The first document a customer or a client sees when they receive your product or service is an invoice. The chances of you getting paid the right amount depend completely on how clear you generate the invoice for that particular package. Should you fail to create a clear understanding of the product or service description or any make even a small mistake in mentioning the right price, chances of your business facing potential complexities in the budgeting rise.

Therefore, it is important for you to know every small detail about invoices so that you easily manage your accounting department of the business. The first thing that you need to consider when integrating an invoicing system to your business, is what type of invoice your business demands. There are several different types so let’s dig deeper.

Interim Invoice – breaks the big projects

If your business takes up big projects quite often, such projects that span over several months to maybe years, then interim invoice might be the right choice for you. This invoice is generated when the value of a big project is broken down into multiple payments. If you have a small business, larger projects would require more amount of labor and operating costs.

Interim invoicing helps you in managing a proper and continuous cashflow so that you do not run out of funds to continue with the project. You may schedule the invoicing monthly so at the end of each month, an invoice is generated that has every financial data that has been accumulated so far and resulted in the completion of a particular portion of a project.

Pro forma Invoice – tells about the total costing before the work

This is a type of invoice that is best suited for a business that makes international deliveries. It is a preliminary type of invoice that is sent to the customer or client before they receive the product or service. It tells everything about the product, from its description to its cost.

A proforma invoice is not a document like a typical invoice that poses as a legal binding document for the customer. It rather fulfills the purpose of telling the client about details of the costing and shipment so the client knows what to expect when the product arrives or service is given.

Pro forma invoice is best for international shipments as it contains all the essential information that is required for customs clearance.

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Final Invoice – demands for the payment

If you want to avoid any kind of collection problems in your projects, especially when you have just stepped into a new business, the best way to do this having an invoice system that generates the final invoice immediately after the work or project is done. The final invoice, unlike pro forma, demands the payment from a client after the completion of the project or arrival of the product.

This invoice includes clear information about the services and products that you have provided and their individual as well as total costing. It clearly mentions the due date of the payment, payment methods and all the required features of an invoice such as names, addresses, reference numbers, etc.

Past due invoice – notifies clients of late payments

It is advisable that you integrate an invoicing system that automatically sends an invoice again to the client when they do not make the payment by the due date that was mentioned on the final invoice. It is the best way to keep track of all the due payments and ensure their managed collection.

The past due invoice includes everything from the final invoice with the additional inclusion of possible late fees or penalty interest for not making the payment on time. This invoice is beneficial in reminding the client of the late payment without causing any hassle.

The alternatives to this approach, such as hiring a collection agency, hold the potential of seriously affecting your relation with the client or customer. On the other hand, sending this invoice proves to be effective as it only notifies the client and does not implement any drastic measures.

Credit memo – paying back the customer

Suppose you are running a small clothing business and have dispatched a package containing several clothing items to a customer. You have also sent a final invoice with the order that has all the billing information, per item cost, and total cost. Now the customer reports a defect in one of the items and sends the product back.

In such a situation, you as a business owner have a responsibility to repair the damage that has been done with your faulty service. The best way to do this is by paying pack the client for that item as soon as possible.

For this purpose, a credit memo comes in handy as it is an invoice that is sent to the customer, reducing the total cost of the original amount of the order. The amount reduced is equal to the amount that was paid for that specific defected item.

Time Billing Invoice – demands payment based on an hourly rate

Typically utilized by freelancers on different freelance websites, these invoice consists of the payment based on an hourly rate. It breaks down the work into hours and mentions the rate of each hour. It provides a systematic solution for the payment of services that are billed on the basis of time rather than the completion of the project.

It may seem similar to the interim invoice, but the difference between the two is that the interim invoice does not have an hourly rate, while this one does.


For someone who has started a small business, it is really important to know what type of invoice will be best for the business. Therefore, this article has covered all the possible types there are to help you find the best solutions.

If you already know which type will be good then explore invoice templates for small business owners to find professional and simple invoicing solutions.