Invoicing glossary
Short, plain-English definitions of the terms you meet when you invoice clients and take payments. Each entry explains how the term works and gives an example with real numbers. Jump to a letter or browse the full list below.
A
- Accounts payableAccounts payable is money your business owes suppliers for goods or services received on credit. See how it works, with a worked example and related terms.
- Accounts receivableAccounts receivable is money customers owe you for work already delivered. Learn how it works, how to track it and what a healthy balance looks like.
- ACH paymentAn ACH payment is an electronic bank-to-bank transfer in the US. Learn how ACH works, how long it takes, what it costs and when to use it for invoices.
- Aging reportAn accounts receivable aging report groups unpaid invoices by how overdue they are. See how to read one, with a worked example and what to do next.
B
- Bad debtBad debt is money a customer owes that you do not expect to collect. See how it works, a worked example, and practical ways to reduce it in your business.
- Billing cycleA billing cycle is the repeating period between one invoice and the next. Learn how cycles work, how to pick one, and see a worked example with dates.
C
- Cash flowCash flow is the money moving into and out of your business over a period. Learn the types, how to calculate it, and why profitable firms still run short.
- ChargebackA chargeback is when a card issuer reverses a payment after the cardholder disputes it. Learn how the process works, what it costs and how to prevent them.
- Commercial invoiceA commercial invoice is the customs document for international shipments, listing goods, values and parties. See required fields and a worked example.
- Credit memoA credit memo reduces the amount a customer owes after an invoice is issued. See when to use one, how it differs from a refund, and a worked example.
D
- Days sales outstandingDays sales outstanding (DSO) is the average number of days it takes to collect payment after a sale. See the formula, a worked example and how to lower it.
- Debit memoA debit memo increases the amount a customer owes after an invoice is issued. Learn when to use one, how it differs from a credit memo, with an example.
- Deposit invoiceA deposit invoice asks a client for part of the payment before work begins. See how it works, how to size the deposit, and how to apply it to the final bill.
- Due on receiptDue on receipt means payment is expected as soon as the invoice is received. Learn when to use it, how it differs from net 30, and what to write on invoices.
- DunningDunning is the process of reminding customers to pay overdue invoices. Learn the stages, a sample schedule with dates, and how to stay polite and effective.
E
- E-invoicingE-invoicing is the exchange of invoices in a structured digital format between systems. Learn how it differs from a PDF, how it works, and a simple example.
- Early payment discountAn early payment discount cuts the invoice total if the customer pays within a set window. Learn how 2/10 net 30 works, what it really costs and an example.
- EINAn EIN is a federal tax ID the IRS issues to businesses. Learn who needs one, how to get it free from the IRS, and when to put it on an invoice.
I
- IBANAn IBAN is an international bank account number format used across Europe and beyond. See how its parts and check digits work, with a sample breakdown.
- Interchange feeAn interchange fee is the charge a merchant's bank pays the card issuer on each card sale. See how it works, who sets it and what it costs you.
- Invoice factoringInvoice factoring means selling unpaid invoices to a finance company for fast cash. Learn how it works, what it costs and what to try first.
- Invoice terms and conditionsInvoice terms and conditions set the rules for payment, late fees and disputes. See what to include, a sample clause set and common mistakes to avoid.
K
- KYBKYB, or know your business, is the check a bank or payment provider runs to verify a company and its owners. See the steps, documents and an example.
- KYCKYC, or know your customer, is the identity check financial firms run before opening an account or moving money. See the steps and what to expect.
L
M
N
- Net 30Net 30 means payment is due 30 days after the invoice date. Learn how net 30 works, how to count the due date and when to use shorter terms.
- Net 60Net 60 means payment is due 60 days after the invoice date. Learn what net 60 costs you in cash flow and how to protect yourself when a client asks.
P
- Payment gatewayA payment gateway securely captures and passes card details from a customer to the processor. See how it works and how it differs from a processor.
- Payment processorA payment processor moves card transactions between your customer's bank and yours. Learn how it works, what it charges and how to compare providers.
- PCI DSSPCI DSS is the security standard for any business that stores, processes or transmits card data. Learn what it requires and how to stay compliant.
- PO numberA PO number is the reference code a buyer assigns to a purchase order. Learn why it belongs on your invoice and what to do when a client has none.
- Progress billingProgress billing means invoicing in stages as a project advances. Learn how it works, how to set milestones and how to track what is left to bill.
- Purchase orderA purchase order is a buyer's written request to buy goods or services at agreed prices. Learn how it works and how it differs from an invoice.
R
- Recurring paymentA recurring payment is a charge that repeats on a schedule with the customer's agreement. Learn how it works, what to disclose and how to avoid disputes.
- Remittance adviceRemittance advice is the notice a payer sends to say which invoices a payment covers. Learn what it includes and how to match it to your invoices.
- Retainer feeA retainer fee is money paid in advance to secure a professional's time or services. Learn how retainers work, how to bill against them and what to include.
- Reverse charge VATReverse charge VAT shifts the duty to account for VAT from the seller to the buyer. Learn how it works, when it applies and what to put on the invoice.
- Routing numberA routing number is the nine-digit code that identifies a US bank. Learn how it works with account numbers, where to find it, and how to check it.
S
- Sales receiptA sales receipt is proof that a customer has paid for goods or services. Learn what it includes, how it differs from an invoice and when to issue one.
- Sales taxSales tax is a percentage added to the price of taxable goods and services in the US. See how it is calculated, collected and shown on an invoice.
- SEPA direct debitSEPA direct debit lets a business pull euro payments from a customer's bank account after a signed mandate. Learn the steps, refund rules and an example.
- Statement of accountA statement of account lists every invoice, payment and credit between you and a customer over a period. See what it includes and a worked example.
- SubtotalA subtotal is the sum of an invoice's line items before tax, shipping or adjustments are applied. See how it is calculated, with a worked example.
- SWIFT codeA SWIFT code, also called a BIC, identifies a bank for international transfers. Learn how the 8 or 11 characters work and where to put it on an invoice.
T
- Tax identification numberA tax identification number is a code a tax authority assigns to a person or business. Learn the common US types, when clients ask for one, and why.
- Time and materialsTime and materials is a pricing model where you bill for hours worked plus the cost of materials. See how it works, with a worked invoice and tips.
V
- VATVAT is a consumption tax charged at each stage of production and sale. See how VAT works on invoices, how businesses reclaim it, and a worked example.
- VAT numberA VAT number is the unique ID a tax authority gives a VAT-registered business. Learn the format, where it goes on an invoice and how to validate one.
W
Invoicing has its own vocabulary, and the same word can mean different things to an accountant, a bank and a client. These definitions are written for business owners rather than specialists. Each one starts with a short, direct definition, shows how the idea works in practice and gives an example with real numbers.
Use the letters at the top to jump around, or open any term and follow its related terms to build a fuller picture. Terms that depend on law or regulation are checked against official sources where we could, and we say so when a detail differs between countries. If a definition looks wrong or out of date, email us and we will correct it.