Interim Invoice Definition
An interim invoice is a request to a client for a partial payment, typically made before the final deliverable is complete. It facilitates the collection of payments in regular installments.
Interim invoices offer businesses payment flexibility by allowing them to receive partial payments throughout a project, rather than waiting for a large lump sum at the end. They function similarly to regular invoices, differing only in that they enable businesses to request a portion of the total payment before the work is fully completed.
Since over 51% of suppliers report late payments, issuing interim invoices can help maintain consistent cash flow. This ensures that businesses stay financially stable and are better positioned to deliver the final work in a timely manner. However, you can’t send interim invoices at any time. Firstly, you need to create a payment schedule and prepare an estimate for a project.
Let’s delve deeper into this topic and uncover the interim invoice’s meaning, benefits, and best practices.
📌 Key Takeaways
- Interim invoices are legal requests to pay the due amount in the regular installments prior to the completion of work.
- Businesses can make an interim invoice in 4 simple steps, including the generation of the final invoice.
- Consistent cash flow, payment security, and minimum non-payment risk are notable benefits of interim invoices.
- Businesses can automate the invoicing process with Moon Invoice and create interim invoices in under 2 minutes.
What is an Interim Invoice?
An interim invoice is a formal payment request to complete the partial payment prior to finishing the entire work. Sometimes known as an interim bill, it is an invoicing process in which businesses can demand some portion of payment at regular intervals. Interim invoices are mostly used by businesses associated with large-scale projects.
They can request payment either on a monthly, quarterly, or yearly basis using interim invoices. Similarly, customers can make payments in intervals rather than bearing the burden of one hefty payment at the end of the project work.
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How to Make an Interim Invoice?
Here is the step-by-step process to create and send an interim bill.
1. Estimate Project Cost
Consider your client’s requirements, discuss with contractors, and identify how soon the project will be finished. Based on these insights, you can consider creating an estimate, highlighting the time and the associated cost required to complete the project work. To offer easy readability and receive faster approval, you can utilize advanced estimating software like Moon Invoice.
2. Make a Schedule
If the client accepts the estimate and gives approval, next, you need to prepare a payment schedule. You can specify when you will send interim invoices, i.e. monthly or quarterly basis. For example, if your project work is likely to be finished in 6 to 8 months, you can send interim invoices each month. Also, keep your clients informed once the schedule is ready.
3. Dispatch Interim Invoices
Now, start generating interim invoices using sophisticated invoicing software like Moon Invoice and send them every month. As per the payment schedule, you can send interim invoices and request a portion of the payment, even if the project work is under development. This way, you can receive half of the payment and finish the work on time.
4. Send a Last Invoice
If you have reached the completion stage of the project, then you can finish the work and share a final invoice with the client. Before sending the last invoice, make sure there is no work pending. The last invoice will be a more detailed one, providing the breakdown of project cost and how much is the total outstanding amount. The client is expected to complete the payment before the invoice due date.
When is an Interim Invoice Issued?
Businesses prefer sending interim invoices when they work on a long-term project. This is due to the timeline of the project, which may take months or a year to get fully completed. By sending an interim invoice, they can demand a portion of the payment to maintain their cash flow and ensure the timely completion of the project.
Businesses also resort to sharing an interim bill in case the client is facing financial woes and may not be able to make the full payment at once. Interim invoices offer payment flexibility as clients can make the payments in regular installments instead of completing the entire payment in one go. In such cases, businesses can utilize the interim invoicing process and get paid as per the payment schedule.
What are the Benefits of Interim Invoices?
Below are a few benefits of issuing a progress invoice or an interim invoice when working on long-haul projects.
1. Consistent Cash Flow
Utilizing the interim invoicing method to draw payments in installments can boost the cash flow consistency. They no longer need to wait for the payment until the project work is finished. They can receive the payment right after sharing an interim invoice on a monthly or quarterly basis.
2. Payment security
Apart from consistent cash flow, another perk is payment security, ensuring you get the partial payment no matter how much work is completed or how much is still pending. As a result, you spend less time on payment tracking and focus on important business matters.
3. Flexibility
Interim invoices help clients to pay in installments rather than making the full payment, allowing them to take advantage of payment flexibility. Such flexibility is much needed for clients dealing with a cash shortage or encountering payment issues while sending a large sum of money.
4. Minimize Non-payment Risk
Unlike regular invoices, progress invoices can be shared at pre-defined intervals, allowing businesses to get paid without waiting for the project to be completed. This approach minimizes the risk of non-payment and aids businesses in the timely collection of payments.
Interim Invoice Best Practices
Here are the best practices worth considering for interim invoicing or progress invoicing.
1. Make a Paperless Interim Invoice
Generate interim invoices in a paper-free way, so that they can be easily shared and are accessible from remote locations. Also, they offer enhanced readability to clients, helping them know the exact outstanding amount and avoid any back-and-forth.
2. Communicate Regularly
Keep your clients updated about the payment schedule and remind them days before you send an interim invoice. Bridge the communication gap by sending a payment reminder even if you have already sent an interim invoice. This will further help you get paid as quickly as possible.
3. Align With Client’s Expectation
Consider the client’s requirements while preparing interim invoices so that you can meet their expectations and encourage them to pay an invoice in less time. Send progress invoices as per the payment schedule, so both parties stay on the same page.
4. Prioritize Automation
Automate your interim invoicing process with the right invoicing software like Moon Invoice. It not only wipes off your workload but also helps you keep accurate records of invoices. You can create invoices in a fraction of a minute with customizable invoice templates.
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Final Words on Interim Invoice
Interim invoices are issued to maintain cash flow consistency during the large-scale projects. With an interim invoice, you can request a partial payment from the client even if the work is ongoing. Once the work is fully completed, you can send the final invoice, demanding the remaining payment from the client.
Moreover, you can utilize advanced invoicing software like Moon Invoice to create professional interim invoices and keep track of them. It helps you store unlimited invoices, POs, and receipts in the cloud storage, so you can centralize your important business data. Want to know more about Moon Invoice? Try a 7-day free trial.
FAQs
How is an interim invoice different from a final invoice?
Can I issue multiple interim invoices for one project?
How should I track interim payments?
Can I convert interim invoices into a final invoice?
Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.
