You should never delete an invoice because a deleted invoice leaves no trace: the stock it moved, the balance it changed and the money it recorded vanish with it. A wrong invoice should be reversed, which undoes its effect and keeps the invoice on record.
What are the four statuses of an invoice?
| Status | What it means | Effect on stock, ledger and cash |
|---|---|---|
| Draft | Saved but not confirmed. Can be edited freely. | None |
| Finalized | Confirmed, numbered and posted. | Full effect |
| Cancelled | A draft that was discarded. | None, and never had any |
| Reversed | A finalized invoice taken back. | Effect removed; the record stays |
Why have a draft at all?
A draft lets you prepare a bill without committing it. Use a draft for a quotation, an order the customer has not confirmed, or a long bill you will finish later. A draft has no number and changes nothing, so it can be edited or cancelled without consequence.
What happens when an invoice is finalized?
Three things happen together, in one step:
- Stock of each product moves, out for a sale and in for a purchase.
- The customer's or supplier's ledger gets the full invoice value.
- Any money paid on the spot is recorded as a payment against a cash or bank account.
If any part cannot be done, for example there is not enough stock, nothing is saved and no number is used.
Why can a finalized invoice not be edited?
Because other figures already depend on it. The customer has a copy, his balance includes it and the stock has moved. Changing it quietly would make your record differ from his. Reversing it and making a new invoice gives both sides a clear trail: the wrong bill, the reversal, the right bill.
What does a reversal do?
A reversal removes the invoice's effect and keeps its history:
- the stock it moved is put back;
- its ledger entries are marked reversed and no longer count in any balance;
- a payment recorded on it is reversed with it;
- the reason, the user and the time are saved.
Because balances are calculated from the entries, every later balance in the running ledger corrects itself.
When is a return better than a reversal?
Use a reversal when the whole bill was a mistake. Use a sales return when the bill was right but some goods came back later. A return has its own date and number and leaves the original invoice finalized.
How does this protect the owner?
It protects the owner because nothing can disappear. A bill made for cash and then deleted is the oldest way to steal from a shop. With reversals, the bill, the cash and the reversal all stay visible in the audit trail, with the name of the person who did it.
In M-Tech Logistics: sales and purchase invoices are draft, finalized, cancelled or reversed, exactly as above. A reversed invoice can be copied to a new draft to enter it correctly. See invoices in the software.