A Guide on How to Fill Out an Official Receipt and Sales Invoice

In the Philippines, you might notice many establishments carry a sign that says, “Ask for Receipt.” Meanwhile, when running a business, chances are a vendor has told you, “I’ll send you your invoice after you’ve settled your payment,” one way or another.

Receipt and invoice are terms that can easily be mistaken for each other. But as an entrepreneur, knowing the difference between a sales invoice and an official receipt is a must. While both serve the same purpose: to record a transaction, the difference lies in what they’re issued for. Goods purchased need a sales invoice, while services paid for need a receipt.

Not giving your customers a sales invoice or an official receipt will result in penalties and fines from the Bureau of Internal Revenue (BIR). To avoid this, you and your staff need to know how to fill up a sales invoice or an official receipt to issue them accordingly. Doing so also helps bookkeeping when you need to update your books.

How to Fill Out an Official Receipt

An official receipt (OR) is proof that a customer has purchased a service over ₱25 from your company. In the Philippines, the law mandates the issuance of OR, as specified in Section 237 of the Tax Code.

Here’s a guide on how to fill out an official receipt: 

1. Calculate and collect the sale

Before writing out the receipt, it’s important to determine the needed documents to complete the transaction. For example, you may issue a BIR-registered acknowledgment receipt first as you wait for your client’s check to clear, or you may work on verifying a customer’s discount card if they use it during the transaction.

Your company may also need to compute the net amount collected depending on the sale.

• Without creditable withholding tax: The full amount will be collected.

• With creditable withholding tax: Identify the gross sales and applicable withholding tax rate. Calculate the withholding tax (gross sales x applicable withholding tax rate), and compute the net amount (gross sales – withholding tax).

2. Write down the specifics of the sale

Whether you’re filling out an official receipt manually or electronically, writing down the following details is a must:

• Name of the customer – If the customer prefers not to provide their name, simply put “cash.”
• Address – Fill this out with their full address or at least their city. 
• Business style – This is the business name registered with a regulatory body, such as the Securities and Exchange Commission (SEC), utilized by the taxpayer apart from its official registered company name.
• Tax Identification Number (TIN) – Leave it blank if the client can’t provide it.
• In the sum of – This is the total amount to be paid written out in words.
• Amount – This is the amount to be paid but written in numbers.
• In full or partial payment for – Specify if the customer is paying in full or partial. For partial payments, indicate particulars of the sales collection, such as if the down payment is at 20%, 50%, and the like.

3. Classify and compute the amount collected

This breakdown, usually found on the left side of the receipt, classifies what went into the total amount paid. It includes the following details:

• Total sales or amount due – The price of the service rendered, including the value-added tax (VAT).
• Less: VAT – The 12% tax added to the total amount.
• Less: SC/PWD discount – The 20% discount granted to senior citizens (SC) and persons with disability (PWD).
• Less: Withholding tax – The amount of withholding tax (if applicable). If your client is a business included in BIR’s list of the top withholding agents, they must deduct 2% of the service price rendered from your company as their local supplier.

For example, imagine a customer purchases ₱1,000 worth of repairs from you.

• Multiply this by 12% for the VAT, which results in ₱120 to be added to the total amount.
• If the customer (an individual) is a PWD, you must multiply the base amount by 20% to apply their discount. The total amount will now be ₱200 less.
• If withholding tax is applied, multiply the base amount by 2%, which gives us ₱20 to be deducted.

4. Review all details and sign 

Make sure to double-check that all the details and computations are correct. Afterward, sign the receipt and hand it over to the customer. 

How to Fill Out a Sales Invoice

A sales invoice is issued to customers who purchased goods over ₱25. While the Tax Code only mandates this for transactions worth the previously mentioned price, companies can still release sales invoices for the sale of goods or products, even if it’s less, to ensure the consistency of process across all sales activities.

Below is a step-by-step guide on how to fill out a sales invoice:

1. List the client’s information

Similar to an OR, you’ll need the following information:

• Full name
• Address – Shipping and billing address (if applicable)
• Business style
• TIN
• Payment terms
• Email address (optional)
• Contact details (optional) – Telephone or mobile number

2. Give a unique invoice number

An invoice number helps track transactions for bookkeeping and better organization of documents.

How you generate your invoice numbers is up to you, but a good way to start is to use letter shortcuts for the item, followed by the transaction date, and then the number it comes in a sequence. 

For instance, if you sold red lipstick on September 9, 2022, and this was the fifth red lipstick you have ever sold, your invoice number can be RL1092022-05.

3. Itemize products sold

In the sales invoice, enumerate the products sold. You can lay them out using the following details:

• Quantity – The number of items purchased. If you sold multiple items, group the same products and count how many were bought.
• Description – The name of the items. It could also include the item code.
• Measurement – The measurements of the items (if applicable). For example, if the customer bought a desk, this is where you fill out the dimensions.
• Unit price – The cost of each product. 
• Total amount – The total cost of all items.

4. Breakdown the total amount due

A breakdown of all amounts involved is essential if there are mixed transactions. It includes VATable sales, zero-rated sales, VAT-exempt sales, and 12% VAT.

Remember that for non-VAT sales invoices, you should print “THIS DOCUMENT IS NOT VALID FOR CLAIM OF INPUT TAX” in bold letters at the face of the invoice. For transactions under VAT-exempted, it’s a must to have the word “EXEMPT” clearly indicated on the document.

5. Check all details and ask for the client’s signature

Once you’ve verified that all details are filled out correctly, ask the client to sign the invoice.

Issue Official Receipts and Sales Invoices Right!

Every official receipt and sales invoice must have complete details to make bookkeeping smooth. It prevents confusion from clients, penalties from BIR, and irregularities when accounting for all your transactions.

If you’re interested in expanding your financial team to handle the work that comes with balancing your books, including keeping your receipts and invoices organized, consider outsourcing experts from CloudCfo.

CloudCfo is a cloud accounting firm for startups and small businesses in the Philippines that can assist with your accounting, bookkeeping, and other finance functions.

Get in touch with us for more information on how we can help grow your small business today!