Invoicing glossary
Invoicing & accounting terms, in plain English
Clear definitions of the invoicing and accounting terms freelancers and small businesses run into — written by Invco, the AI invoicing assistant.
Accounts payable
Accounts payable (AP) is the money a business owes its suppliers for goods or services it has received but not yet paid for.
Accounts receivable
Accounts receivable (AR) is the money customers owe a business for goods or services already delivered but not yet paid for.
Cash flow
Cash flow is the movement of money in and out of a business over a period of time.
Credit note
A credit note is a document that reduces the amount a customer owes, used to correct or refund part or all of an invoice.
Deposit
A deposit is an upfront partial payment a client makes before work begins, with the balance invoiced later.
Discount
A discount is a reduction applied to an invoice, either as a percentage or a fixed amount off the subtotal.
Due on receipt
“Due on receipt” means payment is expected immediately, as soon as the client receives the invoice.
Invoice number
An invoice number is a unique identifier assigned to each invoice so it can be tracked, referenced, and reconciled.
Itemized invoice
An itemized invoice lists each product or service separately, with its quantity, unit price, and line total.
Late fee
A late fee is an extra charge added to an invoice when it isn't paid by the due date.
Milestone payment
A milestone payment is an invoice tied to the completion of a specific stage of a larger project, rather than billing the whole thing at the end.
Net 15
Net 15 is a payment term meaning the full invoice amount is due within 15 days of the invoice date.
Net 30
Net 30 is a payment term meaning the full invoice amount is due within 30 days of the invoice date.
Overdue invoice
An overdue invoice is one that hasn't been paid by its due date.
Payment terms
Payment terms are the conditions under which you expect to be paid — when payment is due and how it should be made.
Proforma invoice
A proforma invoice is a preliminary bill of sale sent before work or delivery, showing the expected cost — it is not a demand for payment.
Purchase order
A purchase order (PO) is a document a buyer sends to a seller to authorize a purchase, listing the items, quantities, and agreed prices.
Recurring invoice
A recurring invoice is an invoice sent automatically on a repeating schedule for ongoing or subscription work.
Remittance advice
Remittance advice is a note a customer sends to confirm which invoices a payment covers.
Retainer
A retainer is an ongoing fee a client pays — usually monthly — to reserve a set amount of work or availability.
Sales tax
Sales tax is a tax on retail sales, added at the point of sale and collected by the seller on behalf of the government.
Subtotal
The subtotal is the sum of all line items on an invoice before tax and discounts are applied.
Tax invoice
A tax invoice is an invoice that meets the legal requirements to claim a tax credit, showing the tax charged on a sale.
VAT (value-added tax)
VAT (value-added tax) is a consumption tax added at each stage of the supply chain and ultimately paid by the end customer.
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