Every business selling goods or services needs to get paid. Invoice plays a crucial part in getting paid.
There are various industries in a country. A few examples are agriculture, mining, utility, manufacturing, transporting, warehousing, education, real estate, retail, finance, healthcare etc. buying and selling is important for all these industries because each industry depends on the other for its progress.
As a result, thousands of business transactions are carried out every day and all the transactions require a record. An invoice is a document that maintains this essential record of transaction. All these industries have different requirements when it comes to invoicing.
An invoice for the construction industry will not necessarily be the same as an invoice prepared for any retail transaction. This is because invoices depend on whether they are for services rendered on the basis of time, hourly or daily basis or if they are made out products bought or sold. On the basis of these different demands by different industries and also for different products and services, invoices can be of several types:
Types of Invoices for Small Business & Freelancers
Here’s the list of different types of invoices in accounting:
Standard invoicing meaning is quite clear by its name. It’s a standard invoice format that consists of all the basic information that is to be included in any invoice such as the unique invoice number, name of seller, the company’s name, address, contact details, name of the buyer, address, items purchased, total cost, etc. It can be used in the same format for different business transactions.
Standard invoice is used by multiple industries such as the retail industry, agriculture industry, wholesale trade industry etc.
We come across such invoices almost every day. It is the basic structured invoice that comes to our mind immediately when we imagine one.
Unlike an everyday invoice that we receive from the nearby department store or a book store, commercial invoice also known as business invoice means a special invoice designed for documentation of any foreign trade such as shipment of machine parts from one country to another.
It is used for customs declaration when the product is crossing international borders.
It includes the name and address of both the seller (sender) and the buyer (recipient), items being sold, the cost of items and the amount of tax payable.
Custom invoice comes with certain special attributes such as the carrier identification number, country of origin, harmonized code for each item, declaration that the invoice is authentic and the signature of the person in charge of the transaction. It may also contain some special notes and comments.
Progress invoice is commonly used in works that stretch over a long period.
It is mostly used in the construction line as this is one industry which not only takes a lot of time for each project but also is very expensive.
Contractors send progress invoices or bills from time to time showing the progress of the work and quoting the amount required to be paid to them because they have to pay the employees working for them and also cover the expenses made during the ongoing construction work.
This is a special kind of invoice that is preferred by professionals whose services are evaluated on the basis of the time period for which the service is being provided.
Such invoices are usually provided by consultants, psychotherapists, lawyers, tuition teachers and mostly by all the professionals whose services are more intellectual than technical. But often the employment of laborers are conducted on the basis of time.
This invoice typically mentions ‘time’ in place of ‘product’.
When any item is rented such as a car, crane, large cooking utensils, tents, costumes or whatever, timesheet invoice is also prepared for all such dealings.
We hardly ever think of the electric bill or a bill for the telephone, cable, internet usage, gas as an invoice but that is what it is, an invoice which is commonly known as bill. It shows the amount payable on the usage of electricity or how much you owe to your internet connection provider for availing their services.
Utility invoice differs from other invoices as it mentions a due date, the amount of penalty payable after the due date and the billing period.
Most utility bills also include the previous amount paid or due.
Recurring invoice typically applies to the rental industry.
These are invoices that have a fixed rate and are delivered at the end of each month. This can include house rent as well as tools rental such as rent of a tractor or such items that one needs for only a specific time of a year.
Pro-forma invoice can be simply termed as an invoice that gives a rough idea to the buyer about the cost of products and services.
Pro-forma invoice is basically referred as estimation or a quote.
This billing method is sometimes used as a seller’s declaration stating his commitment to deliver certain goods or services at the estimated price.
It can also be an advance payment against the estimated project amount. Since it is not a true invoice format, it is neither recorded as account receivable nor account payable.
Sometimes when an organization incurs a large bill and fails to pay the whole amount on time a debit memo is generated by the organization. In the function a debit memo is the same as an invoice.
It shows the balance and late fees, if any.
The balance amount or the pending payment is a part of a pending invoice.
The amount which was not paid during the last payment is presented in the pending invoice.
For example, if a client receives an invoice of $1,000 and he does a partial payment of $600 then an invoice for the balance amount of $400 will be sent to him next time as pending invoice and again if he does partial payment of $200 then he will receive pending invoice of remaining amount of $200, next time. The procedure continues till the client makes full payment.
This type of billing is completely based on the services provided to the client and value of those services.
Value-based billing is basically performance-based billing.
The invoice amount depends on the amount of work delivered to the client rather than the time taken to complete the project.
Value-based invoicing is basically client-based as it mostly depends upon the needs, requirements and expectations of the client. The fee amount is determined prior to the work performed. Creative professionals cannot find this type of billing valuable as it is difficult to decide beforehand the true value of their creative work.
This type of billing is best suited for projects with well-defined requirements. When the requirement is clearly specified, then it is easy to determine the cost of the project.
Small businesses or freelancers can be benefited with fixed-bid billing.
The client is able to quote a fixed price for the project either beforehand or after project completion. Though this type of billing cannot be much profitable for small startups but if they luckily get any contract with big company then surely they fill their pockets.
Some kind of business can take 1 hour for a particular service and some may even take 3 to 4 days for any work. But is it fair, if both of the services get paid similarly? The answer is definitely no! In such cases, time-based billing is a finest choice. If you are able to calculate the right hourly rate then you can earn money for each minute.
By no means undercharge, this is the golden rule of time-based billing.
Hence with time-based billing, you are able to incur the actual value of the project. For creative jobs where you are not sure about the time taken for project completion, time-based billing is the best billing method.
Though there are assorted invoices, generating them shouldn’t be an uphill struggle as you can opt for any favorable online invoicing software and effortlessly create professional-looking invoices in almost no time. Billing software mostly offers a time-tracking feature which helps to bill exactly for the time you spent in completing a particular task or project.
Download Free Invoice Templates
Enter the following password to open the template – “billbooks”