Many small businesses around the world use the standard invoices in their daily operations. However, due to the different areas of business they find themselves in, many others will need to use different types of invoices.
Although the other non-standard invoices may seem overwhelming at first, they are actually quite simple in nature.
Today we’ll look at the 7 most important invoices your small business may need and which businesses are most likely to use them.
- The proforma invoice
Perhaps the most popular of the non-standard invoices, the proforma invoice is used so widely that there are actually two common ways they are employed.
Firstly, they may be used in imports and exports to show the value of shipped goods to customs. However, because they are not actual invoices (in the sense that they are requests for payments for goods already delivered), they do not include the tax.
The second popular way there are used is as a sort of quote or estimate, especially for newer customers. This allows the seller (vendor) to give the purchaser (client) a pretty good idea of what the price will be after the goods or services are delivered.
In terms of the second common usage, almost all businesses can use proforma invoices.
- The commercial invoice
This invoice is used solely for goods being exported across international borders. For that reason, it’s only applicable to small businesses that ship goods internationally.
This can seem similar to the proforma invoice. In fact, in customs you may actually present either a proforma invoice or commercial invoice, although not both.
The commercial invoice however is a finalized document (unlike the proforma) and is used to accurately assess what duties and taxes should be applied to the goods.
- The credit note (memo)
This document is applicable to all kinds of businesses and can be seen as the opposite of an invoice: instead of the seller sending a request for payment to the client, the seller is actually sending a form of payment.
This is because the seller has in some way made an error in either the delivery or quality of the product (such as damaged or unsatisfactory goods).
The seller will then either refund the money or provide credit to the client on a future purchase. This can be for the entire original invoice amount or the part that was in error.
- The timesheet invoice
This invoice can best be seen as a combination of an invoice and a timesheet, and it’s useful for those businesses providing hourly work to their clients.
In this invoice, the seller (vendor) will note down the hours being billed right on the invoice, rather than having to send a secondary sheet.
This helps in clarifying what is being charged for and helps avoid any confusion or lost documents which may result in delays.
The timesheet is similar to a standard invoice except that it will include:
- your details including any applicable ID
- the dates and times worked each day
- the total hours that were worked, including the hourly rate and invoice total
- The self-billing invoice
Instead of being applicable to only certain industries, this type of invoice can be used by any business at all.
Here, the customer actually ends up creating and issuing an invoice to himself, rather than having the seller send it.
The customer receives the goods or services and, once satisfactory, will issue the invoice to the accounts payable department. The customer will also send a copy along to the seller for their own processes.
This helps eliminate having to wait for the seller to create the invoice, and also avoids errors (seeing as the customer is the one creating it and won’t dispute something he created).
Different regions have different regulations surrounding self-billing invoices. For example, in the UK both the customer and the seller have to be VAT registered and have signed a formal self-billing agreement.
- The progress invoice
Progress invoicing is mostly used in the construction industry by businesses involved in long-term projects.
Instead of having to wait until the end of the project to get paid (which could take months or even years), they send out invoices at different stages of the project.
This also helps avoid the responsibility of the customer who probably does not want to pay up front for the entire project without being certain that the end result will be satisfactory.
On the progress invoice, the seller will include:
- the original contract amount and approved changes to that amount
- the amount already paid to date by the customer
- the percentage of the project already completed
- the total amount due on the current invoice
- the total amount still remaining on the entire project
- The recurring invoice
This type of invoice is usually used by SaaS businesses, as well as cable, phone and utility companies.
Recurring invoice allows for the seller to send automatic invoices to the customer on a regular basis (usually the same date each month) for a regular, often fixed price.
For cable, phone and utilities this amount will depend on the usage, although it’s always sent on the same relative date (on weekdays).
For SaaS businesses, this will be the same price on the same relative date. Usually the recurring invoice is accompanied by the customer’s permission to be charged automatically.
That way, the customer has to do no work to actively pay for the service. It is convenient for both sides.
Of course, these are only some of the many types of invoices used by small businesses around the world.
However, they represent the most common forms and ones that many small businesses should consider using to improve their own business operations.