Types of Small Business Invoices: Everything To Know!
Every business has a key point in common and that is the task of invoicing. No matter how small or big the firm is, issuing an invoice to the customers is a must for collecting the revenues. If you run a small business you have to generate different kinds of business invoices due to different factors.
What Is A Business Invoice, Anyway?
To make things simpler for you, an invoice is a formal way to ask for payments from your clients. You can alter your invoice as per your needs, for instance:
If you want to receive the complete payment for your services and products in advance, you can create an invoice.
If you want to get the payments in installments, you can add the terms and conditions and get the payments accordingly.
Creating the invoices majorly depends on the industry in which you operate, the types of customers you have, how often you get paid, etc. But before getting into the details of the classifications, let’s discuss the differences between a bill and an invoice.
Bill V/s Invoice
A business owner creates an invoice with complete accounting details and sends it to their clients. The clients can understand the cost of the services received or the products purchased from the business. An invoice defines the volume of work that has been provided by the business.
On the other hand, a bill lets the clients know how much money has to be paid to the business. One significant difference between a bill and an invoice is that as a business owner, you can add your business terms and conditions in an invoice but a bill doesn’t include that.
Different Types of Business Invoices
Here is what you are reading this article for:
Standard Invoice
The most common form of small business invoices is the standard one that you can issue and send to your clients. The format is flexible enough to fit most of the business types and billing patterns. A standard invoice includes:
Your business’s name and contact information
Your client’s name and contact information
The invoice number
The amount of money the client has to pay you
Credit Invoice
A credit invoice, also known as a credit memo comes to play when your business needs to provide the client with any discount or refund. Sometimes, if you have to correct a past invoice, a credit memo does that too. One thing to note here is that a credit memo always has the number is negative. For example, if your client is getting a 1000 rupees refund, the credit invoice would be -1000 INR.
Debit Invoice
If your business needs to increase the amount of money the client has to pay you, you can issue a debit invoice. It can be very useful for small businesses and freelancers when they make a slight adjustment to an existing bill.
For instance, if you sent your invoice in advance but you ended up working for a few more hours or putting in extra work, you could send a debit invoice for the additional work.
Commercial Invoice
A commercial invoice is issued when you sell goods to international clients. Commercial invoices include details of the sale that include custom duties and cross-border sales. A commercial invoice includes:
Shipment quantity
Volume/ weight
Descriptions of goods
Packaging format
Total value
Interim Invoice
When you are billing on large projects and your client has also agreed to multiple payments, you can issue an interim invoice. For example, a freelancer submits interim invoices when certain parts of a large project are finished.
Final Invoice
You can send a final invoice to a client once the project is complete. A final invoice is more detailed than a pro forma and typically includes the following:
The total cost of the project
A detailed list of all the services and products
Invoice number
Due date
Payment methods
How Important Is An Invoice for Accounting Purpose?
A good invoice is not just a purchase receipt, but a legal document that protects your business from mistakes and risks. The right billing tool can help you simplify your billing process, improve your cash flow, and keep your information simple.
Conclusion
The above are different types of bills that are typically generated by small businesses. Today, business software not only helps you with different types of bills but also comes with full features to help you manage your business more efficiently. If you use invoice generating software, ensure that it supports the type of invoice your business needs.