Invoicing can be a complex process. While you may know the basic requirements, there’s a chance you’re not taking advantage of the different types of invoices. We’ve covered some of the less-known invoice types, to help your get the most out of invoicing.
The benefits of using different invoice types
Even if a client isn’t aware of the many different invoices types, showing that you do can have a large impact. Your business can appear more established, organised and professional than others that use the same invoice for everything. Remember: invoices are as much an opportunity to market your business as they are important recordings of transactions.
Different invoice types can allow for more flexible strategies, which could make your business more efficient. For example, whilst you can final invoice each month, repeated invoices are better done as recurring invoices.
The different types of invoices:
A final invoice is the most commonly used invoice type. It is used at the end of a job to bill the client, notifying them of the balance they need to pay. Most sole traders or small businesses use this for all kinds of transactions. It’s the most basic, but potentially the least efficient.
A collective invoice is used to sum up what would be many smaller invoices. You can use them to group services or goods that may not warrant use of an invoice individually.
Examples of when you might use this are:
- After providing several types of goods monthly to a customer
- At the end of a month of service work
Essentially combining what would be a few hours at a time, or a few small purchases into one lump sum.
A recurring invoice is used to bill for the same thing over a period of time repeatedly. If you set up a contract for a year of tech support, you might bill monthly for the same amount. This type of invoice enables you to do this indefinitely for the same work, similar to a salary.
An interim invoice is one that would be used multiple times during a project. The main difference between a recurring and interim invoice is that interim invoices are limited. Recurring invoices could continue forever, whilst an interim invoice happens till a project has met its conclusion.
Proforma invoicing is similar to an estimate. It is a statement of the work that’s going to be paid for, and the price for the service. Using this type of invoice is effective when trying to scope a project. This is because you have already declared the services you are willing to do for the payment provided.
Proforma invoices differ from estimates as they are exact. They provide a precise sum that is due at the end which only changes if the project scope does.
Making effective use of different types of invoicing is essential to creating a consistent and smooth business/cash flow. Using different invoice types creates an easy way to catalog them, meaning tasks such as taxes are easier to complete.
Not all types of invoices can be used for every type of job. Take note of this when invoicing clients in the future to avoid appearing unprofessional and to get rid of complications. Our app: Invoice24, allows you to invoice in all these ways easily. Give it a try to find out how, or read our blog for more information.