Invoicing Glossary — Every Term Explained
Clear, jargon-free definitions for invoicing, accounting, tax, and payment terms. Whether you're sending your first invoice or automating thousands, this glossary has you covered.
A
Accounts Payable
Money your business owes suppliers for goods or services received.
Accounts Payable Aging
A report showing how long vendor invoices have been outstanding, grouped by time period.
Accounts Receivable
Money customers owe you for invoiced sales not yet collected.
Accounts Receivable Turnover
Ratio of net credit sales to average AR, showing collection speed.
Accrual Basis Accounting
Recognize revenue and expenses when earned or incurred, not only when cash moves.
Accrued Revenue
Income earned but not yet invoiced or received at the end of an accounting period.
Aging Report
A list of open receivables or payables grouped by how overdue they are.
AP Automation
Software that digitizes and streamlines the accounts payable workflow from invoice capture to payment.
B
Bad Debt
Receivables deemed unlikely to be collected in full.
Bank Reconciliation
Matching bank transactions to your books and explaining differences.
Batch Processing
Grouping multiple invoices or payments for processing together at a scheduled time.
Billback
An invoice charging a client for expenses originally paid by your business on their behalf.
Billing Cycle
The recurring interval between invoice dates for a customer or account.
C
Cash Basis Accounting
Record income and expenses when cash is received or paid.
Cash on Delivery
Payment is collected when goods are delivered, not on credit terms.
Chargeback
A reversal of a credit card payment initiated by the cardholder's bank.
Chart of Accounts
The structured list of account names and numbers used in bookkeeping.
CIUS Standard
Country-specific customization of the European semantic e-invoice model (EN 16931).
Clearinghouse
An intermediary that routes and validates electronic transactions between parties.
Collections Process
Formal steps to recover overdue balances, from internal chase to agencies or legal.
Commercial Invoice
A customs and trade document listing shipped goods, value, and parties.
Compound Interest
Interest calculated on both the original principal and any accumulated unpaid interest.
Cost Center
A department or function that incurs costs but does not directly generate revenue.
Cost of Goods Sold (COGS)
The direct costs attributable to producing goods or delivering services that were sold.
Credit Note
A document that reduces amounts owed after returns, errors, or discounts.
Customer Churn Rate
Percentage of customers or revenue lost in a period.
D
Days Sales Outstanding (DSO)
Average days to collect payment after a sale, derived from AR and revenue.
Debit Note
A notice increasing what a buyer owes, often for extra charges or underbilling.
Deposit Invoice
Upfront billing before work starts or materials are ordered.
Disbursement
The act of paying out funds, typically from a designated account or fund.
Discount Terms
Rules on how and when price reductions apply on an invoice.
Double-Entry Bookkeeping
Every transaction has equal debit and credit entries across accounts.
Due on Receipt
Payment is expected immediately when the customer receives the invoice.
Dunning
Automated or manual reminders when invoices or subscriptions go unpaid.
Dynamic Discounting
A sliding-scale discount offered to buyers who pay invoices earlier than the due date.
E
E-Invoicing
Structured electronic invoice exchange, often with government or network validation.
Early Payment Discount
A reduced price for paying before the standard due date.
Electronic Data Interchange (EDI)
Machine-to-machine business documents using agreed formats like EDIFACT or X12.
Electronic Funds Transfer (EFT)
Any digital movement of money between bank accounts, including ACH, wire, and direct deposit.
Escrow
A neutral third-party account that holds funds until contract conditions are met.
Exempt Supply
Supplies not subject to VAT or sales tax, with no tax on the sale.
F
Final Invoice
The closing bill after deducting deposits, progress, or retainage.
Fiscal Year
A twelve-month period used for financial reporting that may differ from the calendar year.
Float
The time gap between when a payment is sent and when the funds are available to the recipient.
Freelancer
Self-employed person selling services project-by-project or on retainer.
Freight Invoice
A bill from a carrier or logistics provider for transporting goods.
G
General Ledger
The master record of all accounts and journal entries.
Goods and Services Tax (GST)
A broad consumption tax on goods and services, often with registration thresholds.
Goods Receipt
Confirmation that ordered goods or services were received as expected.
Grace Period
Extra days after the due date before penalties or suspension apply.
Gross Margin
The percentage of revenue remaining after subtracting the cost of goods sold.
I
Independent Contractor
A non-employee worker engaged under contract, responsible for their own taxes and tools.
Input Tax Credit
VAT or GST paid on business purchases that you offset against output tax.
Intercompany Invoice
An invoice between two entities within the same parent organization.
Interim Invoice
A bill for work or costs before the project or period ends.
Invoice Aging
A metric that tracks how long invoices have been outstanding, grouped into time buckets.
Invoice Factoring
Selling receivables to a third party for immediate cash at a discount.
Invoice Financing
Borrowing against unpaid invoices to access cash before customers pay.
Invoice Matching
Comparing incoming invoices to POs, contracts, or receipts before approval.
Invoice Number
A unique identifier for each invoice in your numbering sequence.
Invoice OCR
Optical character recognition technology that extracts data from scanned or photographed invoices.
K
L
Late Fee
A charge added when payment arrives after the due date.
Limited Liability Company (LLC)
A legal entity that limits owners’ personal liability for business debts.
Line Item
One row on an invoice describing quantity, price, and tax for a product or service.
Lockbox
A bank-managed service where customer payments are sent to a special PO box for faster processing.
M
N
Net 30
Full payment is due within thirty calendar days of the invoice date.
Net 60
Payment is due within sixty days of the invoice date.
Net Revenue
Total revenue minus returns, allowances, and discounts.
Net Terms
The number of days a buyer has to pay an invoice in full from the invoice date.
Non-Disclosure Agreement (NDA)
Contract limiting how confidential information may be used or shared.
O
P
Past-Due Invoice
An invoice unpaid after the due date in your payment terms.
Payment Gateway
A service that authorizes and processes online card and bank payments between buyer and seller.
Payment Link
A URL or button letting customers pay online by card or bank.
Payment Plan
Scheduled partial payments until a balance is cleared.
Payroll Invoice
An invoice from a staffing agency or payroll provider billing for employee or contractor costs.
Peppol Network
A standardized network for exchanging e-invoices and catalogs across borders.
Petty Cash
A small fund of cash kept on hand for minor, everyday business expenses.
Prebilling
Sending an invoice before work is completed or goods are delivered.
Procure-to-Pay (P2P)
The end-to-end process from purchasing goods or services through to payment.
Profit and Loss Statement
A financial report summarizing revenues, costs, and expenses over a specific period.
Proforma Invoice
A preliminary bill showing estimated costs before goods ship or work completes.
Progress Invoice
Billing tied to completed percentage or stages of a contract.
Purchase Order
A buyer’s authorized request specifying items, quantities, and prices.
R
Reconciliation
The process of comparing two sets of records to ensure they agree and are accurate.
Recurring Invoice
Invoices sent on a fixed schedule for subscriptions or retainers.
Remittance Advice
Notice from payer showing which invoices a payment settles.
Request for Proposal (RFP)
Buyer document inviting vendors to bid with solution and pricing details.
Retainer Agreement
Contract for ongoing access, hours, or priority for a recurring fee.
Retainer Invoice
A bill for prepaid access to services or hours over a period.
Revenue Recognition
The accounting principle that determines when earned income is recorded on the books.
Reverse Charge
The buyer, not the seller, accounts for VAT on certain cross-border B2B supplies.
S
Sales Tax
Tax collected on retail sales, common in US states and localities.
Scope of Work
Written boundaries of deliverables, tasks, and exclusions for a project.
Self-Billing Invoice
The buyer creates the invoice on the supplier’s behalf under agreed rules.
Service Level Agreement (SLA)
Measurable service standards, often with credits or penalties for misses.
Shipping Charge
Freight or delivery fees billed on top of product or service lines.
Sole Proprietor
An individual running a business with no separate legal entity.
Statement of Work
A detailed addendum describing timeline, milestones, and acceptance for a deal.
Subtotal
Sum of line amounts before tax, shipping, and global discounts.
Supply Chain Finance
Financing arrangements that optimize cash flow across the buyer-supplier relationship.
T
Tax Invoice
An invoice that meets legal rules so tax can be charged or reclaimed.
Tax Invoice Requirements
Mandatory fields and formats for an invoice to count for tax.
Tax Registration Threshold
Revenue or sales level at which you must register for VAT, GST, or sales tax.
Three-Way Match
Aligning purchase order, receipt, and invoice before paying a vendor.
Timesheet Invoice
An invoice built from logged hours, rates, and often approvals.
Trial Balance
A report listing all general ledger account balances to verify that debits equal credits.
V
W
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