What is an Invoice? Understanding the Purpose and Types


What is an invoice?

An invoice is a payment demand issued by a seller to the buyer of goods or services after the sale, detailing what goods have been provided or work done and how much must be paid in return.

There are several different types of invoices.

Types of Invoices

  • Proforma Invoices

A pro forma invoice is a document that states the commitment of the seller to deliver goods and services to the buyer for an agreed-upon price.

  • Commercial Invoice

A commercial invoice is a document used for customs declaration in the sale of goods that are exported across international borders.

  • Credit Notes

A credit note is a document issued to the buyer if goods are returned due to damage or mistakes.

  • Timesheet Invoice 

A timesheet invoice is sent to a customer to charge them for work done or services rendered on an hourly basis.

  • Retainer Invoice 

A retainer invoice is sent to a customer if they make an advance payment for a product or service. This amount is then deducted from the customer’s final payment on delivery or completion of work.

  • Recurring Invoices 

Recurring invoices are created and sent to customers at regular intervals, for repeating transactions like subscription fees.

What is an invoice used for?

Invoices can be used to bill for one-off projects or for recurring work, but they are most widely used to request payment after work is completed and where there is an ongoing relationship with the customer. Traditionally, invoices came in paper form, either handwritten or typed, then sent by post.

In recent years, many businesses have used email to speed up delivery. But the most tech-savvy firms now employ specialist software to generate e-invoices immediately, with information flowing automatically between seller and buyer.

For more useful information, browse the resources guide today!

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