What is a sales invoice?
A sales invoice is a request for payment by the seller for goods or services provided. It is important for businesses to raise sales invoices for many reasons. Some of these reasons are listed below:
- For tax purposes, HMRC require companies to keep evidence of sales made for at least 6 years and up to 10 years in certain circumstances. Companies also need a record of all the sales made in order to complete the year end accounts and calculate the amount of tax owed.The details on the invoice will show what you have supplied which can then help protect a business against any disputes.
- By reconciling the debtors on a regular basis will highlight any outstanding debts that need to be chased.
- Analysing the invoices can also be a good marketing tool to see how, what, where and when the products and services are being sold and which employee is making the most sales.
What needs to be shown on an invoice?
A limited company that is also registered for VAT, must by law issue a sales invoice showing the following:
- The suppliers name, address and VAT registration number
- The suppliers registered office and company registration number
- The date of issue, the tax point and an invoice number
- The name and address of the customer
- The description of the goods or services supplied, including the quantity, the unit price, the rate of VAT and the VAT exclusive amount.
- The rate of any cash discount
- The total invoice price excluding VAT (with separate totals for zero rated and exempt supplies)
- Each VAT rate applicable and the total amount of VAT
Supplies to the EU
When making supplies to the EU, the following further details are required:
- VAT Reg. No. must be prefixed by GB, eg. GB123456789
If EU customer is VAT registered then,
- Must show their VAT Reg. No. with prefix, eg. DE123456789
Invoices less than £250
If the total including VAT is less than £250, then a less detailed invoice may be issued showing:
- The suppliers name, address and registration number
- The date of supply
- A description of the goods or service supplied
- The rate of VAT and the total amount
In some cases, if payments are below £25, VAT invoices are not required and input VAT can be reclaimed without a VAT invoice, eg. car park fees or cash operated machines. However, this is not generally encouraged and invoices should be raised where possible. So to answer the question above, in most cases invoices are required by law but even when not required, it is best practice to create an invoice.
How do I create a sales invoice?
There are many apps and products available that can create the invoice for you. You can get invoicing apps which mainly focus on creating the invoice but can have add ons to create more functionality. Or you can have accounting packages that will create invoices.
If however, you are a small business and want to start off by creating your own invoice there are many free templates that are available to download by doing a search for them. Alternatively, if you have read all this and just want to get on with it, you can download a template here: Sales invoice template
If you want to do a little more and keep a record of the sales you are making, you can purchase a slightly more involved spreadsheet version here for a one-off fee of only £5 by following this link: Creating an invoice
Need help with your tax returns? Follow this link to find out how I can help you. In the meantime, you can download a free tax dates guide for July 2017.