Invoices are the lifeline for most small businesses for one particular reason: it is the main source of cash flow, which is often more important than profits. While profits are important in the long-term of a business, cash flow is crucial in the short-term to ensure that businesses are able to meet their financial obligations.
While many businesses end up using the standard sales invoice, there are actually quite a few more invoice types. These are used in various businesses for their effectiveness, and they may just help yours.
So let’s look at 7 of the most important invoice types that can help boost your small business.
The proforma invoice may be the most popular of all the non-standard invoices because it can be used in two ways.
The first way is for shipping goods internationally. It is used by customs agents to help them determine the value of the goods being shipped.
The second way is as a type of quotation or estimate. This is normally used by businesses when they have new clients. They want to first show what the price of the goods or services will be, so they send a proforma invoice.
It is important to note that the proforma is not a complete document, so there should be no VAT or other taxes included.
The commercial invoice can seem very similar to the proforma invoice, especially since it is used for shipping goods internationally. It is used by customs to determine the necessary duties and taxes that needs to be applied for the goods.
The commercial invoice, however, is the preferred document as it has more information than the proforma and is more standardized.
The commercial invoice will not only include the supplier and buyer information, but also the itemized goods and the country where the goods were manufactures. It also needs to include the Harmonized System codes, a standard code system that is used to classify internationally-traded products.
The credit note, in many cases, can be seen as the very opposite of a standard invoice. Instead of the supplier sending a request for payment to a buyer, as is the definition of an invoice, the supplier is actually sending credit to the buyer.
This is due to the fact that there has been an error in the original invoice or the delivery of the goods or services. The goods may have been damaged in shipping, the goods or services could have been below standard, or the original invoice overcharged.
The credit note will be equal to the original invoice amount or partial, depending on the circumstances. The supplier will either send a cash refund or provide the customer with credit on the next purchase.
The debit memo is the true opposite of a credit note. Here, the fault lies with the buyer who has made an error in paying the original invoice, or the buyer may not have paid it at all.
The debit note is therefore sent by the supplier to the buyer as a follow-up document to state the outstanding Go to the full article.