an invoice number, start in sequential order by beginning with 001, 002, 003, and so on.

  • Explain The Services In Details

When you’re creating an invoice, you’re informing the customer of your services and their cost. Each service has to be detailed for the customer to understand what they’re paying for. If you did supply goods, list them in their quantities and prices.

  • Add Your Payment Terms and Policies

To get paid on time, you need to state your payment terms in the invoice. Payment terms include how you want to be paid and late fee charges or discounts.

  • Add Your Payment Due Date

When concluding on the invoice, let your customer see the date you want to get paid in the invoice. It is in your best interest to input the date clearly, instead of using vague terms. Your payment date and be written like ” Payment will be due after 30 days.”

  • List The Amount You Are Expecting

After listing the quantities of goods and their prices, add up all the prices in the invoice, including tax, if applicable. The total amount you’re expecting should be boldly written. When the customer sees it, they will be aware of how much they owe you for the sales.

Sales Invoice Template

To make your sales invoices look more professional, you can download templates online and personalized your preferred one to fit in all the information. FreshBooks lets you download your preferred invoice in Word, Excel, and PDF formats.

Difference between Sales Invoice and Sales Order

Difference between Sales Invoice and Sales Order

For accounting purposes, sales invoices and sales orders are useful. The difference between both documents is that a sales order is created by the company or buyer when they buy goods from a vendor. A sales invoice, on the other hand, is created by the vendor or seller after they have delivered their products and services to the company or customer. The sales invoice is used in requesting payment.

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