There are many different types of invoices a business can send or receive for its clients. The type of invoice you choose or receive will depend on your industry, how you bill for your services, how often you plan to get paid, and/or the terms of the contract.
Depending on the type of client and business, there may be different types of invoices that you will need to send out or receive. It’s important to know which types of invoices are out there for utilization and how they are used so that businesses can stay organized and improve their cash flow.
What Are The Different Types of Invoices?
Organizations may receive a variety of invoices depending on their industry. It’s critical to understand the many sorts of invoices and how they may be utilized so that companies can keep organized and boost cash flow. This is especially helpful for the VP of Finance or Controllers who are responsible for Accounts Payables and Accounts Receivables.
What Is An Invoice?
Invoices are simply a document that states what a customer owes for goods or services provided. This is usually given after the products have been delivered or the service has been completed.
What’s The Function of an Invoice?
Invoices are important for a number of reasons. For one, invoices give customers a clear breakdown of what they’re being charged for. This is helpful so the customer can make sure they’re being billed correctly. Additionally, invoices help businesses keep track of what’s been sold and to whom- this is essential come tax time. Finally, invoices serve as a reminder to customers that they need to pay for goods or services received.
The Essential Elements of an Invoice
There are essential pieces of information included on all invoices.
- The name, address, and contact information of the business or person issuing the invoice
- The name, address, and contact information of the customer receiving the invoice
- A unique invoice number
- A description of what was purchased or what services were provided
- The date of purchase or service
- The amount owed for the purchase or service
- The method and schedule of payment
- The terms of the sale or service
- The total amount owed with currency
- A personalized note
While every business is different and will include different information on their invoices, these are the basics that should be included on all invoices. Now that we’ve gone over the essentials, let’s take a look at the different types of invoices businesses can send to their clients.
Invoice By Service Type
Invoices are created for different service types.
The most common type is a project invoice. This is an invoice that’s created for services that have been provided over a period of time, and it will list out each service with a description and the amount charged for that service.
Another common type of invoice is a retainer invoice. This type of invoice is typically used by businesses that provide ongoing services, and it’s a way to bill for those services in advance.
Recurring invoices are also common, and these are invoices that are sent out on a regular basis – usually monthly or quarterly. This type of invoice is typically used by businesses that provide subscription-based services.
There are also product-based invoices, is for companies that sell physical goods. This type of invoice should list the date products were sold, a description of the products, how many units were sold, and the total amount due.
Last but not least, there are hourly invoices. An hourly invoice is for companies that charge by the hour, such as lawyers or contractors. This type of invoice should list the date services were performed, a description of the work completed, how many hours were spent on the project, and the total amount due.
There are 10 main types of invoices
1 Pro Forma Invoice
A pro forma invoice is a preliminary bill of sale. It typically includes an agreed-upon price, product or service to be sold, and delivery terms. This type of invoice is used to confirm both parties’ understanding of the transaction before proceeding with the sale.
2 Sales Invoice
A sales invoice is a document that itemizes the products or services sold to a customer, along with the corresponding prices. This type of invoice is typically used by businesses that sell physical goods.
3 Recurring Invoice
A recurring invoice is an invoice that’s billed on a regular basis, such as monthly or annually. This type of invoice is typically used by businesses that provide subscription-based services, like gyms, website hosting, and magazine subscriptions.
4 Past Due Invoices
Past due invoices are invoices that haven’t been paid by the due date. This type of invoice typically includes language indicating that the payment is overdue, as well as any late fees or interest charges that have accrued.
5 Credit Invoice
A credit invoice is a document that is given by an organization to a customer in order to provide a discount or a refund or to correct an earlier billing mistake. A negative total number will always be included on a credit invoice. If you’re issuing a credit invoice to someone who received $50 worth of goods and services, the entire amount owed would show up as a negative number on the invoice, such as -$50.
6 Debit Invoice
A debit invoice, also known as a debit memo, is a document issued by a company to raise the amount owed by a client. When small businesses and freelancers need to make only a minor adjustment to an existing bill, debit invoices can be beneficial. You could give the customer a debit invoice for additional hours billed if you sent an initial invoice for services rendered, but the customer says they only received half of what was agreed upon.
7 Mixed Invoice
A mixed invoice combines credit and debit expenses on the same invoice, resulting in a total that can be considered either a positive or negative number. Small businesses seldom need to generate mixed invoices for their services, but it’s possible if you’re reducing one of your client’s outstanding balances while raising another.
8 Interim Invoice
An interim invoice is a billing statement that covers a period of less than one month. This type of invoicing can be used in construction or other industries where services are rendered over the course of several weeks or months. Typically, you’ll use an interim invoice when work on a project is completed and you want to bill your client for the services rendered to date. This type of invoice is also sometimes referred to as a progress billing statement.
9 Past Due Invoice
A past due invoice is an invoice that has not been paid by the due date. If you have a client who consistently pays their invoices late, you may want to send them a past due invoice to remind them that they need to pay their bill. This type of invoice is typically sent with a payment plan or late fee attached.
10 Final Invoice
As the name suggests, a final invoice is issued after all of the work on a project has been completed and it’s time to bill the client for the total amount due. A final invoice should include all of the charges for the work that was performed, as well as any applicable taxes and fees.
There are many different types of invoices that businesses can use, and the type you choose will depend on your industry, how you bill for your services and how often you plan to get paid.
By understanding the different types of invoices and when to use them, you can streamline your billing process and ensure that you get paid on time. Also, will help you identify fraud or mistakes, so you can avoid them in the future.
Have you ever had trouble with invoicing? What type of invoice do you use for your business? Let us know.