infosheet The Sales Cycle      Return to menu
     
   The objective




Related infosheets

Cash sales

Invoice design
 		   The single most important objective is to make sure that every
sales transaction is recorded and accounted for properly.

This can easily be achieved by carrying out the following steps:
  • Make sure that you have a fail-safe system to ensure every good dispatched or service supplied is promptly invoiced. You will be surprised how many 'sales' we see that are genuinely forgotten or lost.

  • When you raise a sales invoice, always produce at least one copy to store on a lever-arch file marked 'Unpaid Sales Invoices'. Always store the sales invoices in reference number order.

  • Record the details of each sale in your Sales Day Book (an example of a SDB can be seen below).


  • When you receive payment from your customer of one or more sales invoices, extract the relevant documents from the 'unpaid' file. Annotate them as 'Paid' (include details of date, paying-in slip reference, account into which it was paid, and amount). Then file the paid sales invoices in a series of files called 'Paid Sales Invoices'. As before, always store the sales invoices in reference number order.


  • Update your Sales Day Book records to confirm that the invoice has been settled.


  • Keep the files and Sales Day Book for at least six years from the end of the accounting period.


    		•
       Invoice referencing    The way you reference your sales invoices should be kept as simple as possible.

    In our opinion, the best way is the simplest. Start at S.001, then S.002, S.003 etc.

    If you are going raise hundred of invoices a year, then it is worth adding three leading zeros (e.g. S.0001). Leading zeros will help you in the future, if you need to resort invoices in software applications like MS Excel.

    If you do not want your customers to know you have only just started trading, there is nothing to prevent you from beginning to number your invoices from any figure you care to mention (e.g. S.750). Just make sure you leave a note on file to explain what you have done, and clearly identify the very first sales invoice.

    Some people devise complicated sales invoice reference numbers, to act as keys to record useful management information for other purposes. For example the middle three characters could denote the department number which will be credited with the sale.

    We would recommend you keep the sales invoice reference number reserved as just a simple unique transaction identifier. If you need to include other keys, then introduce them as separate fields.

    Whatever system you adopt, we recommend you keep the same sequential numbering process going over an accounting year-end.

    Do not be tempted to restart numbering from zero at the commencement of each period. As you have to keep your accounting records for up to six years, why create for yourself the unnecessary complication of having six different 'S.001' invoices?

    Keeping track of the sales invoice referencing system.

    Unless you use some kind of software that automatically generates the next available sales invoice number, you will need to devise a manual system to advise you of the required information.

    We have seen many different methods for doing so. The simplest and best approach is to use the sales day book itself to guide you. Just look up the next available number, and use it. It also gives you the incentive to write up the sales day book as you go along.
       The Sales Day
    Book (SDB)

    An example
    		   
    Inv Ref
    Tax Point
    Date

    Customer
    Gross
    VAT
    Net
    Date paid
    Paying-in Slip Ref
    Account
    S.036
    02.09.01

    Gallagher & Co
    117.50
    17.50
    100.00
    15.09.01
    00547
    Current A/c
    S.037

    02.09.01

    Calenics Ltds
    58.75
    8.75
    50.00
    25.10.01
    Page 23
    Cash A/c
    S.038
    03.09.01

    Brent & Co
    235.00
    35.00
    200.00
    O/S
    		  
     
    S.039
    03.09.01

    Canada Supplies
    (65.00)
    9.68
    (55.32)
    -
    -
    -

       Points to note    The 'VAT' and 'Net' columns are only required if you are registered for VAT. If you are not registered, then you only need the one amount column.

    You will see that we have made a point of recording the tax point date and not just the sales invoice date. In reality they are frequently one and the same date, but not always. For further information on why it is important to distinguish between these two different dates, click here.

    The fourth entry made (S.039) is a credit note. Some authorities suggest that you should use a separate day book altogether, or use a different referencing system (e.g. CR001, CR002 etc). It is our view that the credit note is nothing more than a negative sales invoice. For small business accounts, it is more convenient to enter credit notes into the same day book as the sales invoices (making sure to deduct the amounts from the running totals). Just use the next available invoice reference number, and put a "CR" instead of a "S" if you feel it makes the different nature of the transaction clearer. The choice is entirely up to you.

    The last three columns record details of the settlement of each sales invoice. Many people try to cut corners at this stage by just ticking one column to indicate the debt has been settled. This may appear to be acceptable, but it does not maintain a useful paper audit trail. Laborious as it maybe, it takes seconds for you to record this information when you have all the details to hand. It may take you hours to repeat the same exercise, three months later. We won't be able to do it any quicker, and we charge you by the hour.