10 Different Types of Invoices and Which Works Best for Your Business
Producing and sending professional invoices is an important administrative task for any small business owner . Invoices provide the buyer and seller with a record of transactions and important payment details . They are time-stamped documents vital for accounting, so it's important to have an invoicing process to make invoice payments as smooth as possible . However, there isn't just one type of invoice for every business.
Just like there are many different business types, there are also different invoice formats to complement the business that they accompany. In this article, we will cover 10 types of invoices to discover which is best for your business, more specifically:
- Standard invoice
- Recurring invoice
- Pro forma invoice
- Credit invoice
- Debit invoice
- Commercial invoice
- Timesheet invoice
- Interim invoice
- Final invoice
- Past due invoice
The most commonly used invoice is the standard invoice . This type of invoice is easy to create using invoicing software and can be used for a large array of billing transactions . Many businesses choose to use a standard invoice as their format of choice because of its versatility. This means that businesses can use a standard invoice for all client types (new, established, occasional, and frequent).
Generally, standard invoices include the following information:
- Seller's name and contact information
- The reference number or purchase order number
- An itemized list of services or goods
- Payment terms
- Payment options
- Sent and due dates
Recurring invoicing can save businesses time and energy. This type of invoice is best for businesses that send repeat invoices to the same customer or a business that works on large projects . When using Skynova's recurring invoice template , you can create and automatically send recurring electronic invoices to the same customer on a specific date each month or billing cycle.
When creating a recurring invoice , you should pick a start date and select the frequency, duration, and delivery options for the recurring invoices . Once you have selected these important pieces of information, you can have invoices automatically made and sent in accordance with your schedule.
Recurring invoices can be sent weekly, biweekly, monthly, quarterly, biannually, or annually, allowing you and your customer to decide on a schedule that works for both of you.
Pro Forma Invoice
Pro forma invoices are unique from the other types of invoicing . This is because the invoice is made before the service or product is complete. Essentially, a pro forma invoice is a preliminary appraisal in which you estimate the work.
Typically, pro forma invoices include:
- Itemization of services or products
- The nature of the product or service
- Shipping weight of the product
- Any transportation fees
Usually, businesses that work internationally use pro forma invoices as they are particularly helpful for customs purposes. While traditional commerce invoices must list very specific information, pro forma invoices only require enough information to provide to customs to examine the goods.
A debit invoice can increase the amount of money that the business anticipates to receive from the customer. For this reason, debit invoices are usually used if a customer misses the deadline for an early payment discount. Alternatively, it may be used by a business that charged a customer for freight charges ahead of time and now needs additional funds.
Debit invoices are great because they provide a paper trail of the transaction. With this documentation, your business and any auditors have a record of past transactions. Ultimately, keeping these records is helpful for accounting purposes.
Even though debit invoices can be great, they also have some downsides. To begin, the additional paperwork can become confusing, and every time a business issues a debit invoice , they can expect additional expenses. This is because they will need to account for the cost of ink, postage, labor, and the cost of paper when sending the invoice to their customer.
Commercial invoices are used for businesses dealing with customs. Since it is used in foreign trade, a commercial invoice should explain the value of the imported goods so that they can be properly assessed and taxed accordingly. It's important to note that there is no set standard format for commercial invoices ; however, as an important commercial document , they should include some critical pieces of information.
Commercial invoices should include the following information:
- The name and address of the person that the good is being shipped to
- The invoice number
- A customs reference number
- Terms of sale and delivery
- Payment terms
- The shipping method
- An itemized description of the items sold
- The net weight of the goods (unit of measure)
- The unit price
- The total price of the invoice
- Total commercial value
- Package marks, which should include the company name, country of origin, the size and weight of the package, and the destination of the package (port of entry)
- Any certifications
Timesheets are used to document how many hours someone has worked . Many employees are familiar with timesheets because that's how their employer measures how much to pay them. Often, timesheets are used to convey to clients how much you've worked.
Initially tracking your hours can be easy. All you really need is a pen and paper or even your phone to track the time you spent on a particular project. This can also help with time management, as you'll be aware of how you're utilizing your time.
When using Skynova's invoice template, you can charge the customer hourly. Select "Hours" from the drop-down "Item" menu. From there, you can use the "Description" space to describe the project, the "Unit Price" for your hourly rate, and "Quantity" for the number of hours that you worked.
Interim invoices are an excellent choice for those working on a long or large project . This is because interim invoices are sent out regularly during the project. In some cases, an interim invoice might be sent out weekly, while in other cases, it could be issued monthly, quarterly, at the halfway point, or three-quarter mark of a project.
A final invoice is sent when all work is complete, and payment is required. All terms should be adjusted and discussed before issuing the final invoice . This invoice should contain records of previous transactions in addition to the full payment amount due.
Final invoices , like all invoices, should include this important information:
- Names and addresses: The invoice needs to include accurate information regarding the name of the business and customer and everyone's contact information , which might include phone numbers, email addresses, and physical mailing addresses.
- Invoice number : The final invoice must include a unique invoice number to avoid confusion in the future.
- Dates: The final invoice should include the invoice date, which is the date the invoice was created , and the due date , which is the date the invoice is due. Some businesses require the invoice to be paid within seven days, while others allow longer payment periods.
- Costs: Whether you charge hourly, by the project, and/or for materials, the final invoice needs to include a breakdown of these costs. Skynova's invoicing template allows you to charge customers how you prefer.
- Discounts: If you provide any discounts to customers, your final invoice should include this deduction.
Past Due Invoice
Past due invoices are used in the event that your client has not paid the initial bill. Occasionally, you might come across a past due invoice referred to as an interest invoice or overdue account notice. The past due invoice should include the total amount due in addition to any late fees or interest that the client may have accumulated.
Due to the COVID-19 pandemic, many Americans face financial difficulties. For many business owners, this has resulted in higher rates of payment issues. In fact, 6 in 10 freelancers have been impacted by payment issues, and only about 30% of freelancers enforce late payment fees. One of the easiest ways to avoid late payments is to stay on top of bookkeeping and imposing late payment penalties. This way, you can ensure that payments are made on time or remind clients about late payment fees. You can inform customers about late payment fees in the "Notes" section, which can be found at the bottom of the invoice.
Improve Invoicing With Skynova
Depending on the nature of your business and the type of service that you provide, there are a number of invoice options for you. Understanding which invoices your business needs is one of the first steps to getting paid faster. Once you identify which type of invoice works best for your business, you can begin finding the right product to help you. Skynova offers an invoice template that can allow you to quickly create an online invoice, no matter how you're keeping track of payments.
Streamline your other business processes with additional Skynova software products, so you can get back to doing what you care about most — running your business. Discover how Skynova can improve your business operations today.