Sales invoice: Definition, components, and functions for business

What is a sales invoice?

Essentially, a sales invoice is a formal invoice document that confirms a sale between a seller and a buyer. It is issued by the seller and serves as a request for payment from the buyer. Depending on the terms agreed, the invoice can be sent either before or after the goods or services are delivered.

The sales invoice is an essential part of a business's financial records, similar to purchase invoices or tax invoices, as it contains detailed information about the transaction, including product descriptions, quantities and the total amount payable. 

For certain items or industries, they also include value-added tax (VAT) in this document. But why do they also include VAT in their sales invoices?

In the area of tax reporting in Indonesia, the Directorate General of Taxation of the Ministry of Finance considers sales invoices as one of simple invoices that are eligible for tax reporting. Therefore, the seller who is registered as a taxpayer — known as a taxable entrepreneur (PKP) in Indonesia — can use this document as proof that they have collected VAT on taxable goods (BKP) or taxable services (JKP) from customers.

For taxable entrepreneurs, these invoices are therefore official proof for a smooth and compliant tax reporting.

Why sales invoices are so important for your business

1. Proof of completed transactions

Sales invoices serve as indisputable proof of a completed sale between seller and buyer. These records help to avoid potential disputes as they provide clear evidence of what was sold and on what terms.

The detailed information in the invoice ensures that both parties have a common understanding of the transaction and emphasizes the role of the invoice as an official document.

2. Efficient payment collection tool

From the seller’s point of view, an invoice is an official request for payment. It contains the total amount due and thus ensures transparency for both parties. With the essential payment details— such as transaction date, due date and terms — sellers can manage payments more efficiently and reduce payment delays.

3. Facilitates complaints and returns

On the buyer’s side, the sales invoice serves as a reference in case the goods or services do not meet expectations. If there are discrepancies between the products delivered and the products ordered, buyers can use the invoice to file complaints or request returns.

The detailed breakdown allows the buyer to compare the delivered goods with the invoice to confirm accuracy and consistency.

4. Streamlines financial accounting

Sales invoices are critical to ensuring your financial records are accurate and up to date. They serve as the basis for calculating sales, profits and losses, which are then reflected in your financial reports.

Invoices also make it easier to track inventory sold and manage stock levels, giving you valuable insights into your business performance. You can use this data to analyze trends and make informed business decisions for future growth.

5. Supports tax reporting

As mentioned earlier, sales invoices are essential for tax reporting. Proper documentation helps ensure you are compliant with tax requirements. Keeping these invoices organized will make the tax reporting process smoother and more efficient.

Key components of a sales invoice

1. Details of the seller and buyer

Both the seller and the buyer must be stated on the invoice. For business transactions, the full company names of both parties should be stated.

2. Invoice number and date

A unique invoice number and date of issue are essential for easy tracking and reconciliation. This information is essential for the finance team to manage records effectively.

3. Details of the goods or services sold

Each invoice should list the goods or services sold with the corresponding quantities. For example, the sale of an office equipment set should be written as “10 desktops and 15 office desks” instead of just “office equipment set” in a sales invoice.

4. Prices of the goods or services

The invoice should clearly state the unit prices for each item or service and the total amount payable. Any applicable taxes, such as VAT, should also be included.

5. Payment terms and conditions

This section lists the payment schedule, due dates, penalties for late payments and applicable VAT. This is particularly important for credit transactions where payments are made in installments over a longer period of time.

6. Signatures and approval

The names and signatures of both the seller and the buyer confirm the agreement. For large transactions, a company stamp can be added to further formalize the deal.

Types of sales invoices

1. Cash sales invoice

This invoice is issued for cash transactions where payment is made immediately upon receipt of the goods or services. It is straightforward and does not include credit terms or payment collection.

2. Credit sales invoice

This invoice is issued when a buyer opts for a credit transaction and allows payment in installments. It contains detailed payment terms, deadlines and penalties for late payment.

3. Pro forma invoice

A pro forma invoice is a provisional invoice issued before the delivery of goods or services and serves as a payment reminder. Once payment has been made, the seller issues a standard sales invoice.

4. International commercial invoice

This invoice is used for international trade, usually for import and export transactions, and is sometimes referred to as a consular invoice. It contains detailed product information, such as descriptions, quantities, weight, prices and origin, and may require approval from consulates or embassies.

The commercial invoice serves as the basis for calculating customs duties and taxes.

5. Recurring invoice

For businesses with regular customers or subscription-based services, recurring invoices streamline the invoicing process. These invoices are created automatically on a set schedule, saving time and ensuring consistency.

Simplify invoice management with Aspire

Managing invoices is an important part of running a business, but manual processes can be time-consuming. With Aspire’s invoice management, you can manage your invoices and payments efficiently through our all-in-one platform.

With just a few clicks, you can organize, issue and track invoices. In addition, Aspire also takes care of sending invoices on your behalf and ensures that they are delivered in a timely manner. Aspire’s invoice management is also equipped with automatic reminders to ensure that buyers meet their payment deadlines, minimizing late payments.

To further simplify the payment process, Aspire offers a payment gateway that supports multiple payment options at competitive rates. With Aspire's payment gateway, you can receive payments from more than 26 methods, streamlining your payment processes and offering convenience to your customers.

Aspire’s innovative features are designed to help your business grow. Want to learn more? Get in touch with our team today!