Many small businesses use the standard invoice in their daily operations. Although this does help cover a lot of ground for most industries, there are many small businesses, especially in eCommerce, that require more specific types of invoices.
To the new entrepreneur, the vast amount of invoices may seem overwhelming; however, they really don’t have to be.
That’s why today we’ll look at the most important small business invoices based on the industry and how to use them.
1. Proforma invoices
The most well-known of all invoices that are not the standard type would be the proforma invoice. This kind of invoice is used in two important ways.
The first way that proforma invoices are generally used is so that customs can see the value of all the goods being imported. It is important to remember, however, that the proforma is not an actual invoice (seeing as there is no request for payment for goods already delivered), so they don’t include any tax.
The second way is a type of estimate. This is usually in the case when a business has a new customer, and the relationship isn’t established yet. The seller will send the proforma as a sort of preview of what the final cost of the goods will be.
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2. Commercial invoices
These invoices are used exclusively for importing and exporting goods across national borders. The commercial invoice is used for customs to determine the value of goods and assess the appropriate taxes and duties that should be applied to the goods.
Similar to the above-mentioned proforma invoice (besides the fact that the commercial invoice is a finalized document), they both can, in fact, be used for customs. However, they should not be used at the same time, and the commercial invoice is preferred.
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3. Credit notes (memos)
The credit note can be seen as a reverse invoice. A seller does not send it for payment request to a buyer. In fact, the seller sends it to offer payment to the buyer due to an error that the seller has made.
This mistake could be that:
- the products were somehow damaged
- the products or services were not satisfactory
- the seller initially charged more than what was agreed
- the appropriate discounts were not applied
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4. Timesheet invoices
This type of invoice is actually more of a combination of a timesheet and an invoice than anything else.
This invoice applies to those businesses or services that provide work based on hourly pay. Instead of having to submit separate documents, one that lists the hours and the other being the invoice, the seller (vendor) can put the hourly data directly on the invoice.
Beyond the standard information found on standard invoices, the timesheet invoice will include:
- personal details as well as any applicable ID number
- the days and hours that the vendor worked each day
- the total number of hours worked, as well as the rate per hourly and total of the invoice
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5. Self-billing invoices
Self-billing invoices are not applicable to any particular industry. In fact, they’re more of a way to invoice.
Instead of the customer needing to wait to receive the invoice from the seller before he can pay for it, the customer actually issues the invoices to himself.
Once the buyer gets the products or services, he will create the invoice and issue one copy to his accounts payable. The other copy goes to the supplier.
Different countries around the world have different regulations for these self-billing invoices. For example, in the UK, if businesses want to start using these, both the seller and customer have to be VAT registered.
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6. Progress invoices
This is a specific type of invoice for all businesses that are involved in long-term projects that could take months or usually years to complete.
Instead of having to wait until the project is completed and then being paid, the vendor will send invoices at different phases of the larger project.
The progress invoice will usually include the initial contract amount plus what has already been paid by the client. It should also show how much is already finished, the total due for the currently completed stage, and how much is remaining for the whole project.
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7. Recurring invoices
The last type of invoice is the recurring invoice, which is usually used by cable, phone and utility companies. However, it is the standard invoicing model as well for SaaS (Software as a Service) businesses.
Recurring invoices will allow the supplier to submit invoices on a regular date and for a regular amount. For SaaS companies, these charges are the same amount each month. They also normally have the customer’s permission to charge their account automatically. In this way, the client has to do no work to pay for these invoices.
It is incredibly convenient for both sides.
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These 7 invoices listed above are the most common that you will find in use by many small businesses. Although the standard invoice is the most used, these other types of invoices or invoice processes may offer more benefits to small businesses.
This article is written by Bernard Meyer. He is the Head of Marketing at InvoiceBerry, the online invoicing software committed to helping small business owners send out invoices quickly and professionally. You can also find him on Twitter and LinkedIn.