If you’re a new self-employed business owner unfamiliar with how to create an invoice, it can be tough to know where to start.
First, you can find an easy-to-use invoice template on the QuickBooks website. Next, enter your company information and the customer information for the party you are billing. Finally, provide a description of the product and/or service provided, and send the entire invoice to the customer via email, postal service or another preferred method of communication.
For a more detailed approach, there are nine types of invoices in accounts payable and accounts receivable procedures that you should be familiar with. The following is a quick-start guide to get you familiar with the basics of how to create an invoice.
1. Standard Invoice
Standard invoices are issued by a supplier of products or services to a buyer. They show the amount the buyer owes the supplier. For example, if you’re a bookkeeping consultant and you’re billing a client for 40 hours of bookkeeping, you would multiply your hourly rate by 40 and put this amount on the invoice. A standard invoice often shows a purchase number to identify what was bought, but it doesn’t have to. If you’re the one issuing the invoice, the dollar amount shown must be positive because you are owed money.
2. Credit Memo
A credit memo, also known as a credit invoice, is issued by a seller to a buyer and shows an amount the seller owes the buyer. This number should always be negative. For example, if you are issuing a client a refund for $100, you would issue a credit memo for $-100.
You could use a credit memo to issue a refund for returned goods, to give a discount, to write off a billing amount, to issue prepayment credit, to correcting a billing error or to resolve a pricing dispute.
3. Debit Memo
A debit memo, also known as a debit invoice, is issued by a seller to a buyer and shows an increase in the amount of debt the buyer owes the seller. For example, if one of your clients has an account balance of $-1,000 credit with you and you want to charge them for an additional $100 service, you would create a debit memo for $100 to reduce their credit to $-900. A debit amount is expressed as a positive number owed.
Banks often use a debit memo to charge fees to customer accounts, and companies sometimes use a debit memo to clear a small amount of money owed to a customer as a credit balance. Most businesses rarely use debit memos, but they can be useful if you need an incremental billing adjustment. For instance, if you underestimated the amount of hours when billing a project, you might issue a debit memo to adjust the amount owed. Alternately, many businesses choose to reissue the original standard invoice with the adjusted amount.
4. Mixed Invoice
Mixed invoices can have either positive or negative amounts when they are matched to purchase orders or invoices. For example, if you have a mixed invoice for $-500, you could match this to an invoice for $-500 or a purchase order for $500.