An invoice is a document–physical or digital–that you provide to a client to request a payment. It includes the price of every service and deliverable provided to the client along with:
- The total amount due
- The payment terms
- The invoice due date
- A unique invoice number
- Your contact information
- Your client’s contact information
- An itemized listing of the services rendered
Invoices are also used to calculate how much money should be paid in taxes. This means they must be accurate and detailed enough so they can be used by an accountant when filing taxes, which is why a free invoice platform like Invoice Ninja can help.
Types of Invoices Used by Small Businesses and Freelancers
To get the most out of your invoices, you should understand the different types so you can choose the right one for each situation.
Standard Invoice
This is the simplest invoice containing your name and contact details, a unique invoice number, and the total amount the client needs to pay.
Final Invoice
A final invoice is sent to the client when you complete a big project. This kind of invoice can also be used to mark the end of your relationship with a client.
Interim Invoice
An interim invoice, also referred to as a progress invoice or progress bill, is an accounting method where a business invoices a client in regular increments for a larger project. This type of billing allows small businesses to maintain a consistent cash flow throughout lengthy projects, until the project is completed.
Interim invoices are basically meant to break up the total cost of the project into smaller payments that are easier for clients to manage.
While we currently don’t offer this type of invoicing, we offer something similar–a recurring invoice, where you can set date parameters (daily, weekly, or monthly) and the number of cycles (three months, ten months, or endless) to break up a large payment into smaller ones.
Credit Invoice
A credit invoice is issued when a customer returns a product or service purchased from you. This type of invoice allows businesses to document the return and refund their customer.
Debit Invoice
You can think of this as the reverse of a credit invoice–a debit invoice is issued when you need to charge the customer for additional products or services after the original sale. This could include charging for extra labor or supplies.
Benefits of Using Invoices
- Easily keep track of payments–invoices make it easy to stay organized and track payments.
- Ensure overall accuracy–proper invoices make sure every transaction is accurate and properly documented.
- Improve cash flow–interim invoicing can help you manage your cash flow better and get paid faster.
- Facilitate tax filing–invoices can provide the information you need to accurately file taxes.
- Build customer trust–invoices demonstrate your professionalism to clients and provide them with a clear expectation for payment.
How to Create an Invoice
There are two main ways to create an invoice for your business or freelance work.
The first option is to use a template. There are many different types of templates available online, including those for invoices and receipts. Using a template can help you quickly create an invoice that is professional looking and customized to your business.
Still, this can become time-consuming if you need to constantly update and adjust the template for each invoice. In addition, invoice templates might not have fields for all the information you need to include in an invoice.
The second option is to use invoicing software, like that from Invoice Ninja. In addition to helping you generate invoices, these invoicing tools can also help you keep track of payments, manage customer data, and integrate with other accounting or payment software.
This is a great option for those who have multiple clients and billing cycles and want to spend their time on meaningful tasks instead of generating invoices.
