Invoice Glossary Key Invoicing Terms Explained

Payment is due 15 days from the invoice date. Common for smaller projects or clients with a strong payment history. Faster than Net 30 and useful for improving cash flow.

Payment is due 60 days from the invoice date. Typically used by larger corporations with fixed accounts-payable cycles. Extends cash flow pressure on the supplier — use carefully for small projects.

An invoice is a request for payment sent before or after work is complete. A receipt confirms payment has been received. Both documents should be kept for tax and record-keeping purposes.

A charge added to an invoice when a client pays after the due date. Typically expressed as a percentage of the outstanding balance per month (e.g. 1.5%/month). Must be stated in your payment terms to be enforceable.

A recurring upfront payment a client makes to secure access to your services over a defined period (e.g. monthly). Common in consulting, legal, and creative industries. Invoiced at the start of each billing cycle.

A billing structure where invoices are raised at defined project stages (e.g. 30% on kickoff, 40% on delivery, 30% on sign-off) rather than at project end. Reduces financial risk on long-duration work.

An incentive for clients to pay before the due date. Typically written as "2/10 Net 30" — a 2% discount if paid within 10 days, otherwise the full amount is due in 30 days.

An invoice that includes Value Added Tax, required by law in many countries for VAT-registered businesses. Must display the seller's VAT registration number, the VAT rate applied, and the total VAT amount as a separate line.

A document issued to cancel or reduce a previously sent invoice — for example when goods are returned or a billing error is corrected. References the original invoice number and offsets the amount owed.

A unique sequential identifier assigned to each invoice (e.g. INV-2024-001). Required for tracking, auditing, and tax purposes. Must never be reused — even if an invoice is cancelled.

Money owed to your business by clients for services or goods already delivered but not yet paid. Invoices that have been sent but not settled appear as accounts receivable on your balance sheet.

A tax identification number for your business. In the US it's called an EIN (Employer Identification Number); in Canada it's a Business Number (BN). Required on invoices in some jurisdictions, especially for corporate clients who need it for their own tax records.