At the end of the sales process, businesses create invoices to request payment from customers. Today, most invoices are sent electronically, although some companies still send invoices by mail.
However you deliver your sales invoice, they are important documents–at least if you want to get paid.
Sales invoices have other purposes, for example, accurately measuring and monitoring cash flow. This guide will help your team understand the importance of sales invoices and provide several templates for
What Are Sales Invoices?
Invoices are legal documents that create a binding agreement between buyers and sellers, obligating purchasers to pay for the service rendered or sales transactions.
There are several different ways to issue invoices along with different payment methods. Many small business owners use Word, Excel, Google Docs, Google Sheets, or fillable PDF forms to create and print invoices or purchase orders. Others use accounting or invoicing software, such as QuickBooks. Some will use built-in invoicing in platforms like Stripe or PayPal.
There are also options to generate quotes and then turn them into sales invoices.
Sales invoices help businesses track what’s been sold and what buyers owe them. They also provide additional benefits, such as:
- Documentation for tax preparation and payment: Businesses need to track sales and taxes carefully to prepare for filing. If your business is ever audited, it is crucial that you have complete documentation including any tax charged to customers.
- Legal recourse: If a customer fails to pay their bill or refuses to pay, an invoice provides you with a legal record of what you provided and what they owe. It also helps document when goods or services were provided, what terms were included, and the required due dates.
- Budgeting and planning: Sales invoices help you see what you have outstanding, making it easier to budget cash flow and plan for marketing, growth, or investments.
- Moving collections to accounting: In many organizations, once a sale is complete and an invoice is finalized, the responsibility for collecting moves to the accounting department. This frees up the sales team to sell, rather than worrying about payments.
Essential Items to Include on a Sales Invoice
To make sure you get paid on time, it’s important to make sure the correct information is present on every invoice. Since it’s a legally binding document, you do not want to make any mistakes during the invoice process. Here’s a checklist of basic information to include on any invoice you send out.
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Invoice Number
Invoice numbers make it easier for everyone to track individual invoices, especially when there is more than one outstanding invoice for a particular company. If there’s more than one current invoice, it’s important to know which one is being paid. This information will also help you track accounts receivable in the general ledger.
Invoice reference numbers also help you track back to specific quotes, proposals, or opportunities.
Invoice Date
The date also helps identify invoices and also trigger payment terms. For example, if you issue invoices with a 30-day net payment term, this helps you know when payments should arrive for budgeting, or track when they are past due. It also lets buyers know when you are expecting payment.
Company Name
Both buyer and seller names need to be spelled out. The seller’s information is usually at the top of the invoice so purchasers can quickly identify the source. You may also want to include a company logo in the header as well.
Buyer information should go immediately underneath, with any additional information such as the name of the person who placed the order if necessary.
Contact Information
You also need to include contact information to make it easy for buyers to contact you in case of any questions or problems. While most queries are done by email, it’s also a good idea to include your physical address and phone number.
Payment Due Date
You should always make sure to spell out when the payment is due. Business buyers generally are managing multiple invoices from several different companies. Each may have different terms for payment, so you want to make it clear when you expect to be paid.
Total Amount Due
When you request payment, you should detail any line items as required along with the total amount due, including any taxes, service fees, or discounts.
Brief Description
While you do not need to provide a great deal of detail, you do need to itemize the products or services provided so that the buyer can easily identify them. If there is a list of products, you will want to provide a brief description along with the unit price and the quantities provided.
Payment Terms
Payment terms should explain your agreement. This might include:
- Due upon receipt
- Net 30 days
- Net 60 days
If you provide discounts for paying within a certain period or using debit rather than credit to pay invoices, this should also be spelled out.
Payment terms should never come as a surprise to buyers. You should discuss any credit terms when you are closing a sale along with any penalties for late payments.
Accepted Payment Methods
You want to make sure you include information about what types of payment methods you accept. Buyers today want flexibility in how they pay, including options such as:
- ACH payments and electronic bank transfers
- Check
- Credit cards
- Automatic payments for recurring fees
- Online payments, such as PayPal, Google Pay, Payoneer, Stripe, etc.
If you accept credit card payments, you should let buyers know which types of cards you accept. The same applies to online payment platforms. Flexible options can often get you paid more quickly.
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Sales Tax
Tax rates can vary by location, so you want to make sure you provide the sales tax rate that is appropriate. Some goods and services also have different rates depending on state and federal laws. For example, certain types of machinery are taxed at different rates in some states depending on usage.
Different Types of Sales Invoices & Sales Documents
There are a few different types of sales invoices and documents that every business should know about and understand. Depending on your line of business, each of these may play an important part in the sales process, so it’s essential to understand their purpose and how they work.
Commercial Invoice
A commercial invoice is required for exporting or importing goods. Custom officials will use this document to calculate and assess import taxes, fees, or duties required. The commercial invoice acts as both a contract and proof of sale. It is issued by the seller.
Sales Order
You may be asking what’s the difference between a sales order and a sales invoice. While a sales invoice records a sale and is initiated by the seller asking for payment, a sales order is initiated by the buyer. The order will detail what the buyer wants and, upon fulfillment, can acts as a sales receipt once the order is paid.
Typically, sales orders are completed and paid before goods are received. The receipt may then be shown to confirm the purchase and pick up goods at a loading dock, for example.
Purchase Order
A purchase order (PO) is similar to a sales order, sent by the customer to a business to order products or services. However, it does not require payment in advance. POs let business owners know the details of what buyers want along with payment amounts.
In many companies, POs are required to be submitted for approval internally as part of the budgeting process or business plans.
Proforma Invoice
A proforma invoice is a preliminary bill that is used to request payment before goods or services are provided. This includes a description of the products or service, the amount of payment required, and details about the transaction. It acts as a good faith agreement between buyers and sellers in advance.
This is more common in cases where buyers may need to get approval or need to acquire financing to complete a purchase.
Overdue Invoice
An overdue invoice lets buyers know that it’s past due. It may also include any late fees or actions that can be taken by the buyers for lack of payment. This information may also be included in statements, which detail activity on accounts.
Consolidated Invoice
A consolidated invoice can contain requests for payment for multiple goods and services, grouping them together into one bill. This can save time for buyers who make multiple purchases over time.
Interim Invoices
When partial deliveries are made or progress payments are required for goods or services, an interim invoice can detail amounts due that are less than the total amount. For example, when companies reach a milestone in delivering a project or when payments are broken down into smaller amounts over time.
Top 11 Sales Invoice Templates You Can Use Now
If you are using Microsoft tools to create your invoices, there are several free templates you can download and customize, including:
- Microsoft Sales Invoice Templates (Word or Excel)
- Vertex42 Sales Invoice Template (Excel)
- Zoho Sales Invoice Template (Excel)
- InvoiceSimple Invoice Template (Excel)
- Invoice to Go Sales Invoice Template (Word, Excel, or PDF)
- PayPal Sales Invoice Template (Word)
Most Excel or Word templates will also work with Google Docs or Google Sheets.
If you use small business accounting software, there are also free sales invoice templates you can download. Many of these are already customized for particular types of businesses. Download sales invoice templates for your accounting software at:
- QuickBooks Sales Invoice Templates
- FreshBooks Sales Invoice Templates
- Billdu Sales Invoice Templates
- Zero Sales Invoice Templates
- Wave Sales Invoice Templates
- Sage Business Cloud Sales Invoice Templates
Using Sales Invoices to Manage Customers
Sales invoices help both parties to understand what’s being bought, sold, and provided. They provide a legal document that details the transaction and terms under which sales occur. Companies need to make sure invoices include pertinent information and are accurate.
Sales invoicing happens at the end of the sales process. However, there’s a lot of work to be done before any invoice goes out. The most profitable companies work strategically to cultivate and manage sales pipelines to grow their business. That’s why so many businesses have turned to solutions like Close.
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