Learning how to make an invoice for each customer, then manage and track all outstanding and paid invoices may seem like a dull and time-consuming activity for business owners. However, a robust system is critical to keeping cash flowing through businesses of all sizes. Without a regular and smoothly operating invoicing system, cash flow problems arise — after all, a business needs cash to pay the invoices of suppliers as well as generating invoices for its own customers.
Learning how to make an invoice, as well as recognizing the basic types of invoices, can help businesses make decisions about this critical aspect of income tracking.
What is an Invoice?
An invoice is an itemized bill for goods sold or services provided with their prices as well as a statement for the total amount due.
Types of Invoices for Businesses
Whether a business provides goods or services, there are many types of invoices that appear across industries and regions of the world. Here are six basic kinds of invoices that are commonly used during transactions in North America.
- A proposal or bid is really a proposed invoice that states how much a business expects to charge for a job or project. This type of invoice is easily changed to represent the actual costs once the project has been completed.
- An interim invoice is issued at regular intervals for long-term projects instead of sending one final invoice for the total amount. In some cases, interim invoices may be issued as frequently as monthly or weekly; other times they are used at the quarter, half, and three-quarter mark of a project, followed by the final invoice.
- Recurring invoices are particularly useful for businesses providing continuing service to customers, such as Software as a Service (SaaS) organizations. They’re suitable for charges that occur repeatedly without a definite end to the contract. Automating recurring invoices are great time-savers for business owners.
- A miscellaneous invoice works well for any job, contract, or project that doesn’t fit a standard service or product regularly provided by a business.
- Businesses send past due invoices (also known as overdue account notices or interest invoices) when an account is past due. They may include the amount outstanding for goods or services provided, plus any accrued interest resulting from the delinquency.
- A final invoice is used to present the final amount owed when a project has been completed. If interim invoices were issued, it may include a record of payments previously received for those invoices, as well as the final amount outstanding.
How to Make an Invoice
Important elements of an invoice include:
- Client’s name, address, and contact person’s name
- Invoicing company name, the individual at the business’s own name, address, telephone number, and email address
- Invoice number for tracking purposes
- Purchase order number, if applicable
- Current date
- Itemized list of products or services performed with either hourly or per-item/project cost, dates of work if applicable, plus taxes
- Payment terms and acceptable methods of payment (for example, payable in 30 days via check, credit card, or PayPal)
For entrepreneurs who prefer to create and monitor their own invoices, a word processing system such as Microsoft Word offers basic invoicing templates. To save time, work, and frustration, some businesses prefer to use an online invoicing service which allows them to simply input the required information and company logo into a prepopulated form, which may then be tracked online. This service is usually offered with an online accounting solution.