If you’re like most people, your company sends invoices to clients and customers on a monthly basis. But do you know what an invoice is? You may already be using invoicing software, but have you ever wondered the difference between an invoice and a purchase order? This blog post will explore some of the different types of invoices that are out there, and why each one matters.
What is an invoice?
If you’re new to invoices, you may not know the difference between a bill and an invoice. A bill is a piece of paper that tells you how much money you owe someone for something they have done for you or your property. An invoice is like a bill but it also includes what type of payment and when the payment should be made in order to avoid late fees or interest charges.
Below are the different types of invoices that you will be using in your business:
1. Pro forma invoice.
A pro forma invoice is not a demand for payment. You can think of this document like an advance pre-invoice or contract before you complete work for a customer. The pro forma invoice shows how much to pay after the project finishes and, if applicable, what materials are given away during it (like gifts). Usually, these estimates change as they go on because your product may evolve with time; terms in the agreement will be different depending on where things stand at that point too.
2. Interim invoice.
An interim invoice is a payment that breaks down the value of a large project into multiple payments. This helps you to manage your small business cash flow for projects with high operating costs, like labour and materials. You can use money from an interim invoice to cover some of these expenses as they come in during each stage – rather than wait until at the end when all fees are due up front.
3. Final invoice.
The final invoice is an important tool in your business. It’s more than just a pro forma, it marks the end of work you’ve done for one customer and lets them know that they need to pay up! With this notification comes itemized lists with total costs as well as due dates and payment methods. Send out invoices by mail or online quickly after completing services so customers have enough time to honour their obligations (and avoid collections problems).
4. Past due invoice.
A past due invoice is a reminder that your payment date has passed and you’ll need to pay up soon. This can be intimidating, but there are options for those who struggle with paying on time or just don’t want to shell out the cash at one go. For example, changing your terms of service so customers have more than once a month before their next bill will arrive may help people manage payments easier – plus it’s an incentive for them not to forget about getting in contact! If they still aren’t able (or willing) after this change, then consider setting up a monthly plan where they’re required to only give what they can afford each payday without incurring any interest charges; again, though this could result in late fees if paid several days too late.
5. Recurring invoice.
Recurring invoicing is a great way to ensure your customers are up-to-date on their dues. For example, if you’re in the fitness business and have memberships that need to be renewed monthly or every six months, then recurring billing might work best for you. Businesses use invoicing software to track their income and expenses. This is a great way for companies to maintain accurate records of what they owe, and what they are owed. It also ensures that every invoice gets paid on time and in full.