A sales invoice is basically a way in which a seller request a buyer for payment of goods sold or services rendered. It is an accounting tool that a business utilizes to tell clients the sums of money owed following a business transaction.
A sales invoice includes data such as the name of the procured good, the quantity, the extended discounts and the total sum of money. The payment methods accepted may also be indicated depending on the company. The amount of information included in a sales invoice varies from invoice to invoice. Some will have deeper details on the terms of the transaction as well as other order specific data.
A seller usually specifies a time period during which the buyer should settle the debt. Discounts are offered for paying within a specified time frame. These are invoice terms.
Free on board
This is used in a business transaction to indicate ownership of goods and agreed upon shipment methods. The basic variants of free on board are FOB origin and FOB destination.
The former is used to indicate that the buyer has ownership and bears the risk of the goods once they leave the seller while the latter, which is more popular, indicates that the ownership of the goods is with the seller who will also bear liability in case o loss or damage.
Sales invoices variations
Sales invoices vary greatly in terms of appearance and information included. There is no standard format, therefore, they will vary with function, industry and even country depending on regulations. Below are terms of interest in studying the variations in sales invoices:
Purchase invoice – a sales invoice is called so from the perspective of a seller. Purchase invoice is a term that becomes relevant when looked from the perspective of the client or buyer.
Credit note – a credit note is also called a credit memo and it is kind of the opposite of a sales invoice. The seller issues a credit note to a buyer to indicate that a certain amount of money has been sent to the client’s Credit notes are usually used to correct mistakes in the sales invoice.
VAT invoice – this is a good example of a variation depending on location. For firms in Europe, a VAT invoice is required whereby a field on the invoice is allocated for VAT ID number. Unlike U.S based companies and corporations which use retail sales tax; international organizations utilize the VAT ID number.
Proforma invoice – this is basically a pre-sales invoice document. It is issued by the seller to the client to show intent and willingness of the buyer to deliver specified products at a certain price to the buyer. It is also referred to as a sales order.