What you need to understand about tax invoice software

By: John Franky


When it comes to tax invoice software, you need to firstly know what a tax invoice is and the variation between tax invoice and non-tax invoice.

Let’s begin with the basics, an invoice is a billing record under which billing is done for a single transaction, it consists of itemized list of goods and services transacted, take note that it's different from a statement of accounts, that lists all the billing invoices issued on account of a particular client for a particular period. In essence every invoices consist of some basic elements, like invoice date, invoice number, itemized listing of all the goods and services transacted and amounts. Invoices comes with different kinds too like credit memo, debit memo, commercial invoice, pro-forma invoice etc. In today’s market, there are plenty of invoice software and system that may be obtained to manage them.

From a taxation perspective, there are two forms of invoices, namely tax invoice and a non-tax invoice. A tax invoice is an invoice which you issue to a buyer or customer for a purchase made that is covered by sales tax. And a non-tax invoice, on occasion also referred to as standard invoice, is an invoice that a vendor gives to a customer for products that are not covered by sales tax.

In some countries, if somebody is registered for VAT (value added tax), or GST (goods and service tax), then whether he or she is sole trader or limited company, it is required by tax law to put all the relevant tax information connected with sales on the invoices that they create for their sales transactions. Every sale results in a separate invoice, therefore, it is considered good to set records and invoices appropriately for VAT or GST anytime business starts.

Invoice Software _ Tax Invoice Software

For those who are just starting their small companies, they could find it a little bit complicated when it comes to tax invoice or non-tax invoice. After all, the key is to get the correct knowledge concerning what types or transaction items are subject to sales tax, and at what tax rate these transactions be taxed. Experts like accountant will find no issue with that, but for ordinary people, it might be just a good suggestion to seek the assistance of an automated software system which have already set things up.

There are countries which has just began to implement VAT (or GST), this has cause quite a bit challenge to small companies, because now they need to keep track of all their tax invoices. Before VAT (or GST), the majority bookkeeping entries were coded to the proper expense account straight from your bank statement, but now its required to refer to the tax invoices when recording the expenses in the accounting software application, again, setting up a software system to maintain track of the tax invoices is essential.

So far we have talked in regards to the sales perspective in regard to tax invoice, from expense perspective, you also need to keep a solid track of tax invoices for book keeping purposes. Most business expenses, but not all, have some of VAT (or GST) that must be identified. When you do your book keeping and entering your expenses into your invoice software system, you need to make sure you record the correct amount of VAR (or GST) for each expense, and identify expenses which are VAT (or GST) free, you can't simply assume that every one expenses are subject to standard VAT (or GST) rate, for example insurance (the stamp duty portion is tax free), bank fees and food.

Nowadays, many of the tax invoice software in the market should be able to handle the management very easily, you simply need to flag an item as tax-able or non-taxable, then the system will do the calculations for yourself automatically. By right a good tax invoice software should also give you the flexibility of choosing multiple tax rates because it is not correct to assume the tax rate won't ever change. And in a number of countries there a different tax rates for different types of goods or products.

In countries in Australia and New Zealand, businesses from time to time like to sell goods or services to their consumers using a so called “Tax-included” price, from the shoppers standpoint, the vendor is paying the tax on their behalf, but in essence it is not, from a scientific viewpoint, it is simply a lowered selling price or a discounted selling price. It is often hard to calculate the tax-included item amount by hand, but using a correctly designed tax invoice software, this can be achieved very easily.

To find such software systems, if you haven’t explored the internet yet, you need to do so, the internet is an enormous resource of applications, you can also find sample tax invoice forms and tax invoice templates, never take the trouble to create one from scratch, or paying someone to create it for you, because there are free software systems as well.

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Author: John FH, Small business software, accounting software, invoice software expert. Click small business invoice software free download to view his revolutionary DIY invoice software video.

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