Reference
Invoicing Glossary
Clear definitions of 78 invoicing, billing, tax, and accounting terms. Each entry starts with a one-paragraph answer, then explains how the term works in practice with an example and common questions.
Documents
- Commercial invoice A commercial invoice is the official invoice used for international shipments that customs authorities rely on to assess duties and taxes.
- Credit note A credit note is a document a seller issues to reduce or cancel the amount owed on a previously issued invoice.
- Debit note A debit note is a document that increases the amount owed on a previous transaction.
- Estimate An estimate is a document that gives a client an approximate price for goods or services before work begins.
- Final invoice A final invoice is the last invoice issued on a project, sent when all work is complete.
- Invoice An invoice is a document a seller sends to a buyer to request payment for goods or services that have been delivered.
- Past due invoice A past due invoice is an invoice that has not been paid by its due date.
- Proforma invoice A proforma invoice is a preliminary bill sent before goods or services are delivered that shows the expected items, prices, and terms.
- Progress invoice A progress invoice bills a portion of a larger project as work is completed, rather than one invoice at the end.
- Purchase order A purchase order is a document a buyer sends to a supplier to formally request goods or services at agreed prices, quantities, and delivery dates.
- Quote A quote is a document that offers a client a fixed price for specific goods or services before work begins.
- Receipt A receipt is a document that confirms a payment has been received.
- Recurring invoice A recurring invoice is an invoice that is generated automatically on a fixed schedule, such as monthly or annually, with the same client, line items, and terms each time.
- Statement of account A statement of account is a summary document that lists all invoices, payments, and credits between a seller and one client over a period, ending with the current balance owed.
- Tax invoice A tax invoice is an invoice that meets the legal requirements for the buyer to claim a tax credit, typically under a VAT or GST system.
Payment terms
- Deposit A deposit is a partial payment made before work begins or goods are delivered, typically 25 to 50 percent of the total.
- Due date The due date is the specific calendar date by which an invoice must be paid.
- Due on receipt Due on receipt is a payment term meaning the client is expected to pay as soon as they receive the invoice.
- Early payment discount An early payment discount is a small percentage taken off the invoice total if the client pays before a set early deadline.
- End of month terms End of month (EOM) terms set the payment deadline relative to the end of the month in which the invoice was issued rather than the invoice date itself.
- Grace period A grace period is a short window after the due date during which a late payment is accepted without penalty.
- Invoice date The invoice date is the date an invoice is issued.
- Late fee A late fee is a charge added to an invoice when the client pays after the due date.
- Milestone payment A milestone payment is a payment that becomes due when a defined stage of a project is completed, such as design approval, a prototype delivery, or launch.
- Net 15 Net 15 is a payment term meaning the full invoice amount is due 15 calendar days after the invoice date.
- Net 30 Net 30 is a payment term meaning the full invoice amount is due 30 calendar days after the invoice date.
- Net 60 Net 60 is a payment term meaning the full invoice amount is due 60 calendar days after the invoice date.
- Net 7 Net 7 is a payment term meaning the invoice is due 7 calendar days after the invoice date.
- Partial payment A partial payment is any payment that covers less than the full balance of an invoice.
- Payment terms Payment terms are the conditions on an invoice that state when and how the client must pay.
- Retainer A retainer is a recurring fee a client pays to reserve a professional's availability or to prepay for a set amount of work each period.
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Amounts and totals
- Amount paid Amount paid is the sum of payments already received against an invoice, shown on the invoice or statement so the client can see how the balance due was calculated.
- Balance due The balance due is the amount still owed on an invoice after subtracting any payments, deposits, or credits already applied.
- Discount A discount on an invoice is a reduction in price, shown either as a percentage or a fixed amount, applied to a line item or to the subtotal.
- Line item A line item is a single row on an invoice that describes one product or service, with its quantity, unit price, and line total.
- Quantity Quantity is the number of units of a product or service billed on an invoice line, such as 12 hours, 500 brochures, or 3 days.
- Subtotal The subtotal is the sum of all line item totals on an invoice before taxes, discounts, and other adjustments are applied.
- Total due The total due is the final amount the client must pay on an invoice after all line items, discounts, taxes, and prior payments are accounted for.
- Unit price The unit price is the price charged for one unit of a product or service on an invoice line, such as the hourly rate, price per item, or daily fee.
Numbers and identifiers
- Invoice number An invoice number is a unique identifier assigned to each invoice so it can be tracked, referenced in payments, and audited.
- PO number A PO number is the unique identifier on a purchase order that a buyer issues before a sale.
- Reference number A reference number is any identifier placed on an invoice or payment to connect related records, such as the client's project code, a contract number, or the text the client should put in their bank transfer so the payment can be matched to the invoice.
- Tax ID A tax ID is the number a tax authority assigns to a business for reporting and collecting taxes.
Taxes
- GST GST (goods and services tax) is a broad consumption tax applied to most goods and services, functioning like VAT.
- Reverse charge Reverse charge is a VAT rule under which the buyer, rather than the seller, accounts for the VAT on a transaction.
- Sales tax Sales tax is a consumption tax added to the price of goods and some services at the point of sale, collected by the seller and remitted to the state or local government.
- Tax exempt A tax-exempt sale is one on which no sales tax, VAT, or GST is charged because the buyer, the product, or the transaction qualifies for an exemption.
- VAT VAT (value added tax) is a consumption tax charged at each stage of the supply chain on the value added, used in the EU, UK, and more than 160 other countries.
- Withholding tax Withholding tax is an amount a client deducts from an invoice payment and pays directly to the tax authority on the supplier's behalf.
Accounting
- Accounts payable Accounts payable is the total amount a business owes to its suppliers for goods and services received but not yet paid for.
- Accounts receivable Accounts receivable is the total amount of money owed to a business by its clients for invoices that have been issued but not yet paid.
- Accrual basis Accrual basis accounting records revenue when it is earned and invoiced, and expenses when they are incurred, regardless of when cash changes hands.
- Aging report An aging report is a summary of unpaid invoices grouped by how long they have been outstanding, typically in buckets such as current, 1 to 30 days, 31 to 60 days, 61 to 90 days, and over 90 days past due.
- Bad debt Bad debt is an invoice amount that a business concludes it will not be able to collect, usually because the client has gone out of business, disappeared, or refuses to pay and legal action is not worthwhile.
- Cash basis Cash basis accounting records revenue when payment is actually received and expenses when they are actually paid.
- Cash flow Cash flow is the movement of money into and out of a business over a period.
- Days sales outstanding Days sales outstanding (DSO) measures the average number of days it takes a business to collect payment after a sale is invoiced.
- Reconciliation Reconciliation is the process of matching payments received in your bank account to the invoices they settle, and confirming that your invoicing records agree with your bank records.
- Remittance advice Remittance advice is a notice a client sends to a supplier to say a payment has been made and which invoices it covers.
- Write-off A write-off is the accounting action of removing an uncollectible or forgiven invoice balance from accounts receivable and recording it as an expense.
Billing process
- Billable hours Billable hours are the hours of work that can be charged to a client under the terms of an engagement, as opposed to non-billable time spent on administration, marketing, or internal tasks.
- Billing cycle A billing cycle is the regular interval at which a business issues invoices for ongoing services, such as weekly, monthly, or quarterly.
- Change order A change order is a documented agreement to modify the original scope of work, including the effect on price and timeline.
- Collections Collections is the stage of pursuing an unpaid invoice after normal reminders have failed, through a formal demand letter, a collections agency, or legal action such as small claims court.
- Digital signature A digital signature on an invoice or estimate is an electronic image or cryptographic mark that identifies who issued or approved the document.
- Dunning Dunning is the systematic process of communicating with clients about overdue invoices, typically through a sequence of escalating reminders: a friendly notice shortly after the due date, firmer follow-ups, and finally a formal demand.
- E-invoicing E-invoicing is the exchange of invoices in a structured electronic format that the recipient's system can process automatically, as opposed to a PDF or paper invoice that must be read and keyed in.
- Hourly rate An hourly rate is the price charged for one hour of work.
- Invoice template An invoice template is a pre-designed layout that defines where the business details, client information, line items, totals, and payment terms appear on an invoice.
- Markup Markup is the amount added to the cost of materials, subcontractors, or expenses when they are billed to a client, expressed as a percentage of cost.
- PDF invoice A PDF invoice is an invoice saved in Portable Document Format so it looks identical on every device, cannot be edited casually, and is easy to email, print, and archive.
- Product and service catalog A product and service catalog is a saved list of the items a business sells, each with a standard description, unit price, and tax treatment, used to add line items to invoices and estimates quickly and consistently.
- Retention Retention, or retainage, is a percentage of each progress payment, commonly 5 to 10 percent, that a client withholds until a project is fully complete and accepted.
- Scope of work A scope of work is a written description of exactly what a project includes: the deliverables, tasks, timeline, assumptions, and exclusions.
International
- Exchange rate An exchange rate is the value of one currency expressed in another.
- IBAN An IBAN (International Bank Account Number) is a standardized account identifier of up to 34 characters, starting with a two-letter country code, used for cross-border bank transfers in Europe and many other regions.
- Multi-currency invoice A multi-currency invoice is an invoice issued in a currency other than the seller's home currency, usually the client's currency or an agreed international one such as USD or EUR.
- SWIFT code A SWIFT code, also called a BIC (Bank Identifier Code), is an 8 or 11 character code that identifies a specific bank and branch for international wire transfers.
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