When I first opened the (digital) doors of my content marketing agency, I was responsible for every function including prospecting, pitching, and executing each project — along with juggling the administrative tasks of running a business at the same time.
While my job was to do everything, I naturally focused on the areas that were most interesting to me — like sales and content strategy — and it didn’t take me long to fall way behind on “busywork” like issuing sales invoices.
Ultimately, I ran into a situation where there was more than enough work being done to keep the business afloat, but my cash flow told a very different story. It was a wake-up call to the importance of the sales invoice, and it taught me the now obvious lesson that you probably won’t get that check until you ask for it.
Table of Contents
- What Is a Sales Invoice?
- Why Are Sales Invoices Important?
- How Do Sales Invoices Work?
- Parts of a Sales Invoice
- How to Create a Sales Invoice
- Sales Invoice Example
- Sales Invoice Template
- Sales Invoice vs. Purchase Order vs. Receipt
- Building a Strong Financial Foundation
I’ll touch on the specific components included below, but the sales invoice is fundamentally a way to track your business output and your accounts receivable (AR), or the amount your customers owe you for the goods and services you’ve provided.
Why Are Sales Invoices Important?
Sales invoices serve three critical functions. Let’s dive in and outline exactly what the humble sales invoice is accomplishing in your organization.
1. Record Sales
How much realizable revenue did your business generate in a given quarter? How was that revenue distributed across your product or service lines? How is your sales team performing compared to previous periods? Where are your customers located around the country or world? Sales invoices can answer all these questions and many more, simply by recording sales when they happen.
When I put a consistent invoicing process in place for my own business, I was able to spot and eventually plan for seasonalities that I hadn’t known existed.
2. Ensure Payment
Perhaps the most obvious purpose of the invoice is to inform your customers they need to pay you. There are lots of options when it comes to invoicing software, including HubSpot’s Commerce Hub. No matter which option you choose, make sure you turn on auto-reminders at set intervals.
I generally trigger reminders one week before an invoice is due, on the due date, and one week after. If I haven’t been paid at these intervals, my clients will get pinged with a reminder and I don’t have to lift a finger.
3. Inform Tax Preparation
Whether you’re at a large organization with a fiscal year or you’re a sole proprietor working on your own, invoices serve as an excellent record-keeping tool for tax purposes. When it’s time to start putting your tax documents together, invoices provide the documentation needed to report income accurately and to ensure that any applicable sales taxes are collected and paid.
A sales invoice paper trail is critical in the event you’re being audited by tax authorities, but having verifiable financial statements also came in handy when I was applying for a mortgage in the early days of my business.
How Do Sales Invoices Work?
When you finish a project or package and ship a customer order, it’s time to create a sales invoice. I’ll detail what to include in the invoice below — for now, just know that when you issue the invoice (hopefully by some digital means like email or an online system), you’ll record it in your accounting system as accounts receivable to track how much income you’re expecting to receive from the buyer.
When you receive payment, your accounts receivable balance is updated to reflect the payment. Depending on the accounting method you use (cash or accrual), transactions might be recognized as revenue either when invoices are issued or when payments are received. Either way, information from sales invoices feeds into your business’s financial reports and serves as an important indicator of overall financial health.
How to Create a Sales Invoice
Most business accounting software includes an invoicing function, and many will allow you to take credit card payments as well. I’ve used lots of invoicing solutions over the last decade or so including Wave, QuickBooks, Stripe, and HubSpot’s Commerce Hub.
Thanks to the variety of options available, I’m confident you can find something that fits your needs and makes generating invoices easy. If you’ve found that solution, great — if not, take a look at this roundup of the best invoicing software to begin your search.
Whether you’re using robust, enterprise-grade software or building from scratch in a Google Doc, a sales invoice is just a document that includes the following key details for your buyer.
Company Information
Include the name and address of your business, including the contact information of someone in the accounting department or the point person if you don’t have a dedicated accountant.
Customer Information
Add your customer’s name and address, along with a primary point of contact to record who you were dealing with.
Invoice Number
Give each invoice you send a unique number so they’re easier to track down later.
Invoice Date
Include the date the invoice was sent to the customer. This practice gives you a record of when sales were made, and the payment due date is often calculated from the invoicing date if you’re offering extended payment terms.
Sale Details
List the product(s) and quantities the customer purchased, or describe the individual services if you’re a service-based business.
I strive to be as specific as possible so there’s no doubt in the client’s mind what they’re paying for. Instead of “consulting,” for example, I might put “sales strategy session” or “SEO implementation phase two: review of pillar content.” When you’re vague, clients see working with you as a cost to be minimized. When you’re specific about deliverables, you’re a strategic partner and a valuable asset.
Total Amount Due
All invoices will show the total amount the customer owes for the services performed, but I also like to break the total down into separate line items so clients have a better idea of cost. You should also show taxes, late fees, shipping charges, and other costs to provide full transparency.
The customer will probably look for the total amount due first whenever they receive an invoice, so I’ll put it in bold and shade or highlight it so it stands out.
Payment Terms
While payment might be “due on receipt” in the B2C world, it’s common to offer businesses a certain amount of time to pay your invoice. This flexibility helps them manage cash flow and makes your own company easier and more desirable to do business with. I generally recommend Net 30 payment terms, which gives your customer 30 days to pay you starting from the date you issued the invoice.
If that extended duration makes it more difficult to run your own business, consider offering a discount to incentivize quicker payment. I always include a payment link as well to make it as easy as possible for the customer.
Sales Invoice Example
To help you visualize how your sales invoice should look, I’ve included an actual example below — in this case, an invoice LinkedIn sends me each month for their Sales Navigator Core product (coincidentally, something that I highly recommend for sales professionals).
Because it’s a subscription SaaS product, there’s both an effective date and a transaction date. If you’re selling a service, I’d stick with an invoice issue date for simplicity.
The cost is specified in several different locations, but LinkedIn chose to highlight the itemized list with the description, rate, quantity, etc. I’m sure they have their reasons, but I would recommend highlighting the total cost — it’s what your customer will want to know immediately, and if something looks off they can then scan the document for a complete pricing breakdown and look at taxes, fees, and other factors that might have impacted their initial estimate.
In this example, I like that LinkedIn includes the Payment Method. If your business uses a variety of payment methods, it’s useful to know where different charges are billed. While you can find that information in your credit card or bank account statement, it’s convenient to have it on invoices as well.
Sales Invoice Template
Now that you have a sense of what your sales invoice should contain, you might be looking for a place to start creating your own. In that case, check out HubSpot’s Invoice Generator for an easy way to create professional-looking invoices in minutes.
Sales Invoice vs. Purchase Order vs. Receipt
Confused about how a sales invoice differs from a purchase order or a receipt?
A purchase order contains similar details, but it’s sent by the buyer to the supplier to indicate an intention to purchase the products or services outlined in the document. It gives the supplier a chance to marshall the resources necessary to meet the demand, and it outlines when the buyer would like to take delivery.
A receipt is simply evidence that a transaction has been completed, which is why you get them ad nauseam in everyday retail transactions. From a business standpoint, you’ll issue receipts after a buyer pays your invoices. Most business accounting software will have the option to trigger this functionality automatically, which I highly recommend doing to check one more thing off your to-do list. (If you’re still issuing receipts manually, check out these receipt templates for a good starting point.)
Building a Strong Financial Foundation
I can’t promise that a good sales invoice will make your business the next unicorn, but that doesn’t mean you should overlook the importance of this document in getting you paid on time and keeping your books clean, organized, and informative.
Once you’ve got a strong invoicing process that fits your business, work on automating as much as possible and turn invoices into an even greater strength.