There are ten kinds of sales document. Nine of them are views of one transaction, and each knows the one it came from. The tenth, the proposal, is the long-form offer that can come before them all.
Read this page once and you will know which to raise. Most businesses use three or four of the ten.
The ten
| Document | What it is | When you raise it |
|---|---|---|
| Proposal | A designed offer on your letterhead: what you would do, how and on what terms, with a value. | The price alone will not win the work. See Proposals. |
| Quotation | A price you are offering. Not a bill. | Somebody asks what it costs. |
| Sales order | A confirmed order, before it is delivered. | They accept, and delivery takes time. |
| Proforma invoice | A bill-shaped document that is not a tax invoice. | They need paperwork to release payment, before you supply. |
| Tax invoice | The real bill, with GST on it. | The goods or services have gone. |
| Bill of supply | A bill with no tax on it. | You are a composition dealer, or selling exempt or nil-rated goods. |
| Retainer invoice | A bill for money taken in advance. | You are asking for an advance against future work. |
| Credit note | A reversal of part or all of an invoice. | Goods came back, or you over-billed. |
| Debit note | An addition to an invoice that charged too little. | A rate was revised upward, or a charge was left off. See Debit notes to customers. |
| Delivery challan | A note that goods moved. | Stock leaves, and you need paperwork with it. |
Which ones you actually need
- A services business usually needs two: quotation and tax invoice.
- A trading or manufacturing business usually needs four: quotation, sales order, delivery challan and tax invoice.
- A composition dealer raises a bill of supply instead of a tax invoice, because you may not charge GST.
- Everybody ends up needing credit notes eventually.
The chain
Each document remembers the one it came from. A quotation becomes a sales order; the order becomes an invoice. Nothing is retyped, and the link is kept on the line as well as on the document.
That is what makes questions answerable. “How much of what we quoted last quarter turned into paid invoices” is a report rather than an afternoon, because the chain is recorded rather than implied.
You choose whether a sales order is in the chain. In Settings → Business profile you say whether a quotation becomes an order and then an invoice, or goes straight to an invoice, or either. A sales order earns its place when something is delivered over time, and is a wasted step otherwise. Whichever you pick is enforced — the route you do not use is not offered, and is refused if asked for.
Statuses
Each document type has its own list of statuses, because “delivered” means nothing on a quotation. Across the ten there are seventy-five.
Eight of them you cannot set by hand, because the money sets them: paid, partially paid, overdue, partially credited, reversed, written off, partially invoiced and invoiced. Marking an invoice “paid” yourself when no payment exists would be a lie the books would then carry, so the option is not there.
Where to go next
Something missing or wrong here? Tell us. A question that needed asking usually means a page that needed writing.