As a small business owner, you might easily get confused about the different types of invoices. There are 6 different types of invoices you can use in your small business. These include:

  1. Pro forma invoice
  2. Interim invoice
  3. Final invoice
  4. Past due invoice
  5. Recurring invoice
  6. Credit memo

In this article, we’ll outline what each of these terms means and when you should use these various invoices.

Generally, What Is an “Invoice”?

Small business owners send clients and customers invoices after they have provided a service. The invoice states what service was provided, how much is due, and when that payment is due by.

The question you might be asking yourself is why there are so many different kinds then? It’s important to note that the basic components of the invoice remain the same across all six types. 

On all different kinds of invoice, you’ll always include the following invoice information:

  • The invoice date
  • Your customer or client’s contact information (name and address)
  • Your own business information (name and address)
  • An invoice number
  • A list of the invoice items (one line per item if there are multiple items)
    • The quantity for each item provided (sometimes measured in units, sometimes in hours)
    • The cost per unit
    • The total of each line
    • Tax
    • The grand total or invoice amount
  • Your invoice payment terms

So, with the basics established we can get into the 6 different types of invoice.

6 Different Types of Invoice

1. Pro Forma Invoice

A pro forma breaks the general rule of invoices, i.e. that they’re ways of demanding payment. Unlike every other invoice type, a pro forma invoice is not usually paid.

Instead, think of a pro forma invoice as a way of notifying a client what a project will cost rather than demanding payment. It’s almost like a sneak peek at what the actual invoice will be.

Many businesses in North America use estimates as a way of providing the information that might be found in a pro forma invoice. 

Sending a pro forma invoice shows your commitment to providing goods and services and your expectation about what you will be paid when those goods and services are fully provided. 

If you provide a pro forma invoice, know that your client will not expect to pay you until they receive an actual invoice. 

2. Interim invoice

If you’re working on a big project over the span of many months, you might not want to wait until the very end to get paid.

An interim invoice is a way of getting paid in installments for delivery of a project. You might prefer this for a few reasons:

  1. Risk: If you’re worried about your client paying you for a big project, breaking it into instalments minimizes your risk. You’ll collect smaller payments for what you’ve done so far. So, even if they turn out to be a bad client, the impact on your business will be less than if you waited until the very end to invoice them.
  2. Cash flow: Collecting payments in instalments means you have cash coming into your business to help pay your bills or make investments in tools, resources etc. Read more about cash flow here.

Here’s an example of how you might structure interim invoicing: Imagine you’re a web designer and developer and you’ve been commissioned to design and build a new website for a client.

You might say, this is a $17.5k project that will take 6 months. But you can break down the project into milestones and collect that $17.5k collected in instalments, e.g.

  1. Initial deposit – $2500
  2. Research (10 hours max) – $1000
  3. Designs (3 options presented, one round of feedback) – $5000
  4. Development of selected design – $5000
  5. Support while content being uploaded by clients – $1500
  6. QA & Launch – $2500

3. Final Invoice

As the name implies, a final invoice is sent at the end of a project or task, when final payment is due. It lets your client know the work is complete and they should now pay in full, according to the payment terms.

A “final invoice” is the most common kind of invoice used. When people say “invoice”, they generally mean this kind of invoice.

4. Past Due Invoice

A past due invoice is sent when your invoice terms have no been met and the invoice is now overdue. Generally this involves resending your original invoice and adding a “past due” stamp or note.

We recommend sending a past due invoice immediately when an invoice becomes overdue. Depending on the terms of your original invoice, you can add late fees or interest to your past due invoice.

Note: It’s important to note that the invoice number remains the same as the original when you send a past due invoice.

5. Recurring Invoice

A recurring invoice is used for ongoing services. 

For example, you might have a recurring invoice for landscaping work in the summer months, or snow removal in the winter months. 

Other examples include:

  • A membership or subscription to a club or gym
  • A subscription to a service or app (like Netflix or a meditation app)
  • A plan like your monthly phone or cable plan

6. Credit Memo or Credit Note

A credit memo is like a reverse invoice. You use this when you want to give a customer a credit against a previous invoice. 

You might do this for a few reasons, like:

  • An invoice was issued but there was an error in amounts or calculations. In this case you would give a credit note for the discrepancy amount.
  • An invoice was issued but then there were issues with the goods and services. You want to provide a credit as an act of goodwill / to compensate the client.

As an alternative, situations where you use a credit note can also be managed through updating the original invoice to add a discount or credit. But in the case where an invoice has been paid in full a credit note can be used.

Common Elements on Different Types on Invoices

No matter which different type of invoice you’re sending, there are some elements that are common to all invoices. These include:

  • The invoice date
  • Your customer or client’s contact information (name and address)
  • Your own business information (name and address)
  • An invoice number
  • A list of the invoice items (one line per item if there are multiple items)
    • The quantity for each item provided (sometimes measured in units, sometimes in hours)
    • The cost per unit
    • The total of each line
    • Tax
    • The grand total or invoice amount
  • Your invoice payment terms

Conclusion: A Professional Template Solves All Your Invoicing Problems

No matter what kind of invoice you need to send, it’s important to use a template that sets you up for success. For example, if you work in Construction, you’ll want an invoice that can be customized for your industry.

Templates built for Word and Excel can be clunky to use and often mean your client takes longer to pay you.

Professional invoice templates help you:

  • Get paid faster
  • Look more professional
  • Keep excellent invoicing and accounting records

Visit our invoice template guide to learn more about the right invoicing solution for your business.