What Are Different Types of Invoices?

Depending on the type of business you are involved in, you can create different types of invoices. Although such invoices can have similarities, each is used for a specific function. Additionally, the type of industry your business belongs to generally determines the kind of invoices you will want to use. The most commonly used types of invoices are listed and described below.

Standard (Sales) Invoice
Debit Invoice
Credit Invoice
Commercial Invoice
Pro Forma Invoice
Past Due Invoice
Recurring Invoice
Electronic Invoice

Standard (Sales) Invoice

The standard or sales invoice is the type of invoice usually given to clients by service providers. It is typically suitable for a wide range of businesses because of its flexibility. A standard invoice typically contains the names and contact details of the client and service provider involved in a transaction. Also, it would contain the amount and breakdown of money owned for services or goods provided.

Other details that you can find on a standard invoice include supported payment methods, and when the invoice is due. Apart from the contact details such as an email and phone number, it can also include the shipping address of the client.

Online payment processors such as PayPal may block a transaction if it does include at least a standard invoice. And most payment processors use an invoice to confirm with your client that they received the goods or services you are billing them.

Debit Invoice

Debit invoices allow business owners to add to the total amount of money their clients owe them. In most cases, it is used to document additional services or goods purchased which exceeds an initial estimate. A debit invoice can also be referred to as a debit memo. It generally contains all the information that is found on a standard invoice.

Freelancers and small businesses commonly use a debit invoice to update what the client owes them. Common use cases include upsells and cross selling, where a client adds another service after you have sent them a standard invoice.

However, you should use a debit invoice with caution. They can create confusion for clients who aren’t using accounting software to keep track of their debt obligations.

Credit Invoice

A credit invoice or a credit memo allows businesses to provide refunds and discounts to their clients. It also helps enterprises correct invoicing errors. A typical credit invoice would usually contain a negative figure (e.g., $100). This indicates a reduction or outward flow of money.

Therefore, a credit invoice reduces accounts receivable on the credit invoice, and increases sales returns and allowances. The inventory value also reduces when you issue a credit invoice. It’s important to issue a credit invoice for every refund, to keep creating a paper-trail for the refund.

Commercial Invoice

A commercial invoice is a comprehensive version of a standard invoice. It contains information that allows goods to be transported across borders as customs can use it to generate taxes. A typical commercial invoice contains the weight of a shipment, quantity of items, description of items, and the total value of goods.

It also serves as legal evidence that a seller and buyer have transacted. Unlike a standard invoice, a commercial invoice is for export goods. Therefore, it also has to identify the currency that will be used to pay for the goods.

Pro Forma Invoice

Pro forma invoices can be used by a company to communicate the cost of services or goods to customers before transactions occur. In most cases, clients require this type of invoice as an estimate before generating a purchase order.

A proforma invoice describes the goods, their itemized and total cost, as well as other important details such as taxes and discounts. It’s commonly used when billing new clients, or introducing a new product or service to existing clients.

Past Due Invoice

Past due invoices are used by businesses to remind clients that refuse to make payment for goods or services past the agreed due date. Companies are advised to quickly give clients past due invoices the moment they miss the agreed payment date. A typical past due invoice contains all the information that is obtainable on a standard invoice, including interest or late charges.

A past due invoice is different from an outstanding invoice. An outstanding invoice is one that the due date has not passed. Once the due date has passed, that’s when a past due invoice is written. It’s best to write a past due invoice immediately when the due date passes to keep track of late payments.

Recurring Invoice

A recurring invoice is a type of invoice used by the business for clients that require periodic goods or services. Many clients that have repetitive business needs prefer recurring invoices.

A recurring invoice is common with Software as a Service (SaaS) companies, which bill their clients monthly, semi-annually, or annually. Using software to create a recurring invoice can save you time and money. Most recurring invoices are created in digital form and rarely get printed.

Electronic Invoice

An electronic invoice is a simple invoice in electronic form. All the types of invoices mention above can be made into electronic invoices. Many businesses and clients prefer using electronic invoices. Additionally, if a physical invoice is required, the electronic version can easily be printed.

Unlike physical invoice, electronic invoices are easy to store and access. Chances are that if you have a physical invoice, you are going to scan it, and store it in electronic form.

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