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What is a Sales Invoice

Sales Invoice Example

It is a legal requirement to issue a sales invoice when you sell a service or product to a customer. It is a source document in accounting.

The invoices need to be stored for at least six years and may be required by accountants for your year-end or HMRC.

The design of your invoice will reflect your company image. If you are invoicing large companies, it may be worth designing an invoice that stands out. One way of doing this is to use different coloured paper.

Why are Sales Invoices Important?

A sales invoice is an important source document as it shows a transaction between a customer and client and is part of the bookkeeping.

When a sales invoice is issued in accounting software it will create a record of the sale and include it in the figures on the income statement or profit and loss account.

 

What Information Should be on a Sales Invoice?

There are legal requirements for the type of information needed on each invoice; this depends on how your business is structured:

Self-Employed

  • Your business details
  • Address where any legal documents and cheques can be posted
  • Invoice Date

Limited company

  • The full company name, i.e. the name which appears on your Incorporation Certificate issued by Companies House
  • If a different business name is used this needs to be included
  • Address where any legal documents can be posted
  • The registration number issued by Companies House

VAT registered

If you are VAT registered, you will also need to include the following:

  • A unique and sequential number (this is useful on any invoice, whether you are VAT registered or not)
  • The customer’s name and address
  • Date of supply for the goods or services
  • A tax point date, if this is different from the date of supply
  • Description of goods or services
  • VAT registration number
  • VAT rate per item
  • VAT amount
  • Total invoice amount excluding VAT
  • Each item will need an individual unit price
  • If you have any items which are charged at 0% rate, these must be shown clearly

There are other items that you might want to include on a sales invoice, these include payment terms, due date

Sales Invoice vs Purchase Invoice

Though they might look similar at first glance, sales invoices and purchase invoices serve distinct purposes in your business transactions. Essentially, they represent opposite sides of the same coin. A sales invoice is what you send to your customers when they buy goods or services from you. It’s your way of requesting payment and formally documenting the sale. On the other hand, a purchase invoice is what you receive from your suppliers when you buy goods or services from them. It acts as a bill and a formal record of your expenses.

Sales Invoice Template

Sales Invoice Template

We have designed two sales invoice templates for the UK, VAT and non-VAT. You can add your logo, address and details; this will make your business look professional. Full instructions and download are on our sales Invoice template page.

What is a Sales Day book?

Sales Day Book Example

A sales day book is a list of all the credit sale invoices. It is useful if you issue sales invoice manually to keep a record.

Sales Invoice – Other Information

You may also like to include contact phone and fax number, email address, website and details on paying for the invoice by BACS or online payments.

Include as much information as possible on an invoice, especially if you provide credit terms. You should include your customer’s contact name and a purchase order number if available: this may help quicker payment of the invoice.

Terms and Conditions of Sale

Your customer should have a copy of your terms and conditions of sale. Many businesses include a printed copy of their terms and conditions of sale with invoices.

The document will include payment terms, details for returns or warranties and breach of contract.

Issuing a sales invoice

Ensure you always issue your invoices promptly: the sooner they are issued, the sooner you will be paid.

There are several ways to issue a sales invoice.

Invoicing Software

Zoho Books sales invoiceThe above invoice was issued for Zoho Books.

Invoicing software is included in most accounts software packages. It is much easier to use this function as the information will automatically record in the sales ledger and VAT control accounts.

If you have the customer’s email address, the invoice can be emailed directly from the software. You can also send out automatic invoice payment reminders and statements.

Most will have the facility to amend the sales invoice template to create a professional-looking invoice using the business branding. When choosing software for invoicing, it is worth checking if they have unlimited invoices. It is very tempting when you start to use a cheap or free option, but these are sometimes not suitable for a growing business.

Using accounting software will save you time and money. Some of the best packages available are FreshBooks, Xero or QuickBooks.

Read our guide to find the best accounting software for your business.

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If you are using manual records, you can download free Excel and word sales invoice template.
Click Here to view a list of suitable templates.
Make sure you find a suitable template for your business structure.

Invoice Books

You can also purchase invoice forms or books from online stores.

If you only issue a few invoices and run a manual system, keeping an invoice log is worth it. It will list Invoice Number, Date, PO Number, Customer Name, Net Amount, VAT and Gross Amount.

This log will make it much easier to trace an invoice if you want to check any information in the future, rather than looking through the whole invoice file.

Invoicing Service

Some companies will raise sales invoices for you. If you use a bookkeeper, check it it is part of their service.

What is the Difference Between a Sales Invoice and Receipt?

A sales invoice is a payment request, and a receipt is proof of payment.

A receipt confirms that a customer paid for goods or services. A receipt does not need as much detail as an invoice and can be from a till or an invoice marked with paid.

Once a Sales Invoice has been Raised

Once you have issued a sales invoice, you will need to keep copies of them for your tax purposes. By law, you will need to keep copies of these sales invoices for six years, and your accountant may require access to them when auditing your business accounts.

You will find it easier if filed in numeric order with the newest on top: this makes them easy to file and locate later.

Finally, you need to make sure your customer has received your invoice and accepts it for payment. Find further information on credit control and tips on making sure your invoices are paid promptly.

Return from Sales Invoice to Bookkeeping Basics page.