Sales Invoices Explained and How to Make Them Effortlessly
March 30, 2023
Issuing a sales invoice is a must if you sell goods or services. It enumerates all the goods you have sold, informs your buyer of the payment details for their purchase, and helps ensure you get paid on time.
Think of it as a safety measure for your business and a form of agreement between you and your customer. These days, it is important to establish a way to secure all your transactions and maintain a well-regulated record of all your profits.
If you want to learn more about the importance of sales invoices, you’ve come to the right place. This article will provide you with all the key info, and more!
So, let’s get to it!
- Sellers issue a sales invoice to customers to request payment from the latter for goods and services rendered.
- Sales invoices are considered binding contracts and are legally enforceable if a customer fails to abide by the payment terms enumerated in the invoice.
- Sales invoices are also used for managing a business’s inventory and financial records, seller protection, market strategies, and tax documentation purposes.
- A typical sales invoice contains seller and buyer information, invoice number, the total amount owed, the number of items ordered, etc.
What is a Sales Invoice?
A sales invoice is a document that sellers send to their buyers or customers whenever they make a purchase or order. It records the key information about the transaction, enumerating the goods or services provided, the amount to be paid by the customer, and the specific date when the payment is due.
This document is considered a binding contract between sellers and customers. This means that it is legally enforceable in case a customer fails to fulfill their end of the transaction, either by not paying on time or by failing to pay for the items and services they ordered.
Sales Invoice vs. Sales Order—What is the Difference?
A sales invoice and a sales order each serve different purposes.
A sales order is issued after a customer or buyer sends an order form or confirms a need to purchase your goods. It is also sent after a customer explicitly agrees on the shipment due date for the product.
In contrast, a sales invoice is sent to request payment from the customer in exchange for purchasing the seller’s products or signing up for their services.
Why is a Sales Invoice Important?
In a nutshell, a sales invoice is a concrete representation of the transaction that is about to take place between a seller and their customer. It enables sellers to request a payment from buyers with a definite set of payment terms the customer must follow.
Apart from that, a sales invoice is also useful because it can:
- Ensure complete and accurate information in your accounting books. Missing a couple of invoices could potentially lead to a significant loss in profit.
- Maintain a well-organized and updated inventory. After all, you need to record all items that come and go in your inventory so you can restock your supplies accordingly.
- Generate insightful sales and customer data for future marketing strategies. Sales invoices allow you to retrace how well your products and services performed in terms of piquing customer interest and generating ROI.
- Provide essential tax documentation. Whether it’s to check your taxes due, file your tax returns, or address tax audits initiated by the IRS, sales invoices contain key information for verifying your tax claims and supporting your business records if the IRS inspects your business’s financial information.
- Protect you from any disputes that could put your operations in jeopardy. This is common when customers fail to abide by the payment terms or misunderstandings arise between the parties involved in the transaction.
What Does a Sales Invoice Include?
It is important to include all of the following information in your sales invoice to ensure its validity:
#1. Contact Information
The contact information refers to both the seller’s and customer’s details. Essentially, a working mobile or phone number, physical address, and email address of both the seller and buyer must be printed legibly on the invoice.
The seller’s contact details must be placed at the header, while the customer’s information is affixed just below the header.
#2. Date of Issue
This information bears the specific date when the sales invoice was sent to the buyer. It is a vital piece of information because it instigates the transaction between the seller and the customer.
Also, it helps sellers set a considerable amount of leeway for customers to settle their payments and eventually track whether payments are due or delayed.
#3. Invoice Number
This is an identifying number that is unique to each issued invoice. Invoice numbers usually follow a chronological order to make it easier to track payments and orders and manage your accounting process.
A typical way to write invoice numbers is “INV0001” or “INV0002”. Some invoice numbers contain the date when the sales invoice was issued at the beginning and then followed by the sequential number: “20230313-INV0001”.
Other invoice number formats include the buyer’s initials to make it more personal and directed to the recipient, and should look something similar to this: “JOSIECOOPER_001”.
#4. Breakdown of Products and Services Provided
List all the items or services that you provided to your customer. Include the corresponding rates or prices per item and the total amount that the customer owes your business.
Check that the breakdown of all goods and services is enumerated clearly and concisely to avoid any misunderstanding or mistakes in calculating the total amount to be paid.
#5. Payment Terms
The payment terms include your business’s terms and conditions and possible penalties for late and non-payments. It details the date when the payment is due and any payment conditions and arrangements you and your buyer have agreed upon.
For instance, you may accept payments in a particular currency only, accept stage payments, or offer discounts if the customer can pay within 10 or 15 days.
#6. Additional Notes
Additional notes are like an extra gesture in your sales invoices. Here, you can add a simple thank-you note or special instructions for handling the product, especially if you are selling perishable goods.
How to Make a Sales Invoice Easily With a Free Generator
Even if you are running a small business, it is always best to think ahead and expect a growing number of orders over time. As such, a convenient and accessible solution in the form of a free invoice generator is something you should consider.
Paystub offers a free, user-friendly invoice generator that lets you generate as many invoices as you need. It takes three easy steps to use it:
- Access the free invoice generator.
- Fill in the empty boxes with the correct and necessary information.
- Go over the details one last time and download the document.
Our generator saves you time as all you need to do is fill in the required information, and, on top of that, you can use it to create invoices for multiple clients.
Main Types of Business Invoices
Here are a few other types of business invoices:
A standard invoice is a regular type of invoice issued when you charge payments in exchange for your services and goods.
Pro-forma invoice estimates the total charges to be billed to a customer, such as the number of items and corresponding rates, the total cost, added taxes, and shipping and delivery charges.
A recurring invoice is used when goods or services are ordered or requested at repeated frequencies.
A commercial invoice is required for international deliveries to verify the sale of exported and imported goods between a seller and a buyer.
This invoice is used when customers request a refund, return an item, or if there are errors in the previous invoice that must be corrected.
Sales Invoice FAQ
#1. Who issues sales invoices?
A sales invoice is issued by a seller whenever a customer orders an item or expresses a need for the services offered by their business.
#2. Is a sales invoice a receipt?
A sales invoice is not the same as a receipt. The former is sent to the customer to request payment for the goods and services they purchased, while the latter serves as proof that the customer has completed the payment they owe the seller.
#3. What should be on a sales invoice?
A sales invoice must contain the name and contact information of both the seller and the buyer, the invoice number, the date the invoice was issued, the complete list of goods ordered, the total amount to be paid, and the payment terms and conditions.
#4. What is the purpose of a sales invoice?
A sales invoice is issued to request payment from customers in exchange for purchasing services and goods from a business. In addition, it protects sellers from disputes involving non-payment and late payments.
If you want to keep your business protected and your profits continuous, make it a habit to create and issue sales invoices for every transaction you have with your customers.
It is a small and simple step, but it is vital to managing your finances, tracking the progress of your sales, and maintaining a positive buyer-seller relationship.