Invoices play an important role when any transaction is carried out by an organization. They contain specific details about the concerned transactions and act as proof of the exchange of products/services taking place. For small businesses willing to maintain organized books of accounts, invoices provide them with a lot of valuable information about money spent and received over a specific period of time.
Here are the different invoices commonly used by small businesses on a regular basis:
Standard Invoice
As the name suggests, this is the regular invoice created by an organization and submitted to a client. A standard invoice can be created by businesses operating at all scales and functioning in all major industries. It is the proof of goods sold or services offered by an organization to its clients.
A standard invoice contains all the fundamental information regarding a transaction such as the name of the business, the name of the client, contact information about both parties, an invoice number, the amount to be paid, and details regarding the product/service sold.
Debit Invoice
Debit invoice is an invoice raised by a business to add to the amount its client owes to the company. In other words, a debit invoice increases the amount owed to an organization. Small businesses often raise these invoices for making adjustments to their existing bills.
For example, if a business has already sent an invoice to its client based on the estimated hours spent working on a project and it ends up spending more hours on the concerned project, it can send a debit invoice to cover the balance and receive the additional money for its work. A debit invoice is always written as a positive number.
Credit Invoice
As opposed to a debit invoice, a credit invoice is raised by an organization to offer its client a discount or reduction in the amount it owes. A credit invoice brings down the money to be paid by a client to an organization. Also known as a credit memo, a credit invoice is often created to correct an invoicing mistake where the amount charged is higher than the actual amount owed by the organization. Unlike a debit invoice, a credit invoice would always be written as a negative total number.
Mixed Invoice
A mixed invoice is a combination of a debit and a credit invoice. It combined both debit and credit charges on a single invoice where the amount can either be expressed as a positive or a negative number. These invoices are rarely raised by small businesses. They are necessary when a business needs to reduce the amount owed by a client on one project and increase the amount owed by the same client on a different project billed on a single invoice.
Timesheet Invoice
As the name suggests, a timesheet invoice is an invoice where a business bills its client based on the hours of work put in by its employees while working on a project/case. Here, organizations simple multiply their standard pay rate with the number of hours put in by their employees.
This invoice is commonly created by businesses operating in the service sector, including law firms, creative agencies, consulting service providers, and more.
Commercial Invoice
Commercial invoice is the invoice raised by an organization for selling goods to its client internationally. These invoices are commonly created by businesses operating in the import and export sectors. A commercial invoice ideally contains information required to ascertain custom duties for making international sales.
The core details entered within a commercial invoice include the quantity of shipment, the total value of the sale, packaging format, the weight or volume of the goods sold, the mode of payment, and the description of the goods sold.
Expense Report
Many small businesses reimburse their employees for the expenses they incur for business-related activities. The expense report is an invoice raised by an employee to the company they work in for this reimbursement. For example, if an employee is sent for a lunch meeting with a client and promised to cover all their expenses, the client can raise an invoice with the money they spent on the lunch and their travelling expenses.
Pro Forma Invoice
A pro forma invoice is an invoice sent by an organization to its client before the work is completed. It contains the estimated cost of the work to be done by the business before the concerned service is provided. There is difference between pro forma invoice and tax invoice as their use is different. These invoices are often altered once the work is completed to get to the precise amount a business owes. In most cases, a pro forma invoice is followed by a debit or a credit invoice.
One of the key reasons behind an organization raising a pro forma invoice is to provide the client with an estimation of what their products/services would cost them based on their requirements. This allows the client to decide if they want to engage with the concerned business and continue with its services.
Interim Invoice
An interim invoice is raised by an organization during the course of a project being completed. In such cases, businesses often work on larger projects where the clients have agreed to offer multiple payments at specific intervals, hence the name. These invoices are sent every time the organization hits a pre-decided milestone. While working on large projects, interim invoices help small businesses manage their cash flow by earning steady income after regular intervals.
Recurring Invoice
As the name suggests, a recurring invoice is an invoice raised by an organization on a periodic basis, ideally with the same amount. These invoices are commonly created by IT companies for the packages of services offered by them to their clients. To save the time and effort required for creating an invoice every time, businesses often choose to automate the creation and delivery of recurring invoices using software platforms.
The Final Word
These were some of the different types of invoices created by small businesses for the services provided by them. If you run a new and growing business, make sure you analyze the nature and features of your transactions before raising an invoice to your clients.
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