What is a sales invoice? Complete guide on how to create one
Learn all about sales invoices, including how they work, key elements, and steps to creating your own sales invoice.
By Donny Kelwig, Contributing Writer
Last updated July 27, 2022
When purchasing a tasty glazed donut nowadays, it’s a simple matter of tapping or swiping your card at the point of sale and waltzing out of the store. You probably won’t even take the receipt. After all, people might judge you for your Krispy Kreme habit, but they won’t care about the invoice. When it comes to your business transactions and sales operations, however, it’s critical to keep careful records.
Sales invoices are the key to a company’s finances—a handy way to track what you’ve sold to customers, how much they owe, and when they need to render payment.
In this guide, we’ll answer your most pressing questions: What is a sales invoice? How does it work? Why do I need one? And how can I make one? We’ll also provide you with a basic formatting sample so you can start those invoices today and never lose track of an important sale again.
What is a sales invoice?
A sales invoice is an accounting document sent by a provider of goods/services to a purchaser. It records services rendered, items provided, the amount owed by the customer, and how they can make payment. Invoices create legally binding agreements between companies and buyers, especially for larger purchases.
How do sales invoices work?
At the conclusion of the sales process, businesses create invoices to request payment from customers. For most companies, invoices are generated at or immediately following delivery. Some use snail mail, but most invoices nowadays come via email or invoicing software. This software often automatically alerts the company and the customer about changes to the invoice so that everyone is kept up to date.
Let’s dive a little deeper into the most important pieces of information to include in a sales invoice.
Key elements of a sales invoice
Invoices are a lot of info packed into a small space, especially if you’re trying to get everything onto one page. Formatting usually makes things clearer, but there are several items every invoice needs to include:
Invoice number and date
Description of goods or services rendered
Two sets of crucial contact information need to appear on an invoice: the seller’s info and the customer’s info. Sellers’ details are generally part of the header and often include a company logo to personalize the document.
A customer’s contact info usually appears beneath the header in specified fields. Although most invoices now travel back and forth via email, it’s always a good idea to include a physical address and accessible phone number.
Invoice number and date
A sequential identifying number on each invoice helps both sellers and buyers keep track of the document. The issue date also aids in identification as well as understanding payment terms, especially when a business doesn’t specify a date (such as “due in 30 days”).
Description of goods or services rendered
The main body of a seller’s invoice details what has been provided to the customer. Each item appears on its own line with a brief description of the product/service, the unit price, and the quantity provided.
Sellers include payment terms so customers know how and when to pay. Payment terms should also include methods of payment, whether that be cash, checks, credit cards, or cryptocurrency.
This is also the section that includes the seller’s payment time frame. This might be a specific date or within a defined period. Some businesses issue invoices that are “due upon receipt,” though a 30-day window is considered standard.
In order to avoid confusion, the invoice always includes the total amount due. Individual item costs should be detailed, as well as applicable taxes, discounts, and prepayments.
Types of sales invoices
There are four main types of invoices used for business transactions:
1. Standard invoice
The standard invoice is the simplest type and can be used in any sales transaction. It includes the basic information outlined above with a few possible tweaks on a case-by-case basis.
2. Pro-forma invoice
A pro-forma invoice is sent to the customer before goods or services are rendered. Rather than a typical sales invoice requesting payment right away, the pro-forma invoice informs the customer what they can expect to pay once the items or services are provided.
3. Recurring invoice
Recurring invoices are used for regular customers who purchase goods or services at a set interval, often with a membership or subscription. Cellular, software, and Internet providers, for example, generally use a recurring invoice system to bill their customers. Long-term customers can also use invoice software to automate consistent payments.
4. Commercial invoice
A commercial invoice is designed for international trade documentation. These documents are understandably more complex, as they include customs valuation for products crossing international borders. These documents will include country of origin, product weight, and freight cost.
Why are sales invoices important?
Beyond ensuring a company gets paid in a timely manner, a seller’s invoice provides a number of benefits for a company’s sales operations, planning, and forecasting.
Invoices are foundational for keeping organized books and accounting records. Frustratingly, the average business spends 14 hours a week chasing down outstanding payments. This makes transparent and up-to-date records critical to the cash flow of your business. A proper system for creating and filing invoices means you’ll never lose track of outstanding payments and can determine exactly when to follow up with clients.
Additionally, invoices are a valuable resource during tax season and legal proceedings when accurate paper trails are a must.
If your business sells physical products, invoices are doubly important for tracking inventory. You’ll know how much stock you have on hand to fulfill incoming orders and you’ll be able to forecast more accurately based on past data.
This information also feeds marketing strategies for holiday sales or seasonal promotions. Knowing what your bestsellers are means you can drive sales and accurately account for demand.
Organizing your invoices means you can predict future cash flow and create more precise budgets. If you know, for instance, that several large payments are scheduled for the end of the quarter, you can pre-plan for new equipment purchases.
Steps to create a sales invoice
Creating a sales invoice is fairly straightforward. While you can certainly go the route of drafting simple invoices in a word processor or spreadsheet, using a customizable template is less of a headache. You can even select templates in common software programs like Microsoft or Google Suite.
For larger companies, accounting or CRM software platforms often come with more complex templates as well as invoice management tools. These allow a salesperson to generate, send, and monitor invoices in one location.
Let’s take a look at the six steps to creating a basic sales invoice:
Step 1: Label clearly
“Invoice” should be splashed large and bold across the top to prevent confusion with other similar-looking documents. If you’re working on several invoices, feel free to add a date or specific deal name for more specificity.
Step 2: Include relevant contact information
In the header, include your company name, billing address, phone number, and email. Logos are optional but a nice touch to personalize your brand. Include a customer service number in case a client needs to call with questions.
Customer information generally goes beneath this header. Keep in mind that if your client is a large company, your point of contact for payment might not be your standard contact. If you’re using a template, make sure the template includes all the fields you need. Your software may only require the customer’s email address, but it’s always best to include the physical address as well for any snail-mail emergencies.
Step 3: Number and date each invoice
Assign a unique number to each invoice as you generate it. Not only does this help keep track of accounting, but it also clarifies correspondence with your clients. If you don’t have a numbering system in place, you can always begin sequentially: Invoice #001, #002, etc.
Date your invoice clearly. If you have an international clientele, it’s especially important to avoid confusion between months and dates. It also helps customers understand when payments are due.
Step 4: List items or services rendered
Describe the goods or services that you’ve delivered to your client. Identify each item on a separate line for clarity and ease of reading. It’s okay to include item or inventory numbers for your reference, but don’t leave your client scratching their head about what they got. Your description should be detailed enough for clarity but brief enough to avoid page clutter.
Don’t forget to include any previous documents that might be related to this transaction, like purchase orders, estimates, or sales agreements.
Step 5: Explain payment terms
Clear payment terms are essential. After all, that’s why you’re issuing the sales invoice in the first place. Outline payment methods you accept as well as any late fees you charge for overdue invoices.
Don’t forget to state when the payment is due. While many businesses list phrases or periods (such as “due in 30 days” or “due upon receipt”), it’s best to list an exact due date to avoid confusion and ensure timely payment.
Step 6: Clearly state amount due
The total amount due for payment seems self-explanatory, right? Not exactly. Customers want to see and understand the breakdown of what they owe and so does your accounting department.
Be clear about identifying previous deposits made, discounts applied, and necessary taxes. List each applicable item on a separate line. Place the total amount due at the bottom of the invoice where it’s easy to see.
Sales invoice example
Now that we have the tools, let’s see an invoice in action. Here’s an example of a standard sales invoice:
What’s the difference between sales invoices, purchase orders, and bills?
Sales invoices are commonly confused with other transactional documents, like purchase orders and sales receipts or bills.
- A sales invoice signals to the customer that payment is now due for services or products provided.
- A purchase order is the reverse. It is a document issued to the seller detailing the products and services ordered, so the sale has yet to take place.
- A sales order is similar to a sales invoice, in that they are both created by the vendor. The sale order, however, comes first. It confirms that the vendor can indeed provide the goods or services requested.
- Bill is often used interchangeably with invoice. An invoice is actually a type of bill, but not every bill is an invoice. The difference lies in the information each document contains. A bill lacks the detail found in an invoice. For example, restaurants issue a bill after a meal, but it doesn’t contain the customer’s contact information. It shows your crispy chicken wing starter, fancy kombucha, pasta primavera, and of course, your brownie sundae—but not your info. Also unlike an invoice, you’re expected to pony up right then and there, not wait for a future payment date.
Simplify your invoicing process with Sell
You don’t want to drag out a closing anymore than you have to. When your customer’s journey ends, make sure you’re ready to provide them with everything they need to pay you. Zendesk Sell’s centralized platform gives your sales team an easy-to-use tool that lets them generate payment pages and send invoices to customers in just a few clicks.
Sign up for a free trial and experience just how simple sales invoices can be with an industry-leading CRM.
A sales performance management process enables you to analyze and actualize your business’s progress and move you toward success.
Get sales advice on sales leadership, sales careers, customer relationships, and more straight from the pros.
Find the best, most effective sales training program for your sales team.