Creating invoices is among the administrative tasks that every business must do to ensure payments from their clients or customers.
Invoices play a vital role in a business’s record-keeping and accounting processes. These serve as records of sales that provide both the seller and buyer with details relating to a transaction. In addition, these documents also help them keep track of their finances and manage their cash flow. Therefore, businesses must generate a detailed invoice for every transaction they make and learn which type of invoice they must send to their client or customer.
A sales invoice is issued by a seller to its client when payment is made for purchased goods or services. It serves as proof of payment for both the business and the customer. The customer will get the original sales invoice copy, while the seller will have a duplicate.
Pro Forma Invoice
A pro forma invoice is an invoicing document sent to buyers to provide them with the exact cost of the products or services expected to be paid upon delivery of a final invoice. It includes an itemized list of the prices of goods or services as well as applicable taxes or shipping costs.
Businesses use pro forma invoices to provide an official document to their customers or clients to satisfy their internal purchase approval process. This eliminates the back-and-forth discussions during the sales process as all terms are agreed upon upfront.
An interim invoice, also called a progress invoice, is commonly used by businesses to post more than one invoice for a client project. By using interim invoicing as a billing option, enterprises or freelancers can break down the cost of a capital project into smaller payments.
Businesses commonly issue interim invoices when they sign on to long-term projects that will take several weeks, months, or longer to be completed. By doing so, they can maintain cash flow and cover wages and the purchase of needed materials or equipment, and ensure that the activities for the project are smoothly progressing as workers and subcontractors have sufficient liquidity for continuous operation.
The final invoice, also commonly called standard invoice, is an official payment request for a completed project. In contrast with a pro forma invoice, a final invoice is a legal binding document that contains the details of the goods or services delivered within a project and the total amount of money a customer or client must pay within a specific period.
Businesses send final invoices to their clients or customers once work has been completed or products have been delivered.
Past Due Invoice
A past due invoice is a document issued to clients or customers who have failed to pay a specific billing by the due date indicated on the final invoice. A past due invoice includes all details indicated in the final invoice and late fees or interest penalty for paying late.
This type of invoice is used by businesses to remind their customers or clients that they have not sent their payments for their purchased goods or services within the deadline. Enterprises also issue a past due invoice to give their customers adequate leeway to make payment.
A recurring invoice is a billing document that contains the exact invoice details and is sent to a customer at regular intervals. This type of invoice is useful for subscription-based companies, marketing companies, rental companies, and freelancers, among other businesses, who charge their clients with standard pricing per month.
For businesses utilizing recurring invoices as a billing option for their clients, they can leverage online invoice maker software programs to streamline the process of creating and sending recurring invoices.
A credit invoice, also referred to as a credit memo, is a document detailing a refund, discount, or correction to an error from a previously issued invoice. Information in a credit memo typically references the original invoice and details the reason for its issuance. In a credit memo, a negative total is often seen. For example, suppose a business is providing a client with a credit invoice that details a $20 refund; in that case, the total on the invoice document would be -$20.
This type of invoice can be used to help businesses have a more accurate accounting record. Instead of deleting an invoice from their records, they can use credit invoices to cancel out, either in full or in part, an already issued invoice. Regarding the credit, businesses can either provide it to their customers as money or apply it to future purchases.
A debit invoice, also called a debit memo, is a document issued by a business that details an adjustment to the original invoice. This type of invoice is issued by companies that need to increase the charges they made to their clients. In addition, unlike in credit invoices, a positive total is often seen in debit memos.
Businesses may issue this type of invoice for a variety of reasons. For example, the company already sent their client an invoice based on their estimated hours to complete a project but ended up working additional hours to accomplish it; thus, they could send their client a debit invoice for the extra work hours. Consequently, if buyers have missed deadlines for early payment discounts and these have already been deducted in the previously issued invoice, sellers can issue a debit invoice for the discount amount.
A commercial invoice is a document issued for international transactions. It serves as a legal contract and a proof of sale between the seller and buyer. Information on such invoicing form includes details of the sale necessary for shipping and customs clearance, such as shipment quantity, weight or volume, clear description of goods, payment instructions, packaging format, and total sale amount.
Businesses need to know which invoicing document they must send to their customers or clients for different situations to have accurate bookkeeping and accounting records. As mentioned above, there are different kinds of invoices, and each serves a specific purpose.
Furthermore, enterprises also need to upgrade their invoicing system by replacing conventional invoicing processes with modern ones. With the advancements in technology, small and medium-size businesses can utilize invoice maker app and business accounting software programs to automate their invoicing process.
KIPPIN is a cloud-based accounting and bookkeeping service tailored to simplify the everyday tasks of businesses. We align our clients to top financial experts on our platform to take care of all your accounting and invoicing needs. We also provide software-only solutions to automate processes, making them quick, easy, and remotely accessible.
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