As a freelancer or self-employed professional, mastering the art of invoicing is crucial for maintaining a healthy cash flow and professional reputation. However, the world of invoicing comes with its own set of terminology that can be confusing for newcomers. In this guide, we’ll break down the most common invoicing terms you need to know to navigate your freelance finances with confidence.

1. Invoice

Let’s start with the basics. An invoice is a document that itemizes and records a transaction between a buyer and a seller. For freelancers, it’s your formal request for payment for services rendered or products delivered.

Kindly Invoice Tip: With Kindly Invoice, you can create professional, customized invoices in minutes, ensuring you always put your best foot forward with clients.

2. Invoice Number

This is a unique identifier assigned to each invoice you create. It’s crucial for keeping your records organized and is often required for accounting and tax purposes.

Kindly Invoice Tip: Our system automatically generates sequential invoice numbers, but also allows for custom numbering systems to fit your specific needs.

3. Due Date

The date by which the client is expected to pay the invoice. Common terms include “Due Upon Receipt,” “Net 30” (due within 30 days), or a specific date.

Kindly Invoice Tip: Set automatic reminders in Kindly Invoice to follow up on unpaid invoices as the due date approaches.

4. Line Item

Each individual product or service listed on an invoice. Line items typically include a description, quantity, rate, and total amount.

Kindly Invoice Tip: Save frequently used line items in Kindly Invoice for quick and easy addition to future invoices.

5. Subtotal

The sum of all line items before any taxes, discounts, or additional fees are applied.

6. Tax

Any applicable sales tax or VAT (Value Added Tax) that needs to be added to the invoice. The rate can vary depending on your location and the type of service or product.

Kindly Invoice Tip: Kindly Invoice can automatically calculate and add appropriate taxes based on your location and settings.

7. Total

The final amount due, including subtotal, taxes, and any other additions or subtractions.

8. Payment Terms

The conditions under which you expect to be paid. This can include the payment deadline, accepted payment methods, and any late payment penalties.

Kindly Invoice Tip: Create custom payment terms templates in Kindly Invoice to easily apply consistent terms across all your invoices.

9. Deposit

An upfront partial payment required before work begins. Also known as a retainer or advance payment.

Kindly Invoice Tip: Easily create and track deposit invoices separately from final invoices with Kindly Invoice’s project management features.

10. Late Fee

A penalty charged when a client fails to pay by the due date. This is typically a percentage of the total invoice amount.

Kindly Invoice Tip: Set up automatic late fee calculation and application in Kindly Invoice to encourage timely payments without awkward conversations.

11. Recurring Invoice

An invoice that is automatically generated and sent at regular intervals, typically for ongoing services or subscription-based models.

Kindly Invoice Tip: Set up recurring invoices in Kindly Invoice to automate billing for your repeat clients or ongoing projects.

12. Credit Memo

A document issued to reduce the amount a client owes. This might be due to returned goods, errors, or as a goodwill gesture.

Kindly Invoice Tip: Easily create and apply credit memos in Kindly Invoice to maintain accurate records of all transactions.

13. Accounts Receivable (AR)

The amount of money owed to you by clients for goods or services delivered but not yet paid for.

Kindly Invoice Tip: Track your accounts receivable effortlessly with Kindly Invoice’s financial reporting features.

14. Aging Report

A report that categorizes unpaid invoices based on how long they’ve been outstanding. Typically broken down into 30, 60, and 90-day periods.

Kindly Invoice Tip: Generate aging reports with a single click in Kindly Invoice to stay on top of overdue payments.

15. Purchase Order (PO)

A document issued by a client to authorize a purchase. Some clients, especially larger companies, may require you to reference a PO number on your invoice.

Kindly Invoice Tip: Easily add PO numbers to your invoices in Kindly Invoice for seamless alignment with client requirements.

Conclusion

Understanding these key invoicing terms is an important step in professionalizing your freelance business. It helps you communicate more effectively with clients, manage your finances more efficiently, and present yourself as a knowledgeable professional.

Remember, mastering invoicing isn’t just about knowing the terminology—it’s about implementing efficient systems to manage your billing process. That’s where tools like Kindly Invoice come in, offering features designed specifically for freelancers and small businesses to streamline their invoicing workflows.

Ready to take your invoicing to the next level? Try Kindly Invoice today and experience how easy professional invoicing can be!