📘 Invoicing Glossary
The plain-English invoicing glossary
Clear, jargon-free definitions of the invoicing and billing terms freelancers and small businesses actually run into, from "what is an invoice" to Net 30, proforma invoices, and past-due balances.
Create a free invoiceCore concepts
Recurring Invoice
A recurring invoice is an invoice that is automatically generated and sent on a set schedule for ongoing services.
Read definitionRetainer
A retainer is an upfront fee a client pays to reserve ongoing access to your services, either drawn down against work or as a recurring fixed fee.
Read definitionInvoice
An invoice is a document a seller sends to a buyer that itemizes goods or services provided and requests payment by a stated due date.
Read definitionInvoice number
An invoice number is a unique identifier assigned to each invoice so it can be tracked, referenced, and reconciled in accounting records.
Read definitionInvoice vs. receipt
An invoice is a request for payment sent before money changes hands, while a receipt is proof of payment issued after the buyer has paid.
Read definitionPurchase order
A purchase order (PO) is a document a buyer sends to a seller to officially authorize and commit to a purchase, listing the items, quantities, and agreed prices.
Read definitionStatement of account
A statement of account is a summary document that lists all invoices, payments, and the outstanding balance for a customer over a period of time.
Read definitionItemized invoice
An itemized invoice lists each product or service as a separate line, with quantity, rate, and amount, rather than charging a single lump sum.
Read definitionInvoice vs. quote
A quote is an estimate of cost given to a customer before work begins, while an invoice is a request for payment issued once the work is agreed or completed.
Read definitionPurchase order number
A purchase order number (PO number) is the unique identifier assigned to a purchase order, used to track the order and match it to the invoice that follows.
Read definitionInvoice types
Proforma invoice
A proforma invoice is a preliminary, good-faith estimate of costs a seller sends before goods or services are delivered, so the buyer can review and commit before a final invoice is issued.
Read definitionCommercial invoice
A commercial invoice is a legally binding document used in international trade that declares the contents, value, and parties of a shipment for customs clearance and payment.
Read definitionCredit note
A credit note (or credit memo) is a document a seller issues to a buyer that reduces or cancels the amount owed on a previously issued invoice.
Read definitionTax invoice
A tax invoice is an invoice that separately states the tax charged on a sale (such as GST, VAT, or sales tax), so a registered buyer can claim the tax as a credit.
Read definitionSales invoice
A sales invoice is the standard document a seller issues to a buyer to request payment for goods or services that have been sold.
Read definitionDebit note
A debit note is a document used to indicate an adjustment that increases the amount owed on a transaction, for example, an undercharge by a seller or goods a buyer returns to a supplier.
Read definitionGetting paid
Invoice payment
An invoice payment is the funds a buyer sends to a seller to settle the amount owed on an invoice, by or before its due date.
Read definitionPayment terms
Payment terms are the conditions on an invoice that state when payment is due and how it should be made, for example "Net 30" or "Due on receipt."
Read definitionNet 30
Net 30 is a payment term that means the full invoice balance is due within 30 days of the invoice date.
Read definitionDue on receipt
"Due on receipt" is a payment term meaning the client is expected to pay the invoice immediately upon receiving it, rather than within a set number of days.
Read definitionPast-due invoice
A past-due invoice is an invoice that has not been paid by its due date, making the balance overdue.
Read definitionRetainer fee
A retainer fee is an upfront payment a client makes to secure a provider’s availability or services, often drawn down against future work as it’s performed.
Read definitionTimesheet
A timesheet is a record of the hours a person works on tasks or projects over a period, used to bill clients accurately and to pay employees.
Read definitionDunning
Dunning is the process of systematically communicating with customers to collect overdue payments, usually through a sequence of escalating reminders.
Read definitionChargeback
A chargeback is a forced reversal of a card payment, initiated by the cardholder’s bank, that returns the funds to the customer and pulls them back from the merchant.
Read definitionACH payment
An ACH payment is an electronic bank-to-bank transfer processed through the US Automated Clearing House network, commonly used to pay invoices and run payroll.
Read definitionWire transfer
A wire transfer is an electronic, bank-to-bank transfer of funds, usually settled quickly and often used for large or international payments.
Read definitionBilling basics
Billing address
A billing address is the address associated with a payment card or account, the one your bank or card issuer has on file, used to verify and process payments.
Read definitionBilling cycle
A billing cycle is the recurring interval, often about a month, between one billing date and the next, over which charges accumulate before an invoice or statement is issued.
Read definitionBalance billing
Balance billing is when a provider bills a customer for the difference between the provider’s full charge and the amount a third party (such as an insurer) has already paid.
Read definitionAccounting
Accounts receivable
Accounts receivable (AR) is the money customers owe a business for goods or services that have been delivered and invoiced but not yet paid for.
Read definitionAccounts payable
Accounts payable (AP) is the money a business owes to its suppliers and vendors for goods or services it has received but not yet paid for.
Read definitionRemittance advice
Remittance advice is a document a payer sends to a supplier to confirm that a payment has been made and to specify which invoices it covers.
Read definitionInvoice factoring
Invoice factoring is a financing method where a business sells its unpaid invoices to a third party (a factor) at a discount to get cash immediately instead of waiting for customers to pay.
Read definitionW-9 form
A W-9 is an IRS form a business asks a contractor or freelancer to fill out, providing their name and taxpayer ID number so the business can report payments to the IRS (usually on a 1099).
Read definitionOverhead
Overhead is the ongoing cost of running a business that isn’t tied to a specific product or job, things like rent, software, insurance, and utilities.
Read definitionMarkup
Markup is the amount added to a product or service’s cost to set its selling price, usually expressed as a percentage of that cost.
Read definitionPayment terms
Net 15
Net 15 means the full invoice amount is due within 15 days of the invoice date.
Read definitionNet 60
Net 60 means the full invoice amount is due within 60 days of the invoice date.
Read definitionNet 90
Net 90 means the full invoice amount is due within 90 days of the invoice date.
Read definition2/10 Net 30
2/10 Net 30 means the full amount is due in 30 days, but the client can take a 2 percent discount by paying within 10 days.
Read definitionCOD (Cash on Delivery)
COD (cash on delivery) is a payment term where the buyer pays the full amount at the moment goods or services are delivered, rather than before or after.
Read definitionEOM (End of Month)
EOM (end of month) is a payment term meaning the invoice is due on the last day of the month in which it was issued, regardless of the invoice date.
Read definitionPIA (Payment in Advance)
PIA (payment in advance) is a payment term where the client pays the full amount before any work starts or goods are shipped.
Read definitionTaxes and business
1099 (Form 1099-NEC)
A 1099-NEC is an IRS form a business issues to a non-employee it paid 600 dollars or more during the year, reporting that income to the contractor and the IRS.
Read definitionW-2
A W-2 is the IRS form an employer issues to each employee, reporting the wages paid and the federal, state, and FICA taxes that were withheld during the year.
Read definitionEIN (Employer Identification Number)
An EIN, or Employer Identification Number, is a free federal tax ID number from the IRS that identifies a business, letting you keep your Social Security number off invoices and W-9s.
Read definitionSole Proprietor
A sole proprietor is the default, unregistered business structure for a single person, where you and the business are the same legal entity for taxes and liability.
Read definitionLLC (Limited Liability Company)
An LLC, or Limited Liability Company, is a registered business structure that separates your personal assets from business liabilities and is taxed as pass-through by default.
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