Published September 02, 2020
For small businesses, keeping track of your finances is a daunting task. If accounting isn’t your strength, all the different types of documents can be overwhelming. How do you write them? When should you use one over the others?
That’s why we at Invoice Home have compiled this list of 9 widely-used documents, how they work, and when to use them. To create any of these documents, head over to our invoice generator to get started with one of our more than 100 templates!
What is an invoice?
An invoice is a general statement of goods and services provided. It’s sent to the customer to show what services they’ve received, and what they owe to the seller. As a rule of thumb, items should be itemized to minimize disputes. For example, rather than listing “garden services- $100”, instead list separate items on separate lines such as “lawn mowing- $40; weeding- $25; hedge trimming- $20”, and so on.
When should you use an invoice?
When in doubt, if a customer owes you money, use a general invoice. It’s simple and straightforward. Any changes from the norm or items not able to be listed can be amended in the description at the bottom. Send an invoice to the customer after you’ve completed the work, within 30 days.
To get started, use one of our hundreds of free invoice templates here.
2. Tax Invoice
What is a tax invoice?
The key difference between a tax invoice and a general invoice is the tax information provided, specifically the GST (Goods and Services Tax) information. A tax invoice shows the exact amount of tax to be paid by the purchaser, and allows them to claim tax credit when submitting their taxes.
When should you use a tax invoice?
A tax invoice is often sent to a manufacturer or another business entity who will re-use the goods they’ve purchased from the original supplier. This tax invoice will allow them to claim tax credits on the purchases.
Tax invoices are not necessary in all cases, and it can all be a bit confusing. So check out this article on the differences between invoices and tax invoices from Difference Between for a more in-depth comparison.
3. Proforma Invoice
What is a proforma invoice?
A proforma invoice is a document sent to a customer before a product is delivered. This is a crucial distinction to make. This provides the customer with an exact price that will be expected to be paid upon the delivery of a final invoice. It’s a binding agreement, so all information on the proforma invoice is final.
Each individual item should be listed separately, along with price and as much other information as is necessary (weight, quantity, etc.).
When should you use a proforma invoice?
Often, proforma invoices are used for international transactions, so the recipient can prepare information for customs about the goods arriving in their country.
A proforma invoice is typically used when a product is physically being shipped, and often includes extra information such as weight and transport charges. A customer may also ask for one for their records before the transaction is complete.
What is a receipt?
A receipt is a document showing proof of payment from a customer. The primary purpose of a receipt is to provide proof that a contractual obligation regarding the exchange of goods or services for goods or services has been fulfilled.
When should you use a receipt?
It’s best to send each client a receipt after each time receiving payment from them. It shows official confirmation that you’ve received their payment, and allows both parties to adjust their financial records accordingly.
5. Sales Receipt
What is a sales receipt?
Polymath said it best. “A sales receipt is like entering both the invoice and payment in a single transaction. No money is owed when the transaction is complete.” It shows that the customer already paid the amount, and the goods have already been exchanged.
When should you use a sales receipt?
Simply put, a sales receipt is the document created when the customer is paying the full amount for a good or service on the spot, at the time of service.
Think of buying from a florist’s shop. You show up – they sell you flowers – you give them money – they give you a receipt. That receipt is essentially a sales receipt, showing that the money was paid at the time the goods were delivered.
What is a quote?
A quote is a formal document explaining your prices before any services are agreed upon. At its core, it’s a price list to show the customer how much they will be paying if they decide to do business with you.
Like all of these other documents, quotes should be itemized, showing how much they will pay for each part of the service you are providing them.
When should you use a quote?
A quote should be issued when seriously discussing services with a potential customer, or right before the services are agreed to. The quote puts all verbal agreements into writing, so there’s no dispute or confusion about price once the final invoice is received.
What is an estimate?
An estimate is just that: an estimation of how much the final services will cost. It’s similar to a quote in that way, but an estimate is more informal. With an estimate, there’s more room for discussion on price for both sides.
When should you use an estimate?
Though they’re similar to quotes, estimates should be used in more preliminary, early discussions with a potential customer. This gives each party an idea of the other’s expectations, and allows for some wiggle room on both sides. Once the price is agreed to, this can be resent as a formal quote, or even a proforma invoice.
8. Credit Memo/Credit Note
What is a credit memo/credit note?
These documents accomplish the same thing, so they’ve been combined here. This is given to a customer after completing a payment or receiving an invoice to offer a sort of discount post-purchase, and states why the customer was given this lower price.
When should you use a credit memo or credit note?
Whenever a customer is owed money back from a transaction, you can issue them a credit memo/note. For example, if a customer returns goods to you, you should issue them a credit note with the money back, stating the reason for return. As a general rule, whenever money is returned to a customer, issue a credit note.
Additionally, they can be used in other fringe cases. Say you have a 30% off promo starting Friday, but a customer paid full price just two days prior. If they reach out to dispute, you may offer them the 30% (or another percentage) back, and issue a credit note for both parties’ records.
9. Purchase Order
What is a purchase order?
A purchase order is a document sent by a customer to a vendor in advance of a delivery. This is used as a formal request for goods/services.
When should you use a purchase order?
You can request that your customers fill out a purchase to have a formal record of their order before the transaction occurs, and to ensure that the invoice reflects the amount that was ordered. Additionally, you should also send a purchase order to any suppliers your business uses whenever you need more raw materials.
To get started on any of these documents, go to our invoice generator and get started with one of over 100 templates!
- 3 Tips For Enjoying Summer, Even When You Have to Work!
- 7 Ways to Prevent Work-From-Home Burnout
- How to Get a Customer to Pay Your Invoice
- New Year’s Resolutions for Small Business Owners
- Holiday Gifts for Small Business Owners
- Why You Should Use an Invoice Template Software
- Managing & Engaging Your Remote Employees
- How to Deal With Difficult Customers
- How to Send an Invoice
- 4 Simple Steps to Start Freelancing
- You’re Setting the Wrong Goals for Your Business
- How to Get Over Your Phone Anxiety
- Questions to Ask Yourself When Starting a Business
- 4 Steps to Take When Taking on a New Client
- Introducing Cash Receipt Templates!
- How to Make Your Small Business More Professional
- 9 Invoicing Documents, and When You Should Use Them
- Common Mistakes Freelancers Make
- How to Network Without Leaving Your Home
- 6 Signs That You Might be Ready for a Side Hustle
- 8 Financial Blogs Small Business Owners Need to Read
- How to Prevent Late Payments on Invoices
- Top 10 Countries by Startup Ecosystem
- 5 Reasons To Use Paperless Invoices
- How to Avoid a Toxic Workplace
- Why You Should Upgrade to Unlimited Invoicing
- Tech and Economy: How Tel Aviv became the Start-up City
- The Importance of Customer Service
- What is an Invoice?
- 5 Plants to Minimize Toxins & Maximize Productivity
- M-Commerce in Developing Countries
- Customize Your Invoice
- 9 Ways to Vacation Stress-Free
- How to Get Your Laptop Spring-Ready
- The Truth About Failure
- 5 Women You Should Know About
- The Most Expensive Super Bowl Ads of All Time
- Top 10 Cities for Female Entrepreneurs
- Jobs That Didn't Exist 20 Years Ago
- Gifts for the Entrepreneur in Your Life
- How to Secure Your Small Business
- Unique Ways to Thank Your Customers
- Best Cities to Live in With a Salary of $50,000
- How Your Business Can Profit From Halloween
- How to Separate Yourself from Your Business
- How to Manage Your Mental Health as a Business Owner
- Books to Read Before Starting a Business
- 5 Ways to Get Loyal Customers
- Why You Should Take a Staycation
- Businesses You Can Start While Working Full Time
- Should Freelancers Ever Work for Free?
- How to Stay Active at the Office
- Best Business Ideas for People Who Love to Travel
- How to Perfect Your Elevator Pitch
- The Best Places in the World to Work Online From
- 5 Businesses You Can Start for Free
- How to Organize Your Desk for Maximum Productivity
- How Your Business Can Profit off the World Cup
- What the Color of Your Logo Says About Your Business
- How to Become a Wedding Planner
- Why Veterans Make Perfect Entrepreneurs
- Why Every Day Should Be "Take Your Dog to Work Day"
- 3 tips For First-Time Freelancers
- 3 Tips for a Stress-Free Vacation
- Spring Cleaning in The Office
- 5 Tips When Starting Your Business
- New to Invoicing
- 3 Tips on Last Minute Tax Filing
- Characteristics of a Successful Business Owner
- Accomplishing Your 2018 Goals
- How to Set and Achieve Your New Year's Goals
- Tips For Boosting Your Productivity
- Motivational Quotes to Get You Through Any Day
- New Flags on The Template Gallery!
- Be Featured on Our Site!
- How to Create Your First Invoice
- A Helping Hand on the Road to Success
- How Wine and Invoicing Go Together
- How to Use 'My Reports' as Statements
- 1st Day of Summer
- A Faster Way to Organize and View Your Documents
- 3 Ways to Wrap Up Your Month
- 5 Activities You Have Time for While Using Invoice Home
- Creating a Partial Payment
- What Invoices and Technology have in Common
- Get an Invoice that Suits You
- Need more details in your Invoice? No problem! Use the Advanced Form.
- Ready to bill your client? Awesome! Time to convert your Estimate into an Invoice.
- Stay organized! Bookmark customers, unpaid.. Here’s how!
- Need Two Taxes on One Item or a Compound Tax?
- Providing discounts? Effortless work-flow here!
- 500 Free Business Logos for You!
- Introducing 300 awesome Invoice Templates - Make your Business Shine!
- Invoice faster, write less. Copy items like this!
- Faster invoicing? Use the ‘Copy’ button. Here’s How.
- Don't mess with passwords anymore!
- Invoice paid in cash? Set it as “Paid” manually.
- Invoice customers faster with the ‘Email’ feature!
- Self-Organized Invoicing is Here!
- See why the New Invoice Home got a 5 Star Rating!
- 100 Professional Invoice Templates to promote your Brand
- Taxable and Non-Taxable Items on One Invoice? Here’s How!
- Get paid faster with Payment Links! Here’s how.