As a freelancer, you’ll come across lots of different types of invoices that you can use to bill your clients. Initially though, invoicing can be a challenge for many self-employed people. In this article, we’ll cover the various important ones, from classic outgoing invoices to specialised small-value invoices, that will help you in your freelancing business.
- Types of invoices at a glance
- Incoming and Outgoing invoice
- Recurring invoice
- Partial invoice
- Interim invoice
- Retainer invoice
- Cancellation invoice
- Credit invoice
- Hourly-rate invoice
- Flat-fee invoice
- Expense report invoice
- Small value invoice
- Late-payment invoice
- Proforma invoice
- Reverse charge invoice
- Joint invoice
- Final invoice
- Conclusion: Types of invoices are diverse
Types of invoices at a glance
There are various types of invoices that a freelancer can use depending on what they need. The type and scope of the business case at hand plays a major role in determining which invoice one should use. As a freelancer, you need to issue the correct type of invoice and record it accordingly in your accounting.
|Incoming invoices to be paid by the freelancer.
|Outgoing invoices to be paid by clients.
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|Used for ongoing services with a set frequency, like monthly retainers.
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|Enables the billing of partial stages or milestones during ongoing projects.
|Issued during longer projects, reflecting progress and partial payments.
|Used to request upfront payment from clients before initiating a project or delivering a service.
|Corrects already created invoices in the event of errors or changes.
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|Reduces or refunds the invoice amount, serves to compensate for payment claims.
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|Details hours worked, the hourly rate, and the total amount due.
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|Billing method with a fixed overall price, without detailed hourly or service statements.
|Expense report invoice
|Includes reimbursable expenses incurred during the project.
|Freelancers can use this method to bill smaller orders more quickly and easily, without extensive formalities.
|Sent when a client fails to pay on time, including any applicable late fees.
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|A special form of invoicing used by companies that are considered small businesses and have below a certain turnover limit.
|Preliminary document outlining project details, rates, and terms before work begins, providing clarity between the freelancer and the client.
|Reverse charge invoice
|Special billing method for international business relationships in which the recipient of the service assumes the sales tax.
|A combined invoice for collaborative projects involving multiple freelancers.
|Marks the completion of a project and the final payment request.
Incoming invoice and outgoing invoice: What is the difference?
An incoming invoice is the first document that a freelancer receives when receiving services or goods from a supplier. This invoice not only serves as confirmation, but also as a starting point for accounting. It also lays the foundation for transparent financial processes.
An incoming invoice is, for example, when a freelancer buys a new laptop or uses a service that has to be paid for.
An outgoing invoice is a classic invoice with which a freelancer invoices the customer for services provided or goods delivered. It acts as a payment request and an essential accounting tool that marks the beginning of the financial interaction with the customer.
💡 For all types of invoices, it is important to comply with legal formal requirements and mandatory information – regardless of the type of invoice.
A recurring invoice is an invoice requests regular, periodic payments of the same amount. A perfect example of where recurring invoices are used are in businesses that offer subscription-based services.
Recurring invoices are a great option for freelancers who don’t have time to waste scheduling reminders or copying invoices.
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Partial invoice: Flexibility and transparency
A partial invoice (also called milestone invoice) is a flexible accounting instrument. It allows total costs to be divided into several parts. This method allows freelancers to bill milestones or stages step-by-step, for example if the first sub-goals of a project have been achieved.
This offers transparency for both the freelancer and the customer and enables a continuous payment basis. Each partial invoice is subject to separate payment, which supports flexible and liquid processing.
Interim invoice: Partial cost covered
An interim invoice is what is used when you’re requesting partial payment. Instead of sending a final invoice for a project at the end, the freelancer can send interim invoices throughout the project for each cost and task completed.
Though this may sound a lot like a partial invoice, they are different. With a partial invoice, a part of the project has already been completed and is invoiced. With an interim invoice, the freelancer invoices a part of the total cost, of which no service has yet been provided..
Retainer invoice: Partial payments for ongoing projects
The retainer invoice (or advance payment invoice) enables freelancers to receive advance payments during ongoing projects – regardless of whether the freelancer has reached the first milestone.
Not only does this encourage regular revenue, but it also provides clear insights into project progress for clients. The flexible financial processing strengthens cooperation with the customer, with each retainer invoice representing an independent, payable stage of the project.
What is the difference between a retainer, down-payment invoice, and deposit invoice?
While it may look like the above mentioned invoices are similar, they are a bit different in freelancing terms.
Where a retainer invoice is an advanced payment in order to secure a freelancer’s time and availability, a down-payment is a percentage of the total project that is paid before the freelancer starts working.
Similarly, a deposit payment is a payment made upfront to the freelancer before any work begins. A deposit payment is usually used in cases where a product or a specific thing is involved whereas a down-payment is used when services are involved.
Cancellation invoice: Correct processing of changes
A cancellation invoice is issued in situations where invoices have already been created and need to be corrected or cancelled. This is used to correct errors or changes in previous statements.
A cancellation invoice is an independent invoice that shows the original amount with a negative sign and thus signals the need for correction. This enables clear and comprehensible accounting: for both the freelancer and the client. It offers the certainty that errors will be corrected properly.
Credit invoice: Clarity in financial processing
A credit note is an important instrument for compensating payment claims. It enables the transparent processing of repayments, compensation or discounts. By issuing a credit note, the invoice amount is reduced or refunded, resulting in accurate and clear accounting.
Freelancers use credits to offer their customers a reliable overview of financial adjustments and thus strengthen trust in the business relationship.
With our free template, a credit invoice can be created in no time.
An hourly-rate invoice, also called a time-based invoice or a timesheet invoice, is an invoice sent by the freelancer that charges the client by the hour.
Time-based invoices include information that detail the work done, the hourly rate of the freelancer and the number of hours worked.
Flat-fee invoice: Transparent fixed price billing
The flat rate invoice enables clear and uncomplicated fixed price billing for services or projects. Freelancers use this method to offer their customers a fixed amount for a defined service without having to go into detailed hourly or service statements. The flat rate invoice therefore creates transparency and clarity in the financial agreement.
Expense report invoice
An expense report invoice, also known as an expensive invoice, details the expenses made by the freelancers for the project or service. An expense invoice keeps track of all the expenses incurred during the project that the client is obligated to pay for.
Small value invoice: Efficiency for small orders
Sometimes less is more – especially with smaller projects. With a simplified structure, small-value invoicing enables quick processing, especially if detailed service descriptions are not a priority.
Freelancers can use this method to bill smaller orders more quickly and easily, without extensive formalities.
Note that these types of invoices are more common in European countries like Germany and Austria.
A late-payment invoice is, as the name suggests, an invoice that freelancers can use when a client fails to pay on time. The late-payment invoice details any applicable late fees and the original terms of your late fees as per your contract.
Small business invoice: sales tax exemption for small businesses
Small business invoicing is a special form of invoicing that companies can use who are considered small businesses and have below a certain turnover limit.
With this type of invoice, there is no sales tax shown and the application of the small business regulation is indicated on the invoice. This makes processing easier because the small business is exempt from sales tax.
Proforma invoice: More appearance than reality
A proforma invoice is a preliminary invoice giving the client an advance estimate of the cost of products or services.
In contrast to a final invoice, the proforma invoice requires no payment and gives the client or customer an early overview of expected costs.
Reverse charge invoice
International projects require special measures: Reverse charge invoicing is a billing method that is particularly necessary in international business relationships.
Here it is not the supplier but the service recipient who is responsible for sales tax . This form of invoice enables smooth and legally correct processing of cross-border projects. Depending on your country and the country of your client in question, you will need to check the exact steps required to be legally protected.
A joint invoice, also called collective invoicing, combines different documents detailing services and tasks into a single invoice document. However, certain data needs to be common across these source documents.
The aim here is to make invoicing of similar services onto one document in order to save time.
A final invoice is exactly what it sounds like – a request for payment for a completed project, service, or product.
Freelancers can send this invoice at the end of the project to highlight the total amount owed to the freelancer from the client. In the invoice, they may mention a detailed, itemised list of all services that they have provided and about how the client is expected to pay.
Conclusion: Types of invoices are diverse
It turns out that the choice of the right type of invoice depends on the individual circumstances and needs of a freelancer. The outgoing invoice is suitable for standard invoices. Partial invoices for step-by-step project stages. Instalment invoices enable regular advance payments, and small amount invoices offer efficient processing for small amounts.
Cancellation invoices correct errors. Credit notes offset payment demands. Flat-rate invoices offer fixed price billing, and so on.
The variety of these types of invoices underlines the need to consciously choose the appropriate method depending on the project, customer and tax conditions.