Invoice & Billing Glossary

An extra authentication step for online card payments where the cardholder verifies themselves with their bank, shifting fraud liability away from you.

Specific conditions that must be met for work to be considered complete.

Money your business owes to suppliers and vendors for goods or services received but not yet paid.

A ratio measuring how quickly a company pays its suppliers.

Money owed to your business by customers for goods or services delivered but not yet paid for.

Recording revenue and expenses when earned or incurred, regardless of cash timing.

Expenses incurred but not yet paid or invoiced.

Electronic bank-to-bank transfer processed through the Automated Clearing House network.

An electronic bank-to-bank payment processed through the Automated Clearing House network, typically settling in one to two business days.

Journal entries made at period-end to properly allocate revenue and expenses.

Report showing unpaid invoices grouped by how long they've been outstanding.

Spreading the cost of an intangible asset over its useful life, or paying down a loan through scheduled payments of principal and interest.

A report categorizing accounts receivable by how long invoices have been outstanding.

A measure of how efficiently a company collects its receivables, calculated as net credit sales divided by average AR.

The chronological record of documents and entries that lets anyone trace a financial transaction from start to finish.

Automatic recurring payment where funds are deducted on a scheduled basis without manual action.

The average number of days between when an invoice is issued and when payment is received.

Accounts receivable that are uncollectible and must be written off as a loss.

A financial statement showing what your business owns, what it owes, and what's left over for the owner at a single point in time.

Matching your accounting records to your bank statement to identify discrepancies.

Creating and sending many invoices at once in a single run, instead of building each one individually.

Work hours that can be charged to clients, as opposed to administrative or non-billable time.

The recurring interval at which you invoice a client—weekly, monthly, quarterly—covering the work or service delivered in that period.

The process of recording daily financial transactions in accounting books.

The point at which total revenue equals total costs, resulting in zero profit or loss.

Any card payment made without the physical card being presented, such as online invoice payments, carrying higher fees and fraud risk.

Recording revenue and expenses only when cash is received or paid.

An accounting method that records income when payment is actually received and expenses when they're actually paid.

The movement of money into and out of a business, measuring actual cash availability.

A projection of the cash coming into and going out of your business over the coming weeks or months.

A financial statement tracking actual cash moving in and out of your business over a period, grouped by operating, investing, and financing activity.

Money a business deliberately sets aside to cover expenses during slow periods, late payments, or emergencies.

A formal document modifying the original project scope, timeline, or cost.

A forced reversal of a credit card payment initiated by the cardholder through their bank.

The complete list of account categories used to classify financial transactions.

Payment made via paper check drawn on a bank account.

The percentage of customers or recurring revenue you lose in a given period, usually measured monthly.

The process of integrating new clients and setting up the working relationship.

A secure online area where clients can access project information and documents.

Journal entries that transfer temporary account balances to permanent accounts at year-end.

A third-party service that pursues payment of debts owed to other businesses.

A customs document required for international trade describing goods and their value.

When uncertain, choose accounting treatments that are least likely to overstate assets or income.

Using the same accounting methods from period to period for comparability.

A single invoice combining multiple orders or deliveries into one billing document.

A potential liability that may occur depending on the outcome of an uncertain future event.

An account that offsets the balance of a related account.

Money or assets invested into a business by owners in exchange for equity.

The amount remaining from revenue after variable costs, available to cover fixed costs.

The direct costs of producing what you sell—materials, production labor, or subcontractors—subtracted from revenue to get gross profit.

Pricing method where you charge your costs plus a markup percentage for profit.

The system that enables businesses to accept credit card payments from customers.

A document that reduces the amount owed by a customer, often used for returns or adjustments.

Maximum amount of unpaid credit you'll extend to a customer.

A document issued to reduce the amount a customer owes, often for returns, discounts, or billing corrections.

The conditions under which you extend credit to customers, including limits and payment expectations.

A measure of the average number of days it takes to collect payment after a sale.

A document that increases the amount owed by a customer for additional charges.

Payment received for goods or services not yet delivered, recorded as a liability until earned.

A tangible or intangible output produced as part of a project.

An invoice requesting partial upfront payment before work begins or goods are delivered.

The accounting practice of spreading the cost of a tangible asset, like equipment, over the years it will be used.

An app or service that stores a customer's payment credentials so they can pay online or in person without entering card details each time.

A pull-based payment where, with the customer's standing authorization, you collect money directly from their bank account on a schedule.

A bookkeeping system that records every transaction in two accounts—a debit and a credit—so the books always stay in balance.

An upfront partial payment a client makes before work begins, committing them to the project and funding its early costs.

The final date by which invoice payment must be received to avoid being considered late.

The process of systematically following up on overdue payments through a series of increasingly urgent communications.

A percentage reduction offered to customers who pay their invoice before the standard due date.

An umbrella term for any movement of money between bank accounts done electronically, including ACH, wire transfers, and direct debits.

A digital invoice transmitted electronically in a structured data format.

A written agreement defining the terms of a professional service engagement.

An arrangement where a neutral third party holds the client's payment and releases it to you once agreed work or conditions are completed.

A non-binding approximation of what a project will cost, given to a client before work begins.

The price of one currency in another, determining how much you actually receive when a client pays an invoice in a foreign currency.

A payment transaction that did not complete successfully.

The last invoice in a project, showing total charges minus any deposits or previous payments.

A formal report summarizing a business's finances—chiefly the balance sheet, income statement, and cash flow statement.

The 12-month period a business uses for accounting and tax reporting, which may or may not match the calendar year.

Business expenses that remain constant regardless of production or sales volume.

A set project cost agreed upon upfront, regardless of actual time or materials used.

Unforeseeable circumstances that prevent fulfilling contractual obligations.

Requiring financial statements to include all information necessary for informed decisions.

The master record of all financial transactions in a business.

Assumption that a business will continue operating for the foreseeable future.

The excess amount paid for a business above the fair value of its identifiable assets.

A set period after the due date during which payment can be made without penalty.

Revenue minus the direct costs of producing goods or services sold.

The amount charged per hour of work, used to calculate billing for time-based services.

The International Bank Account Number, a standardized account identifier used in much of the world to route cross-border bank payments accurately.

A financial statement showing revenue, expenses, and profit over a period—also called a profit and loss (P&L) statement.

A contractual obligation to compensate another party for losses or damages.

A self-employed person who provides services to clients under contract, handling their own taxes rather than being on payroll.

Creations of the mind protected by law, such as inventions, designs, and content.

The fee paid to the card-issuing bank on every card transaction, forming the largest share of your payment processing costs.

A partial invoice issued during a long project before final completion.

Tracking how long unpaid invoices have been outstanding, usually grouped into buckets like 0-30, 31-60, and 61-90 days.

The process of reviewing and authorizing invoices for payment.

Using software to generate, send, remind, and reconcile invoices automatically instead of handling each step by hand.

The date when an invoice is officially issued, which starts the payment term countdown.

Selling unpaid invoices to a third party at a discount for immediate cash.

Borrowing against your unpaid invoices to get cash now, then repaying the lender when clients pay.

The process of verifying invoices against purchase orders and receipts before payment.

A unique identifier assigned to each invoice for tracking and reference purposes.

A reusable invoice layout with your branding and standard fields pre-filled, so each new invoice only needs client and line-item details.

The final amount due on an invoice after all line items, taxes, discounts, and fees are calculated.

An invoice that breaks the total into individual line items, each with its own description, quantity, rate, and amount.

A record of a business transaction with debits and credits to affected accounts.

Payment due when a client cancels a project after work has begun.

The terms and charges applied when invoice payments are overdue.

A penalty charged when payment is not received by the invoice due date.

A contract clause capping the maximum damages one party can recover.

An individual entry on an invoice describing a specific product, service, or charge.

A flexible borrowing limit a business can draw from, repay, and reuse, paying interest only on the amount outstanding.

The amount added to your cost to set a selling price, usually expressed as a percentage of cost.

A contract establishing terms for all future work between two parties.

Recording expenses in the same period as the revenue they helped generate.

The threshold for whether a financial item is significant enough to impact decisions.

A bank account that allows businesses to accept credit and debit card payments.

Invoicing based on completion of specific project phases or deliverables rather than time.

The smallest amount a business will charge for any project engagement.

The predictable revenue your business earns every month from subscriptions, retainers, and other recurring agreements.

Payment term requiring full payment within 30 days of the invoice date.

Payment term allowing 60 days from the invoice date to pay in full.

Payment term providing 90 days from invoice date to pay the full amount.

The total profit after all expenses, taxes, and costs are deducted from revenue.

Total revenue minus returns, discounts, and allowances.

A contract protecting confidential information shared between parties.

An invoice that has been sent to a client but not yet fully paid, whether it's current or overdue.

Day-to-day costs of running a business, excluding COGS and one-time expenses.

Ongoing business expenses not directly tied to producing goods or services.

Money taken out of the business by the owner for personal use.

A payment that covers only a portion of the total invoice amount.

An invoice that remains unpaid after its due date has passed, triggering reminders, late fees, or collection steps.

The card issuer's real-time approval confirming a customer's card is valid and has funds available, placing a hold before money actually moves.

A formal disagreement between parties regarding payment amount, timing, or validity.

Technology that securely transmits payment information between merchants and payment processors.

A shareable URL that takes a customer straight to a secure checkout page where they can pay a specific amount or invoice.

An agreement to pay an invoice over multiple installments rather than all at once.

Charges assessed for processing electronic payment transactions.

The company that moves payment data and funds between your customer's bank, the card networks, and your account when you get paid.

The process of matching received payments to their corresponding invoices.

A notification sent to customers prompting them to pay an upcoming or overdue invoice.

The conditions under which a seller expects to be paid, including due dates and any discounts.

Meeting the PCI DSS security standards required of any business that accepts, stores, or transmits payment card data.

A payment that has been initiated but not yet fully processed or settled.

Small amount of cash kept on hand for minor business expenses.

Payment made before goods are delivered or services are rendered.

A preliminary invoice sent before goods are delivered or services completed, outlining expected charges.

The percentage of revenue that remains as profit after accounting for costs.

Invoicing based on the percentage of work or project milestones completed.

A formal document offering to provide specific services at a stated price.

Adjusting a charge to match the portion of a billing period actually used, such as when a client starts or changes plans mid-cycle.

A formal document issued by a buyer to authorize a purchase from a seller.

A formal estimate of costs for goods or services, often valid for a limited time.

An invoice automatically generated and sent at regular intervals for ongoing services or subscriptions.

Money returned to a customer for a previous payment, typically for returns, cancellations, or errors.

Out-of-pocket costs you incur on a client's behalf and bill back to them, usually with receipts attached.

A note from a payer telling you a payment has been sent and which invoices it covers.

A formal solicitation inviting vendors to submit proposals for a project.

A percentage of payment withheld until project completion or warranty period ends.

The cumulative profit a business has kept and reinvested over its life, after subtracting owner draws or distributions.

A contract where a client pays a regular fee to secure ongoing access to services.

The accounting principle determining when revenue should be recorded in financial statements.

Terms defining how many changes or revisions are included in a project price.

The nine-digit code identifying a US bank in the payment system, required alongside your account number for ACH and wire payments.

An additional charge for expedited or faster-than-normal turnaround.

A document issued at the moment of payment confirming what was sold and that the customer has already paid.

A government-imposed tax on the sale of goods and services, collected by the seller.

The gradual expansion of project requirements beyond the original agreement without corresponding price adjustments.

A detailed description of the work to be performed under a contract.

An arrangement where the buyer creates invoices on behalf of the supplier.

The behind-the-scenes process where authorized payments are finalized and the money actually moves into your account.

The default business structure for one owner, where the business and the person are legally the same entity.

A single bill settled through multiple payments, whether one invoice paid in scheduled installments or one charge divided across several payers or methods.

A document defining project deliverables, timeline, responsibilities, and terms.

The process of automatically charging customers on a recurring schedule for ongoing access to a product or service.

The sum of all line item amounts before taxes, discounts, or other adjustments are applied.

An extra fee added when a customer pays by credit card, passing some or all of your processing costs back to the payer.

Status that exempts certain organizations or transactions from sales tax collection.

An invoice that shows the tax charged on a sale, required in VAT and GST countries for buyers to claim tax credits.

Contract provisions specifying how and when the agreement can be ended.

Legal terms governing the business relationship, often included on or referenced by invoices.

A billing method charging for actual hours worked plus materials used, typically with a cap.

A record of hours worked used to calculate billable time and generate invoices.

Replacing a customer's real card number with a meaningless stand-in token so payments can be processed and stored without exposing card data.

A report listing all general ledger accounts and their balances to verify debits equal credits.

A pricing model where clients are charged based on how much of a service they actually consume, rather than a flat fee.

The percentage of available work hours that are billable to clients.

Setting prices based on the value delivered to clients rather than time spent.

Business expenses that change proportionally with production or sales volume.

A digitally issued card number, often single-use or limited, that works like a normal card payment when a client uses one to pay your invoice.

An invoice cancelled by marking it void—zeroing its value while keeping the invoice number and record in your books.

A guarantee that work or products will meet specified standards.

Direct electronic transfer of funds from one bank to another, typically same-day for domestic transfers.

The difference between current assets and current liabilities, measuring short-term financial health.

The formal removal of an uncollectible account from your books, recognizing it as a loss.

The process of finalizing your books at the end of a fiscal year so accurate financial statements and tax returns can be prepared.

A running total covering the period from the start of the current fiscal year up to today, used to track income, expenses, and profit in progress.

A budgeting method where every expense must be justified from scratch each period, instead of rolling over last period's numbers.