List of all Important Types of Invoices That Every Business Must Know

Business operations are complicated with everyday tasks, client relationships taking precedence and invoices can easily get lost in the shuffle. For businesses to maintain a consistent cash flow, invoices must be sent properly, and payments must be received on time.

A business can send multiple invoices to its customers throughout the different stages of a project. These invoices may be sent to them according to the due date, the industry, the compliance requirements, and the regional dependency.

It is vital to know what to send and when to send it. 

In this article, you will find about 21 different types of invoices, from interim invoices, proforma invoices, commercial invoices, recurring invoices, and much more, and the purpose of invoices so that you can send the right invoice out faster and get paid on time when your invoices are sent.

Why Do You Need an Invoice?

A business must create invoices to ensure that its clients pay them as soon as possible. The business invoice is a legally enforceable agreement between a business and its clients, as it provides detailed documentation of services rendered and the payment due.

The use of invoices can also help businesses keep track of the sales they make and manage their finances. 

Invoices are helpful tools for gathering valuable data regarding how your sales change over time and can also assist you in generating accurate forecasts for your business. 

In addition to determining the average amount of time it takes to receive payment from your clients, invoices can also determine the amount of money you need to stay in cash flow.

 

Things to Consider in Any Invoice

A successful business relies heavily on invoices, be it recurring invoices, sales invoices, final invoices and more. Billing your customers in the right format and with the right type of invoice will help you make money. 

There is no way for invoices to be generated at random. Your invoice should note specific information, and you must identify that information beforehand. The benefits of proper invoicing are both time and money-saving. 

A failure to handle the invoicing process and a lack of a proper invoicing system could result in months of chasing down the client to clear the pending invoice. 

If you prepare invoicing information precisely, you are more likely to receive payment immediately for your services. Financial success requires you to accomplish several points on your invoice.

Keep an eye out for legal information

Invoices sent to customers must be marked as “invoices.” Failure to do this will hurt your legal rights. 

Once the “invoice” phrase has been added to your document, you must include the name, address, and phone number of your company, the name and contact information of your customer, your explanation of the charge, the list of your products or services, the invoice date, the VAT amount, and finally the customer’s payment obligations.

Your invoice should include this information, so you can easily track your payments and have legal grounds for defending yourself if you do not receive your payment.

Make sure your price is accurate

Remember to explain the price of your service to your customer upfront and ensure the bill reflects the correct price. 

This may lead you to request more money from them or have to reimburse them. 

Remember to include any discounts or special offers you have offered to all your customers or this specific customer when you add your offer to your invoice.

Give a brief description of the products and services you offer

Clear descriptions of your products and services will prevent consumers from asking what they’re being charged for. If customers can’t see what they purchased in detail debit memo or any type of invoice, they may feel they received poor service. This may result in a delay in payments.

Provide multiple payment method information

An invoice’s payment methods are its most important section. You will make paying easier for your clients by carefully and systematically creating this section. 

Offering different payment options will help you reach a wider audience. When you request payment through online banking payments, you should always include your bank account details. 

Hence, you should create your payment policy and make sure your customer follows it.

What are the Different Types of Invoices?

 A business can create different kinds of invoices for its clients, including 

1. Standard invoice

 Standard invoices are documents that a business issue and submit to clients for payment. Small businesses commonly use this invoice form to create invoices because it is a flexible format that can be customized to fit most industries and billing cycles. When it comes to standard invoice, the following information is included about the sale:

• Name of the company and contact information for the company
• The name of the client and the contact information of the client
• An invoice number
• The number of dollars owed to the business by the client as a result of its services

2. Interim invoice

 As the name suggests, interim invoices contain only a portion of the final invoice fee to assist in raising funds for the project and cover operational expenses. 

Interim invoices are also used when dealing with larger, more expensive projects due to the ease with which the total amount can be divided into smaller invoices, thereby making the total amount more affordable.

An interim invoice is calculated based on the percentage of work that has been completed or the milestones that have been achieved throughout the project.

3. Debit invoice

Debit invoice, also called debit memo, are issued by businesses when they need to increase their client’s balances.

Small businesses and freelancers may benefit from using debit invoices when adjusting an existing invoice. 

In the case of a project where you estimated the number of hours to be spent but spent more time on the project than you originally estimated, you may send a debit memo to the client for the additional hours. Debit invoices are always positive.

4. Mixed invoice

 Mixed invoices combine credit charges with debit charges, and each invoice can be expressed in either a positive or negative number based on the total amount. 

In most cases, small businesses can create multiple invoices to request payment from their client in exchange for the service provided. 

However, there may be occasions when you may need to do so if, for some reason, you are reducing a client’s credit balance on one of the projects you’re billing for while increasing their credit card balance on another project.

5. Commercial invoice

Businesses issue commercial invoices for goods they sell to customers overseas and are issued when a business sells those goods. When goods are sold across borders, a commercial invoice contains all the necessary details to determine customs duties. On a commercial invoice, you will find the following information:

• Quantity of shipment
• Volume/weight
• Goods description
• The total value
• Format of packaging

6. Timesheet invoice

 Businesses or employees use a timesheet invoice to bill based on the hours worked and their standard pay rate. Hourly contract employees use timesheet invoices to keep track of their hours worked. 

Several industries bill their clients hourly, such as:

• Attorneys
• Creative agencies
• Consultancy services
• Psychologists

7. Credit invoice

The credit memo, also known as a credit invoice, acknowledges the debt instead of charging the customer. This credit memo definition highlights that there must be an equal or lower amount on the credit invoice than on the customer’s original invoice.

You might have to send a credit memo for several reasons, including returning goods, delivering damaged products, or even sending the wrong item. It is possible to provide a credit invoice to refund a customer’s original payment or to provide the customer with a credit for future purchases.

8. Recurring invoice

 It is helpful for businesses to have recurring invoices for their clients to charge them the same amount for the same services periodically. In the recurring invoice exact amount is charged to clients every month for a package of IT services by IT businesses. 

Your clients benefit from the social media marketing packages you offer monthly if you work as a freelance digital marketer. 

By using cloud-based invoicing software, you can create recurring invoices automatically, including sending them out each month on the same day.

9. Digital invoice

Software is used to generate digital invoices. Software like InvoiceOwl] simplifies creating an invoice for sellers by allowing them to input information like the seller’s name, item names, quantity, prices, and the amount owed. 

Various types of software can be used to create a digital invoice, including word processors, spreadsheets, downloadable templates, and online invoice generators.

Automating the creation of digital invoices is possible with InvoiceOwl. Even so, it is the most common type of invoice today.

You start a FREE trial with InvoiceOwl and see how it eases creating invoices.

10. E-invoices

 Issuing, receiving, and processing an e-invoice is wholly automated without manual intervention. There is interoperability between e-invoices and different billing systems. 

Therefore, the buyer’s accounting system can interpret and read receipts and invoices generated by the seller’s invoice system, automating the Accounts Receivable/Payable process end-to-end. 

Using e-invoices directly helps reduce the scope for tax evasion, and many countries are mandating the use of e-invoicing.

11. Final invoice

 Invoices that show the total amount owed to the product or service provider at the end of a project are called final invoices. 

The retainer and interim invoice amounts must be deducted from the total amount owed to calculate this amount. 

The Final invoice includes payment terms, invoice creation date, items, subtotals, deductions (retainer and interim invoice totals), and total invoices.

12. Retainer invoice

Invoices for retainers are sent to buyers to collect prepayments for tasks to be performed soon. Upon payment of a retainer invoice, a client reserves a business’s services and has access to them as needed. Likewise, advance payments are often collected for capital or logistics or to protect against cancellations.

13. Expense report

 Employees submit expense reports to employers for reimbursement of business-related expenses. The employee can create an expense report for lunch, parking, and gas that they paid for upfront if you send them to a lunch meeting with a client.

14. Pro forma invoice

Pro forma invoice are the types of invoices that businesses send to clients before providing services. A Pro forma invoice provides the client with an estimate of the cost of the work to be completed. It may be necessary to edit pro forma invoices after a project is complete to reflect the hours worked correctly.

15. Sales invoice

 The sales invoice is sent by a business to a client to request payment. A sales invoice contains the product or service’s description, quantity, and price. The buyer and seller use sales invoices as official sales records.

16. Purchase invoice

 Sellers provide purchase invoices to buyers that outline the goods or services they have purchased, the quantity sold, and the price. A purchase invoice proves that a product or service was purchased and paid for.

17. Consolidated invoice

 An invoice consolidated under one customer’s name is a collection of existing invoices under the customer’s name. As a result, the buyer doesn’t have to pay each invoice separately, which saves them a lot of time.

18. Past due invoice

It is never a good feeling to receive late payments, but there will be times when your clients are late with their payments.

Those situations require an immediate past-due invoice to be issued.

A past due invoice reminds a client that it is past due on an invoice and they will need to pay it as soon as possible. All previous invoice information includes any late fees or interest charges that may apply.

19. Miscellaneous invoice

 An invoice for miscellaneous services such as shipping and setup is used when a buyer owes money. In most cases, no parts or items are required for these services.

It is used for quick financial transactions or small adjustments to an invoice that has already been issued. There often needs to be an invoice number to distinguish miscellaneous invoices from others.

20. Milestone-based invoice

 A value-based invoice or a milestone-based invoice. Upon reaching certain milestones, businesses issue invoices alerting their buyers to the money owed. In this type of invoice, the value of the goods or services is measured rather than the amount of time spent.

21. Utility invoice

 Utilities play a critical role in the daily lives of house dwellers, businesses, restaurants, industries, and corporations. Whenever gas, electricity, water, or sewerage companies have to demand payment from their customers for these utilities, they issue utility invoices to them. As a result, they would be alerted about how many utilities have been consumed and how much money has been owed to the utility company.

Conclusion 

You must familiarize yourself with different invoice formats, whether recurring invoices, digital invoices, or e-invoices are appropriate for your industry and business model.

Taking a moment to determine the purpose of your draft invoice before creating it will help you know what to include in your invoice when you are ready to create it. Negotiation and the collection of advance payments could be the reason.

It could also be an adjustment to an old invoice. Having that well-defined, it is time to pick the right type of invoices that will be able to accomplish the task at hand.