Free invoice template UK
Use our easy to use free invoice template to get started.
Nowadays everyone is familiar with this word “Invoice”. Where buyer and seller are involved, you will hear the word invoice. Most of the people think invoices are only used particularly when you buy something. In actual, it’s not.
I am sure everyone is aware of the words bills. Bills are also called invoices. We pay different bills in our daily lives. Well, you can say that bills are one of the invoice types.
As you know, trading business is increasing day by day whether it is for goods or services. Invoices become a very important document in any trade or deal, whether it is on a larger scale or smaller scale.
You are engaged with this somehow. E.g. If you buy something, you will receive a receipt, it is called invoice. You pay your monthly utility bills. It is called invoice. You hire someone and he presents you a piece of paper, it is also called invoice. You got a car or house on rent; in return, you will get an invoice.
So basically, invoices are the evidence that you have made payment against any service or good. It transfers the ownership of goods or services over to you because you have paid for a particular thing. You can also say that it is evidence that you have purchased goods and services from a particular business owner whether it is small or big. Well! All these points are from buyer end. Now come to the seller side, invoices are issued when the seller has received the money or he will receive the money in future. Invoices are usually issued after the consent of both parties’ i.e buyer and seller. In some cases, acknowledgment of the buyer is compulsory. Without buyers consent, the seller will not get any claim.
herefore, invoices are for the safety of both parties. In case of legal proceeding, an invoice plays an important role in obtaining a claim whether it is raised by the seller or buyer. Though, these invoices have no legal value. But it is considered as strong evidence in any legal suit.
This is a very common practice among the different industries specifically in international trading; the sample invoices are sent to the buyer before sending or generating the final invoice. It helps you in getting the payment quickly because all the concerns have been removed just because of the sample invoice. The buyer or consumer validates the contents of the sample invoice. You can also say that sample invoices are helpful in removing the ambiguity before processing and shipment of the goods. The buyer is also sure about the goods he has ordered and the seller has the same clarity for the shipment he has to ship.
First, we should know the contents of the basic invoices. They are particularly the same in all the invoices. But some invoices do have additional invoices according to the business need.
There are different types of invoices which are being in different industries. Now let’s discuss the types of invoices one by one and it’s sample as well to understand them properly.
Types of Invoices:
Types of Invoices
Types of invoices are mentioned below;
Pro forma Invoice
Withholding Tax Invoices
Time Billing Invoices
Now let’s discuss these invoices one by one;
As it is clear from the name, also those invoices which are used within the country trade are known as inland invoices. In simple words, when trading between the different parties who belong to different cities are made.
These invoices are vice versa of inland invoices, means invoices which are used in foreign or international trades are known foreign invoices. You might hear about the invoices famous as a) Proforma Invoice b) Commercial Invoice.
Pro-forma invoices are very commonly used in the international trades. It is also considered as important documents which are required in any deal between the countries. Basically, Pro-forma invoices are generated when the buyer shows consent to purchase certain goods from the seller. Its contents are more alike standard invoices. But additional information is also required like, date of delivery of goods and agreed currency of amount of the products. The other most important content is the acknowledgment of the invoice by the buyer is necessary. Without this, a Proforma invoice cannot be useful for claim purposes as well as in a legal suit.
One important thing which needs to be clear is that it’s not a promissory document. It means it’s not a payment voucher. On presenting this document, the seller cannot get the payment. But it is very important that buyer is bound to make payment against the goods which should be delivered in the given timeline by the seller.
Like Proforma invoices, commercial invoices are very common and important piece of the document when we are talking about international trade or business. It is considered as the key document which is used in import and exports of goods at international level.
Difference between Commercial Invoice and Proforma invoice:
Both are an important document which is required in the international trade. Even the contents of the invoices are same, but theirs is a slight difference in it. Proforma invoices are generated when a buyer or seller agreed on some point after the settlement and selection of goods. It is acknowledged by the buyer that he is agreed to purchase certain products or goods at some certain rate and the buyer will remit the payment when the goods are delivered.
Whereas, the commercial invoices are generated when the shipment is made or sent to the buyer’s country along with the goods.
Importance of Commercial Invoice:
Commercial invoices are considered more important because it depicts the true picture of the shipment. This importance also increases because this document is also considered as a benchmark for the calculation of the duties and taxes by the government authorities at the port. The unit price, description, quality, usage, and conditions are helpful for customs authorities to identify the actual amount of tax and duties.
Furthermore, your shipment cannot be processed or cleared from the port if this document is missing with the shipment.
Some more points are mentioned below;
Commercial invoices are also important because of its unique reference number, it is easy to monitor that which invoice is pending and you can also filter the invoice according to the buyer. Because, if any buyer is blacklisted due to any reason, you will be able to identify it immediately.
As mentioned earlier, it is a very helpful document to check and verify the accuracy of the document that the same goods or products were sent by the seller and same were received by the buyer.
These invoices are also used as pending payment notice to your buyer. In such cases, where payments are due or pending at the buyer end, the seller can send commercial invoices as a reference for payment.
The other most important benefit of the commercial invoice is that it protects the seller from getting exploit by the buyer. Because all the details of goods like unit price, the total amount due, are mentioned on the commercial invoices. With this, the seller can easily identify the fraudster.
Similar to the Proforma invoice, it’s not a paycheque. You cannot get cash or payment against it, but this document is very helpful and considered as concrete evidence in case of suit file. Therefore, it helps the seller to claim amount legally.
Like earlier said, commercial invoices are very useful in record keeping. You can easily monitor and maintain your record.
A commercial invoice plays a vital role in the calculation of the duties and taxes. The information mentioned on the commercial invoice helps the customs agents to calculate and identify the type of goods.
The most important advantage of a commercial invoice is the insurance claim. This document has more significance while claiming for payment from insurance companies in case of any loss or disaster. The insurance companies can evaluate and validate the exact amount of loss of goods before booking of shipment till the delivery of goods to buyer’s country.
Those invoices which are received by the consumer or you can say buyer from the seller is called inward invoices. It means, whenever you purchase something, the received invoice will be called “Inward Invoice”.
These invoices are vice versa of the inward invoices. When sellers prepares or generates an invoice and send it to the buyer or consumer, it is known as an outward invoice.
Well, standard invoices are also called normal invoices. These invoices are usually used by small business owners or freelancers. Don’t get confused with name, though there are no such invoices. Standard invoices named to differentiate the invoices. The pattern of the standard invoices is simple. You can say that if any invoice or receipt contains item details, sender information, buyer information and total amount, it is called invoice. Regardless of the fact that invoices are in different format.
Below screenshot is the sample for a standard invoice which is commonly used by the buyers and sellers for any trade.
These invoices are used in an organization by the employees. That’s why these called expense invoice. For instance, if the expense is made by an employee, whom he entitles to and submit a claim along with the request for reimbursement and same expense will be recorded in the system to prepare expense report.
With the help of these expense reports, an expense invoice can be generated to monitor business-related expenses.
Withholding tax Invoice:
As it is clear from the name, withholding tax invoices are used and generated when you pay some certain amount of money to tax authorities. The generated invoice in receipt of the money is called withholding tax or tax invoice.
These are very important and commonly used in any business. The purpose of this invoice is to compare both invoices and purchase orders. In return, the desired information will be a positive or negative amount. That’s why these are called mixed invoices.
It’s an accounting terminology which is commonly used in the accounting system. Recurring means all such expenses which will occur in every month or a definite period of time. Those invoices which are generated when payment is scheduled or due. For instance, rent invoices are generated when the rent date is due or schedule.
All those payments which are made in advance to a supplier or employee and invoice generated in this regard. After that, when there are two or more prepayment invoices, you can claim full amount from the supplier. These can be more than one.
There are some accounting systems available, in which when you entered the standard invoice for a particular buyer; you will receive a notification from system highlighting the buyer that he has some prepayments available.
Pre-payments are of two types;
Pre-payments cannot apply to the invoices. To understand this, let’s take an example for this if you use them to pay some lease deposit, which you think you will be not invoiced for them.
These are applicable to expense reports and invoices which you have received. For instance, you have used this pre-payments invoice to pay your rent expense. But on the due date, when you receive a full amount of invoice for the rent, your pre-payments will reduce the number of rent bills.
As it is clear from the name, interest invoices are generated where a certain amount of interest is charged or due. Let’s take an example for this if you receive an invoice and you have to make payment against it, but you are unable to make payments. Then after the due date, a certain amount is charged as an interest, for this, a new invoice will be generated, this is called interest invoice.
These invoices are generated with a certain period of time. In our daily lives, we know them as “Bill”. Bills are also called invoices and it got complete details of the consumption of utility during a specific period of time. As mentioned earlier, the invoice has certain information related to the consumer or buyer, which includes complete details of the buyer or consumer, sender information, consumption, unit price, total amount and etc.
These value-based invoices are also known as milestone based invoices. Basically, these invoices are those which are generated or raised according to the hours work are done. You can also say that when as a certain milestone is achieved, according to that these invoices are generated. These invoices are usually dependent on the expectations fulfillment of the client on a certain project. It’s very obvious that certain terms and conditions are also applicable to these kinds of invoices and agreement.
Time Billing Invoice:
These invoices are very famous among service providers like freelancers, photographers, consultants, lawyers, and digital agencies.
The main content of the invoices includes a total number of hours spent with the complete detail of provided services.
Well! As it is clear from the name that, invoices are which generated against the partial payments of the product or services. The main contents of the invoices contain pending payments or due amount along with the payments were already made.
Credit and Debit Invoice:
Credit invoices are generated where some discounts are offered or awarded to the buyer. For instance, a deal was booked between buyer and seller. But below the delivery of goods, seller awarded a special discount to the buyer for any reason, and then the credit invoices are generated. Basically, this invoice is issued due to the difference of pricing of the product.
Debit invoices are vice versa of the credit invoices. These invoices are often issued when the client returns the goods to the seller due to any reason.
In this article, we have discussed the types of invoices in details along with the sample screenshots of the invoices. Therefore, it is considered the best practice to send a sample invoice to your buyer, before sending a final and official invoice, so that the buyer and seller are on the same understanding level.
I hope you like this article and its content. For more informative and interesting article please follow us on Facebook, Twitter, and Instagram. And don’t forget to subscribe the page for new articles intimation.