What are the difference types of invoice?

Dependent on your industry, businesses and SMEs create a number of different invoices for their clients, these vary depending on how often they get paid and how they choose to bill for the services they offer.

The rate which they receive payment and how a company chooses to bill for services they provide can also have big effects on the type of invoice they utilise.

To have a better understanding of the different types of invoices you can use, here are the main types of invoices small business owners will deal with on their day-to-day business life:

Different invoice types explained

We will now walk you through each of these invoice types in more detail. It is important that as a business owner, you understand the various types of invoice that can be used today. Strap in as you are about to take in a lot of information, but try to remember that your business will not be required to use all of these invoices formats throughout its lifespan.

Proforma invoice

This invoice will be delivered before any work has been completed. It is a document that will list the products and services that are set to be provided, along with the total cost. A proforma invoice generally acts as more of a notice of when payment will be required (the due date), rather than an outright request for payment like other invoice types.

Standard invoice 

This is the most common type of invoice you will find in the world of business. This form of invoice can be found in almost all industries due to its flexible nature. General details about the sale and price will be included, though it is all pretty straightforward stuff.

Sales invoice

A sales invoice is a document that records the sale of goods or services from a vendor to a customer. The invoice typically includes the date of the sale, the customer’s name and contact information, a description of the goods or services sold, and the unit price and total cost of the transaction. The invoice may also include any applicable taxes or other charges. In some cases, the customer may be required to sign the invoice to indicate their agreement to the terms of the sale. Once the invoice is paid, it can be used by the vendor as a record of their sales for tax or accounting purposes.

Mixed invoice 

Mixed invoices list the total charge, including both credit and debit on one single document. Small business ventures will likely never need to create a mixed invoice, but in a tiny number of cases it could prove to be worthwhile. If you are looking to reduce the amount a client owes for one project and increase the amount owed for another, you could do this all on the same invoice here.

Commercial invoice

If you sell goods to customers internationally, you will likely find yourself needing to use a commercial invoice. These invoices include details on sales that are needed to determine customs duties regarding overseas sales. Here you will be required to list the total value, packaging format, a description of the goods, the weight/volume, and the shipment quantity.

Timesheet invoice 

If you are billing a client or customer based on the number of hours you have worked for them, you will need to use a timesheet invoice. These are regularly used by contract employees that are paid an hourly rate by their employers. They may also be commonly found amongst the likes of lawyers, creative agencies, business consultants, and psychologists.

E-invoice 

This is the blanket term used for invoices sent online, regardless of their type or format. E-invoicing has become standard practice in recent years for businesses in almost all industries and sectors within the UK, and the rest of the world. Most things are completed online these days due to the internet’s high level of convenience, and so it is no different when it comes to sending out invoices.

Digital invoice

A digital invoice is an electronic version of a traditional paper invoice. It typically includes the same information as a paper invoice, such as the date, the name and contact information of the customer, and a list of goods or services sold. However, a digital invoice can be created and sent electronically, using software such as invoicing software or accounting software.

This can make it faster and easier to create and send invoices, and can also help to reduce paper waste. In addition, some digital invoicing systems allow customers to view and pay their invoices online, which can further streamline the invoicing process.

Mixed invoice

A Mixed invoice is basically two different types of invoices that are merged into one. The first type is the Regular Invoice which is used for products and services. The second type is the Credit Memo which is used to correct an error on a previous invoice or to refund a customer for returned merchandise. When the two types are mixed together, it can be confusing for the customer as well as the business owner. That’s why it’s important to clearly indicate which charges are for products and services, and which charges are for correcting an error. By doing so, everyone can avoid any misunderstandings or confusion.

Past due invoice

A past due invoice is a bill that has not been paid on time. This can happen for a variety of reasons, ranging from simple forgetfulness to more complicated financial problems. Regardless of the reason, however, a past due invoice can have serious consequences for both businesses and individuals. For businesses, unpaid invoices can lead to cash flow problems and difficulties meeting financial obligations.

For individuals, past due invoices can damage credit scores and make it difficult to obtain loans or other forms of financing. In some cases, past due invoices can even lead to legal action. As a result, it is important to stay on top of one’s finances and make sure that all bills are paid in a timely manner.

Pending invoice

A pending invoice is a request for payment that has not yet been processed. Pending invoices can be caused by a number of factors, such as incomplete information or outstanding questions regarding the invoice. In some cases, a pending invoice may simply be awaiting approval from a supervisor. Regardless of the cause, pending invoices can result in delays in payment and may adversely impact cash flow. As such, it is important to keep track of pending invoices and take steps to resolve any issues in a timely manner.

Final invoice

This is pretty much what it says on the tin. The final invoice will be the last invoice sent to a client once all work has been completed and finalised. It will list any outstanding balance that remains due.

Recurring invoice

A recurring invoice is either sent indefinitely or when a project is set to last for a specific amount of time. Therefore, if a project will definitely take 6 months to complete for example, a recurring invoice may be used.

Collective invoice 

Rather than sending out multiple small invoices when you are completing a large number of little jobs for a client, you can submit one collective invoice. This groups together smaller invoices and allows them to be paid off together. This is useful for business owners, as it provides them with far less to keep track of and limits the amount of transaction fees involved with the completion of projects.

Commercial invoice

A commercial invoice is a document that is used to track the sale of goods between a buyer and a seller. The invoice typically includes the date of sale, the quantity and type of goods sold, the price of each item, the total amount due, and the terms of payment. The commercial invoice can also be used to provide customs information, such as the country of origin of the goods, if they are being shipped internationally. In some cases, the commercial invoice may also be used for tax purposes.

For businesses, commercial invoices can be useful for tracking inventory levels and sales figures. For individuals, commercial invoices can be useful for keeping track of expenses.

Purchase order

A purchase order, while not technically an invoice is a commit to buy, it shows the seller that there is intent to purchase goods, it also gives a clear list of things the buyer would like to purchase with all the deals on delivery and who is purchasing the goods.

Interim invoice

Interim invoices can be sent at multiple occasions throughout the project completion process. This is ideal for longer jobs, as you will be securing payment as time goes on at multiple stages, rather than having to trust it will turn up right at the end.

Milestone based invoice

A milestone-based invoice is an invoice that is issued based on the completion of milestones in a project. This type of invoice can be used in a variety of industries, but is particularly common in construction and other types of contracting work. With a milestone-based invoice, the contractor can specify certain milestones that must be completed before the invoice is issued. This can help to ensure that the work is being completed as agreed upon and that the client is happy with the progress of the project. Milestone-based invoicing can also help to simplify the billing process, as it eliminates the need to issue multiple invoices for different phases of the project. As a result, milestone-based invoicing can be a helpful tool for both contractors and clients.

Evaluated Receipt Settlement (ERS)

An Evaluated Receipt Settlement, or ERS, is a type of payment settlement in which the buyer calculates the payments to the supplier based on the value of the goods received. This can be done either at the time of receipt or after the goods have been received and inspected. The advantage of ERS is that it can help to improve cash flow and reduce costs associated with invoicing and payment processing.

However, it is important to note that ERS is not suitable for all suppliers or buyers, and it is important to carefully consider the risks and benefits before entering into an ERS agreement.

Credit Invoice

Credit notes are typically used to issue a refund or discount because of an invoicing error that has occurred at some stage of the process. These are issues to either businesses or clients and usually include a negative amount that needs to be repaid. A credit note is also sometimes known as a credit invoice.

Self-billing invoice

A self-billing invoice is a type of invoice that is issued by the seller and submitted to the buyer for payment. This type of invoice is often used when the buyer has a good credit history and the seller trusts that the buyer will make the payment in a timely manner. With a self-billing invoice, the seller does not have to wait for the buyer to issue a purchase order or send an invoice before issuing their own invoice. This can save time for both the buyer and the seller.

In addition, self-billing invoices can help to improve cash flow as payments can be received sooner. However, it is important to note that self-billing invoices can only be used if both parties agree to this arrangement. If the buyer does not make the payment on time, the seller may not be able to claim any late payment penalties from the buyer.

Timesheet billing

Timesheet billing is a method of billing that is based on the amount of time that a person works. This type of billing can be used for a variety of services, including legal services, consulting services, and even some types of project-based work. In many cases, timesheet billing is used in combination with other types of billing, such as flat-rate billing or retainer billing. Timesheet billing can be an effective way to ensure that you are paid for the work that you do, and it can also help to provide a clear record of the work that has been done. When used correctly, timesheet billing can be a helpful tool for both businesses and individuals.

Time billing invoice

A time billing invoice is an invoice that is used to track the amount of time that a person has worked on a particular project. This type of invoice can be used by businesses or individuals who need to keep track of their time in order to bill their clients appropriately. The time billing invoice can be used to track the number of hours that a person works, as well as the rate that they are charging for their services. This type of invoice can be customized to include the specific information that is needed by the person who is using it. Time billing invoices can be created using software programs or online services, and they can be printed out or emailed to the client.

Expense claims

An expense claim is a document used to request reimbursement for business expenses. The claim should include all relevant information, such as the date, amount and purpose of the expenditure. Expense claims are typically submitted to an employer or accounting department for approval.

If approved, the claimant will be reimbursed for the full amount of the expense. In some cases, claimants may be required to provide receipts or other documentation to support their request. Expense claims can be filed electronically or on paper, depending on the policies of the organisation.

Utility invoice

An utility invoice is a bill from a utility company for the services they have provided. This can include electricity, gas, water, or trash collection. The amount due will depend on the type and amount of service used. The invoice will also include any applicable taxes and fees. Utility companies typically send out bills monthly, although some may bill more or less often. Payments are usually due within a certain number of days, and companies may charge late fees if payments are not received on time. Understanding your utility invoice can help you budget for your monthly expenses and avoid late payments.

Accountant statement

An account statement is a record of an account holder’s activity over a period of time, typically sent monthly or quarterly. The statement includes all deposits, withdrawals, and other transactions that have occurred during the specified period. It can also provide an overview of the account balance and any fees that have been charged.

Account statements can be useful for tracking spending, monitoring credit usage, and identifying irregularities. For businesses, account statements can also provide valuable insights into cash flow and customer behavior. Ultimately, an account statement can be a helpful tool for keeping track of finances and ensuring that accounts are in good standing.

Debit invoice

A debit invoice is a type of invoice used by businesses to track money that is owed to them by their customers. This type of invoicing is different from standard invoicing in that it uses a special code to indicate that the invoice is for a debit transaction. Debit invoices are typically used for business-to-business transactions, and they can be used to track payments for goods or services. When a business receives a debit invoice, they will typically record the amount owed in their accounts receivable system. This information can then be used to follow up with the customer and ensure that the debt is paid.

The miscellaneous invoice

In business, a miscellaneous invoice is an invoice for products or services that don’t fall into a specific category. For example, if you own a store that sells both clothing and cosmetics, each type of product would have its own invoicing category. However, items like gift wrapping or shipping would be considered miscellaneous and would be invoiced separately. While miscellaneous invoices may not seem important, they can actually provide valuable information about your business.

By tracking what types of products or services are being purchased together, you can get a better understanding of customer behavior and make changes to your business accordingly. In addition, miscellaneous invoices can help you identify areas where you may be losing money. For example, if you find that many customers are buying gift wrapping but not actually using it, you can stop offering the service or raised the price to make up for the loss. Ultimately, miscellaneous invoices may not be the most exciting part of running a business, but they can provide valuable insights that can help your business succeed.

Tax invoice

A tax invoice is a document that businesses use to itemise the taxes owed on a purchase. The invoice lists the price of the purchased goods or services, as well as any applicable VAT or other taxes. The buyer then pays the total amount due, which the seller uses to offset their own tax liability. Tax invoices are commonly used in countries with value-added tax (VAT) systems, such as the UK. In most cases, businesses are required to issue a tax invoice whenever they sell taxable goods or services to another business.

This helps ensure that the buyer knows how much VAT they need to pay, and also allows the seller to reclaim any VAT paid on purchases made for their business. While tax invoices may seem like a hassle, they play an important role in ensuring that businesses comply with tax laws

A brief history of the evolution of invoices

The invoice is a document that is commonly used in business transactions. It is a document that specifies the terms of a transaction, and it also itemizes the products or services that were provided. The history of the invoice can be traced back to ancient Mesopotamia, where clay tablets were used to record business transactions.

In the Middle Ages, invoices were often written on parchment paper. The modern invoice began to take shape in the late 18th century, when businesses began to use standard forms to request payment. Today, invoices are typically generated electronically, and they can be sent and received quickly and easily. The evolution of the invoice has been shaped by the needs of businesses, and it has played an essential role in the development of commerce.

Written in stone

Although invoices are often thought of as being set in stone, this is not always the case. In some cases, an invoice can be revised after it has been issued. This may be done if there was an error on the original invoice, or if the terms of the sale have changed. For example, if a customer requests a change to their order, the seller may issue a new invoice with the revised total. In other cases, a company may choose to issue a credit memo instead of a new invoice.

This is typically done when a customer returns goods or cancels an order. Regardless of the reason, it is important to note that invoices are not always final. If you have any questions about an invoice you have received, be sure to contact the issuing company for clarification.

Papyrus, parchment, and paper

The development of accounting and record-keeping is inseparable from the history of writing. For centuries, businesses have relied on papyrus, parchment, and paper to create invoices. These materials are durable and can be easily transported, making them ideal for record-keeping. However, they also have some drawbacks. Papyrus and parchment are expensive, and paper can be easily damaged by moisture. As a result, businesses are increasingly relying on electronic invoicing.

This method is more efficient and cost-effective, and it offers a number of other advantages as well. For example, electronic invoicing can help to reduce fraud and errors, and it gives businesses the ability to track payments and invoice status in real-time. As businesses continue to adopt new technologies, it is likely that electronic invoicing will become the norm.

Typed invoices

A typed invoice can serve as a legal document that can be used in court to show that payment is owed. It can also help resolve disputes between businesses or customers. A typed invoice can be created using a word processing program, such as Microsoft Word, or a spreadsheet program, such as Microsoft Excel.

The template for an invoice can be downloaded from the internet or created from scratch. The template should include the name and address of the business, the date of the invoice, the name and address of the customer, a description of the services rendered, the amount owed, and the date by which payment is due. Once the template is complete, it can be customized with the specific details of each transaction. Creating typed invoices is a simple way to keep track of payments and ensure that all parties involved are clear on what is owed.

Today’s modern invoice

In today’s business world, the invoice has become an essential tool for keeping track of payments and expenses. With the advent of online invoicing, it has never been easier to create and send invoices. However, there are still a few things to keep in mind when creating an invoice. First, be sure to include all the relevant information, such as the date, your company’s name and contact information, and the recipient’s name and address.

Second, make sure that the amount you are requesting is clearly stated, and that any discounts or special terms are clearly indicated. Finally, be sure to sign and date the invoice before sending it off. With a little care and attention, your invoices will help to ensure that your business runs smoothly.

Why do we use invoices?

An invoice is a document that businesses send to their customers to request payment for goods or services. An invoice typically includes the date of purchase, a list of the goods or services provided, and the total amount due. For businesses, invoices serve an important purpose: they help track customer purchases, ensure timely payments, and manage inventory levels.

For customers, invoices provide a record of what was purchased and when payment is due. In short, invoices are an essential part of doing business. By providing clear and concise information, they help to ensure that both businesses and customers are on the same page. As a result, invoices play a vital role in keeping businesses running smoothly.

Keeping a record

Invoices act as a keeping a sales record of the income that a business has received. This is important because it allows you to be compliant in order to know how much tax is owed on the income. HMRC can also use the invoices to check that the correct amount of tax has been paid. If HMRC finds that someone has not paid enough tax, they may charge interest and penalties. Therefore, it is important to keep accurate records of all tax invoices.

Evidence of a transaction

In business, a transaction is an agreement between two or more parties to exchange goods, services, or money. Transactions can be either physical or digital, and they can be documented in a variety of ways. One common way to document a transaction is with an invoice. An invoice typically includes the names of the parties involved in the transaction, a description of the goods or services exchanged, and the total cost of the transaction.

In some cases, an invoice may also include additional information such as delivery details or special instructions. Whether you’re buying or selling goods or services, an invoice can be a helpful way to document your transactions.

Assists in accounting

Many businesses use accounting software to keep track of their finances. This software can be used to create invoices, reconcile bank statements, and track expenses. While this software can be helpful, it is important to remember that it is not a substitute for a trained accountant.

Accountants have the knowledge and experience to provide accurate financial reports and advise businesses on how to improve their financial health. As a result, businesses that use accounting software should also consider hiring an accountant to assist with their bookkeeping.

Record taxes

Most businesses keep track of their income and expenses using a system of invoicing. This system allows them to know how much money they are bringing in, and how much they are spending. Taxes are one of the most important expenses that businesses have to pay, and it is important to keep track of them carefully.

One way to do this is to create a record of all the taxes that you have paid. This can be a simple invoice, or a more complicated spreadsheet. Either way, it is important to keep track of your tax payments so that you can be sure you are staying on top of your obligations. Doing so will help you avoid penalties and interest, and will ensure that you are making the most of your resources

Legal support

When you purchase an item, you expect to receive a proof of sale, also known as an invoice. This document serves as a contract between you and the seller, and it helps to protect your legal rights in the event of a dispute. The invoice should include important information such as the date of purchase, the names and contact information of the parties involved, a description of the item purchased, and the agreed-upon price.

If you do not receive an invoice at the time of purchase, be sure to request one from the seller. Having a copy of the invoice can save you a lot of headaches down the road

Marketing invoices

One of the most important aspects of running a successful business is maintaining a efficient system for invoice collection. This ensures that you are able to track payments and keep tabs on your finances. There are a few key things to keep in mind when collecting invoices from customers. First, be sure to include all the necessary information on the invoice.

This should include the date, the amount owed, and any applicable discounts. Next, be clear about your payment terms. Include when the invoice is due and what methods of payment you accept. Finally, follow up with customers who have not yet paid their invoice. A friendly reminder can often prompt them to take action. By following these tips, you can ensure that your invoice collection system is effective and run smoothly.

What all types of invoices should include

An invoice is a document that lists the products or services that have been provided, along with the corresponding prices. When creating an invoice, it is important to include all relevant information to avoid confusion or misunderstanding. The invoice should include the date of service, a description of the product or service, the unit price, and the total amount due.

In addition, the invoice should clearly state the terms of payment, such as the due date and any applicable late fees. By including all of this information, you can help ensure that your invoice is clear and accurate.

All types of invoices must include an invoice number

All types of invoices must have a unique invoice number to keep track of their orders and separate the charges according to the invoice number.

Company and seller’s information

An invoice is a document that companies send to their customers to request payment for goods or services. The invoice should include the company’s name and address, the customer’s name and address, a description of the goods or services sold, the quantity of each item sold, the unit price, the total price, the date of invoice, the payment terms and the invoice number.

The invoice should also include contact information in case the customer has any questions. Most invoices are sent electronically these days, but some businesses still prefer to use paper invoices. Either way, it’s important to make sure that all of the necessary information is included.

Date of issue

The date of issue on an invoice is the date that the invoice was generated. This date is generally printed on the invoice, and can be used to determine when payment is due. The date of issue can also be used to track when an invoice was sent out, and can help to ensure that payments are received in a timely manner.

In some cases, the date of issue may be different from the date of purchase, if the invoice was generated after the purchase was made. In other cases, the date of issue may be the same as the date of purchase. In either case, the date of issue is an important piece of information that can be used to track payments and manage finances.

Discounts

Making timely payments is important for businesses, but it can be difficult to keep track of invoice due dates. This is where discounts for quick payment come in. By offering a discount for customers who make payments within a certain timeframe, businesses can encourage prompt payment and help improve their cash flow. There are a few different ways to offer discounts for quick payment. The most common is to include the discount amount on the invoice itself.

This makes it clear to the customer that they will receive a discount if they make their payment within the specified timeframe. Another way to offer discounts is to send a separate email or notice with the details of the discount. This can be an effective way to remind customers of the discount and encourage them to take advantage of it. Whichever method you choose, offering discounts for quick payment is a great way to improve your business’s cash flow.

Tax (if applicable)

When you receive an invoice from a UK company, it’s important to understand the tax breakdown. The invoice will usually include a line for VAT, or Value Added Tax. This is a tax that is levied on most goods and services in the UK. The standard rate of VAT is 20%, but there are some items that are taxed at a reduced rate of 5% or are exempt from VAT altogether.  Finally, you may see a line for Income Tax on your invoice. This is a federal tax that is applied to your income. The amount of Income Tax you owe will depend on your income level and whether you are eligible for any exemptions or deductions. By understanding the tax breakdown on your invoice, you can be sure that you are paying all the taxes you owe in the UK.

Payment methods

When a business provides a service or sells a product, an invoice is typically generated. This document lists the date of the transaction, the products or services sold, the quantity of each item, the price of each item, any discounts that were applied, and the total amount due. The invoice may also include the business’ contact information, as well as the customer’s name and address. In some cases, the invoice may also show the method of payment that is preferred by the business. For example, if a business only accepts cash, BACS payment or cheque, this will be noted on the invoice. Including this information can help to ensure that customers are able to make their payments in a timely manner.

Due date

An invoice is a document that specifying the amount and due date of payment for goods or services. It is typically used by businesses to request payment from customers or clients. An invoice can be created manually or generated by accounting software. It should include the name and contact information of the business, as well as the name and contact information of the customer. The invoice should also list the items being billed, the quantity of each item, the unit price, and the total amount due.

The due date is typically included on the invoice, along with instructions for how to make the payment. In some cases, businesses may offer a discount for early payment. Invoices are an important part of doing business, and they can help ensure that you get paid on time

Frequently Asked Questions

What is a standard invoice?

A standard invoice is a document that provides a breakdown of what was purchased, the quantities, the prices, and the total amount due. It typically includes the seller's information, the buyer's information, and a list of the items purchased.

Can I use an invoice as a receipt?

Yes, you can use an invoice as a receipt. You can also use a receipt as an invoice.

Are digital and electronic invoices the same thing?

Digital invoices are typically created using software that converts traditional paper invoices into a digital format. Electronic invoices, on the other hand, are often generated directly from accounting software and sent electronically, without a paper copy ever being created. So, while digital and electronic invoices may share some similarities, they are not exactly the same.

What is the difference between a voucher and an invoice?

Most people are familiar with invoices. These are documents that indicate what a customer owes for products or services. A voucher, on the other hand, is a document that shows payment has been made.

Are invoice numbers and bill numbers the same thing?

Invoice numbers and bill numbers are both ways to keep track of payments. However, invoice numbers are typically assigned by the company that is being billed, while bill numbers are assigned by the bank or other financial institution.

What is the difference between a purchase order and an invoice?

A purchase order is a document that a buyer sends to a seller, authorizing the purchase of goods or services. An invoice is a document that a seller sends to a buyer, detailing the goods or services that have been purchased.

How does a pro-forma invoice differ from a purchase order?

A pro forma invoice is a document that provides an estimate of goods or services to be sold. It is often used in international trade and may include the type of product, unit price, quantity, shipping costs, and other fees. A purchase order is a legally binding contract between a buyer and a seller. It includes the same information as a pro forma invoice but also includes the terms of purchase, such as delivery date and payment terms.

Conclusion

In conclusion, understanding the different invoice types used in business is crucial for efficient financial management and smooth transactions. From standard invoices to pro forma invoices, credit memos, and recurring invoices, each type serves a specific purpose and caters to various business needs.

By utilising the appropriate invoice type, businesses can maintain accurate records, streamline their billing processes, improve cash flow management, and enhance customer relationships.

Whether it’s generating professional invoices, tracking payments, or managing outstanding balances, businesses must adapt their invoicing practices to suit their unique requirements and industry standards. By doing so, they can achieve greater financial clarity, minimise errors, and ultimately contribute to their long-term success.