Transactions and payments are the fundamental blocks of running a business. Invoices help you record all the transactions you make with your clients and customers. But with companies working on different business models, the type of invoices issued can also vary.

Today’s blog post will discuss the different types of business invoices in accounting. If you are using a fully-functional online invoicing software, creating all the different types of invoices is quick and simple. 

What are the different types of invoices?

Invoices are of various types. If we sit down and list every one of them, the list will probably go past 15. Different recurring billing and invoice systems may support different types of invoices.

Or, instead of covering all types of invoices, we’ll delver into the ones that you’re likely to use in your day-to-day business operations.

Types of invoices

1. Proforma invoice

A proforma invoice is like a pre-invoice sent to your customer before fulfilling the order. This invoice doesn’t ask for payment. Instead, you use a proforma invoice to show your customer how much they’ll pay once you deliver the product or service. 

This invoice is also suitable for demonstrating the value of gifts or other items you give away. But in general, businesses use pro forma invoices to estimate the work they’ll do and how much it’ll cost. 

A Proforma invoice is different from a standard invoice. Using online invoicing software, sending proforma invoices is quite simple and quick. 

2. Interim invoice

If you’re working on a large project spread across months, sending a final invoice at the end of the project might not be the best bet. And there are several reasons for it. Maybe your consumer doesn’t like the final product and rejects it completely. Or perhaps a price agreement issue may arise. 

An interim invoice breaks down a large project into several smaller components. So, instead of sending the final invoice at the end of the project, you can send interim voices as you work. 

Additionally, interim invoices also help you manage your resource and cash flow. When you work on a big project, keeping track of the labor and resources spent can be a hurdle. With interim invoices, you can better manage your resources. 

3. Final invoice

The final invoice you send after completing the project or order is discussed. This invoice lists down all the work you’ve done, including the products and services you’ve provided. Since the final invoice is a demand for payment, it should include the necessary details, like total cost, payment methods, and due date. 

The timing of the final invoice is critical. Be sure to send it as soon as you complete the work so you can get healthy cash flow in your business. 

4. Past due invoice

Missed invoices are a common issue faced by small business owners. 39% of invoices in the US are paid late, showed a report by Sharespace. A past due invoice is issued when your customers don’t pay you by the due date. 

The purpose of a past due invoice is to remind a customer that they have missed the final invoice due date. When creating a past due invoice, mention all the details from the final invoice, along with any late fees or penalties you’re charging. 

Like final invoices, timing is a critical factor in past due invoices. Be sure to send the invoice immediately after a customer misses the final invoice due date. 

5. Recurring invoice

Service providers mainly use recurring invoices. If you’re a freelancer or a digital agency, you likely charge the same amount every month. In such cases, you can use recurring invoices to bill your customers for the same amount repeatedly. 

The use of limited invoices is not confined to freelancers and agencies. Let’s say you’re a security company that provides security to organizations on a contract basis. Since you’re probably charging the same amount every month, you can use recurring invoices to streamline your invoicing

6. Credit memo

A credit memo comes into play when you owe your customers money. Let’s say the product you supplied was damaged, and thus, was returned. Or you couldn’t deliver the promised results, so your client now wants a refund. 

In such instances, you can issue a credit memo that indicates the amount you owe to the customer. With a credit memo, you can either initiate a refund or provide credit to your customers that they can redeem later.

What’s the Difference Between an Invoice and an Estimate?

Must-have invoice elements – Online invoicing software

Every invoice is unique and has a specified purpose. But regardless, the core purpose of an invoice remains constant – to record the exchange or transaction of products or services between two parties. 

So, here are the key essentials of the small business invoice that one needs to take care of while issuing types of invoices to the customer or the client.

Must-Have Invoice Elements-Types of invoices

Many online invoicing software brands offer free invoice templates that are predefined and ready to use. It saves the company time in generating invoices. 

Let’s check the key invoice essentials.

1. Dates

Dates-Types of invoices

Dates are one of the essential components of an invoice. Make sure you mention the date you created the invoice, the final due date, and any other dates worth mentioning. 

2. Business information

Include all the necessary details about your company, such as name, contact information, and address. 

3. Business signature

It is crucial to sign an invoice using a digital business signature before sending it to your customers or clients. 

4. Customer information

An invoice should also consist of all the information about the customer. This includes the customer’s name, contact information, and address. 

5. List of items

The invoice should clearly mention all the products and services you had provided in the form of a clear, itemized list. 

6. Total amount due

You should mention the amount billed corresponding to each listed item. Towards the end, state the total amount due and all the taxes or other charges added. 

7. Payment terms

State all the payment terms and conditions. Mention all the payment methods you accept, such as cash, cards, check, etc. Also, state guidelines, if any, regarding instalments or partial payments. 

8. Invoice number

Lastly, have a unique number for each invoice. You can later enter this number in your recurring billing and invoice system to refer to the invoices you’ve issued.

Also Read: Common Types of Invoices in Business and Their Uses

Conclusion

The types of invoices you issue can depend on the products and services you offer and the payment terms you’ve agreed upon. But a Sharespace report suggested that 61% of delayed payments are due to incorrect invoices. 

Therefore, it’s essential to invest in a robust client payment tracker app that helps you create, send, and manage invoices efficiently. Check Out Moon Invoice if you’re looking for powerful and cost-effective recurring billing and online invoicing software for small businesses.

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