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Sales Invoice Basics

Sales invoice

Some people are just not made to create paperwork but if you are going to run a business learning how to make an invoice is important. Learning how to invoice correctly will save you time and money. Invoicing is the lifeline of your business. You don’t pay for services or utilies at home without an invoice do you?

What is a Sales Invoice?

A sales invoice is a record of a sale you made. The customer pays for the goods or services received based on your invoice.

An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms. The buyer has a maximum amount of days to pay for these goods and is sometimes offered a discount if paid before the due date.

Invoice – Wikipedia

How to Make an Invoice?

First let’s talk about making your invoice look professional. How your invoice is created also reflects on the professional image of your business. It is also an opportunity to do some marketing.

  • Include Your Logo

    Part of your branding strategy should be to include your logo on each and every piece of stationary you distribute, that includes your invoices. Include your logo in the top of your invoice. Usually it is in the top left of the invoice.

  • Include the Word Invoice

    Include the word invoice in good sized letters to make it clear that the document is an invoice (opposed to an estimate, proposal, credit, etc.). Off on the top right, free of other clutter would be a good spot.

  • Include Your Contact Information

    Include all the contact information a customer might need including:

    • Your business name.

      The official name of your business. If you are incorporated, a limited company or any other registered business, include the official business name on your certificate of incorporation/registration.

    • Your business address.

      If you are working from home and do not accept client visits include your mailing address and note it as such.

    • Phone, fax and email address.

      Including your business phone number, a fax number (yes some people still use fax numbers) and an email address provides a number of ways for the customer to contact you should they have a question. If you have set up your website on your own domain as suggested in our Strategies to Present a Professional Business Image article you can set up an email address just for accounting/billing questions (makes you look bigger than you are if you are a one person show too (wink)).

    • Your website address.

      Having your website address on your invoice provides another contact/marketing touch point. The customer has your web address right there to place another order or double check pricing if they are confused by the invoice.

  • Show Your Registration Numbers

    Depending on how your business is setup and the laws in your area you may be required to include your business license number as well as your tax collection numbers. Certainly tax number(s) if you want to collect taxes from the purchaser.

  • An Invoice Number

    All invoices need a number. The traditional way to number invoices is sequentially and this is how they are numbered if you use accounting software, an online billing service like PayPal or an invoice book.

    For a job were you are progress billing a larger contract you might be able to add the progress invoice number (e.g. Prog. #1). If not, include this information somewhere in the description of what the invoice is for.

  • Payment Options and Information

    Provide all the forms of payment you accept for invoices. You will notice that the bills you receive in the mail from the your credit cards, utilities and other accounts you have do this.

  • Due Date

    The due date may not be applicable if you require prepayment for your orders.

    If you are allowing people to be billed then state the date they are to pay the invoice by. Credit cards usually state a specific date but in business the traditional due date is 30 days from the date of invoice.

    You could improve your cash flow by offering a discount for early payment. e.g. 2% discount if received within 10 days of invoice date. One small business I worked for saved enough doing this to cover their utilities bills.

  • Terms of Service/Conditions

    Your Terms of Service (TOS), return policy and Conditions of Sale might be too long to fully explain on the front of the invoice. You will notice that when you receive a bill in the mail, these are usually on the back of the bill. For electronic invoicing this is a bit more difficult. If your invoicing system can not accommodate this at least provide the important points with a link to a full copy on your website. These should be on your website anyways and easily accessible before their online purchase for good customer relations.

  • Customer Information

    Most ecommerce software you can make any of these required information. The software can be programmed to verify that the information like phone number, email address and zip/postal code are entered correctly before processing the order any further. If you accept orders from individuals you might not want to make fax number, tax numbers and website address required.

    All of this information should be collected manually when you are not using a website to accept and process orders.

    • Customer name or their official business name.

      Businesses wanting to use the tax benefits of their tax numbers should provide their official business name as registered with the tax number account.

    • Customer contact information.

      Their billing address, phone number, fax number and email address are all contact points for you to contact them should you have a question about their order and for future contact (if they opt in to being contacted in the future but that is another post).

    • Their P.O. number. (purchase order number).

      Larger businesses (small businesses should do this too in preparation for expansion) use a document called a purchase order when ordering things. You might have seen this question when ordering from a stationary store like Staples. The purchase order lists what they are buying from you. Some will include the pricing for their purchase. This is what they are expecting to pay for the order. If it is wrong you should contact them on receipt of the purchase order and correct them instead of shipping the merchandise, billing them correctly and then getting into a discussion about the price later.

    • Their tax number(s).

      In some areas you calculate what tax you have paid and what taxes you have collected then remit the difference. There are some items that are non taxable if a tax number is provided, another reason to get this number from the customer. To find out how to deal with this contact your local tax authority.

  • Customer Shipping Information

    This is the information you need if you are phyically shipping the order.

    • Name of business or person the order is to be shipped to.
    • Address where to ship the purchase to if different from their billing address.
    • Contact information at destination. Person to contact and their phone number.
    • Zip code/postal code for the shipping company or post offfice to direct the shipment to the right area.

    Including how the merchandise was shipped including the receipt number or waybill number makes it easy to track who and how the shipment was shipped should there be a problem. Noting who signed for it would also save time later if you needed the information.

  • Invoice Details

    The more information you provide in the invoice details section the better for both of you. Everyone is clear what the invoice is for and saves time having to look for backup information should there be a question.

    • Date product or services were provided.
    • Details of what was sold or service provided. An itemized list is the standard when multiple items are being billed for in the invoice.
    • Total before taxes.

      This is the total of the order before taxes are added.

    • Shippig charges

      On a separate line show the shipping charges for the order if shipping is not free.

    • Duty and custom charges

      If you charge duty and custom charges as an extra charge when invoicing the order instead of the shipping company or post office collecting them for out of country shipments include this on the invoice.

    • Taxes charged.

      For areas where collection of multiple taxes is required, show each tax calculation on a separate line. This makes it clear to the customer what taxes were charged on the order and it makes it easier to calculate the taxes you have collected and have to remit.

So there is your long list of what is to be on the invoice. Now you want to know what to use to actually produce the invoice.

Producing Invoices

Most these days have an accounting software either on their computer or use an online service to produce their invoices. Once you have the template of the typical information on your invoices set up it is just a matter of filling in the customer details, shipping details and order details, recording the invoice then either printing it for mailing or email it off to the customer.

For those who do not have accounting software or the not so computer savvy there are a couple of options:

  1. Use a word processor or spreadsheet on your computer to produce your invoices. Remember to change the invoice number next time you use your template!
  2. Use a preprinted invoice book from the stationary store.

Invoicing Records

Everyone wants to go paperless but sometimes paperless is not practical.

You need to have your own copy of the invoices issued for your records. The accountant is going to need these to calculate your yearly sales at tax time. When you get audited by the tax department it is a lot easier to point them to the filing cabinet instead of them tieing up your computer reviewing your books. And latestly, should there be an inquiry regarding the invoice it is sometimes easier to look for a hard copy instead of firing up the computer and searching for it.

Depending on your business, the following might be suitable (this is what I do):

  1. A stack of invoices in numberical order for the purpose of calculating sales. For a larger firm where you have someone doing the bookkeeping for you it is easier for them to find things by the invoice number.
  2. A copy in the customer’s file. When you have a repeat customer it is easier to find their invoices if filed in their own customer file. All the details applicable to the invoice (emails, purchase order, shipping documents, etc.) are right there in one spot, attached to the invoice.

There is one more record you need to keep, a sales ledger (accounts receivable list). When you are smaller a list on your desk to keep track of who owes you money, when you expect money coming in and who has paid their bill all helps you keep on track for your cash flow. No invoices get left unpaid. You are on top of it.

For those who use accounting software there is a section to enter money received from customers and get a report of who still owes you money. It is just a matter of entering payments as received and running the report.

Invoice Promptly

Invoicing promptly is an issue for businesses that do not require prepayment that causes poor cash flow. They do their invoicing in batches (usually at the end of the month) instead of dealing with it daily or as the job is completed. The sooner you send out your invoices the sooner you will get paid. This improves your cash flow. Instead of money coming in next month than you could have had this month it is arriving sooner. You can pay your bills sooner to take advantage of discounts if possible, don’t have to worry about meeting payroll (if applicable) and keep your inventory well stocked.

Here is another reason to invoice promptly. This quote is from an article written as a content provider who didn’t get paid. It is applicable to any type of work you do.

Some writers actually incur their own problems by not staying up to speed on their invoicing matters. Make sure that you have been turning them in on the requested date so that payments are not delayed. In the event you turned one in for June 30 with the agreement you were to be paid by end of July, follow up on Aug. 1 if you have not received payment.

What Do I Do When My Client Will Not Pay Up? – Freelance Switch

In this instance, the company they wrote for closed shop. If you haven’t kept up your invoicing and follow up you don’t have a leg to stand on when trying to collect your money.

Learn the Basics of Sales Invoices

Some people are just not paperwork people, I understand that. But consider how much time (and money) you are going to loose if you do not learn even the basics of producing an invoice in a timely fashion and following up on payments due. Yes, you can leave this all to the accountant to do, for a price (including your non productive time explaining what you did to him or her), but as a small business you need to pinch every penny you can. Get your cash flow working for you instead of against you. Get that invoice out, collect your money sooner, pay your financial obligations sooner and reinvest into your business.


Sales Invoice Articles

About

With over 30 years of experience running businesses for others and my own I want to share my experiences with those just starting out. Many have the dream of owning their own business but don't take the time to learn how to run a business properly. By reading this blog, I hope I stear you in the right direction to become successful and fullfill your dream.

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