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Invoice Terms and Definitions Glossary [Updated]

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Whether you're a business owner, a freelancer, or someone just trying to understand their bills better, our "Invoice Terms and Definitions Glossary" is here to help.

Dive in to get a clear handle on all those tricky terms.


Advance Payment

This refers to a payment made before the receipt of goods or services. It's a portion of the total amount due, paid in advance. Advance payments are often used to secure a particular service or product and can act as a commitment that the buyer will follow through with the full purchase. In some industries, it's standard practice to request an advance payment, especially for large orders or projects.

Approved Payable

This refers to an invoice that has undergone a verification process, ensuring all details match the goods or services provided, and is now awaiting payment.


Bill of Lading (BOL)

A legal document between the shipper and carrier detailing the type, quantity, and destination of the goods being carried. It serves as a shipment receipt when the carrier delivers the goods. In international shipping, the BOL can also be used as a title document to show ownership of the goods.


Credit Note

Issued by a seller to a buyer, a credit note indicates a reduction in the amount due. This can be due to returned goods, overpayments, or any other reason that would reduce the total amount the buyer owes.

Commercial Invoice

A commercial invoice is an invoice that serves as proof of sale and facilitates customs clearance.



This term highlights any inconsistencies between the details listed on an invoice and the actual goods or services provided. Discrepancies can arise from errors in quantity, pricing, or description, and they typically require resolution before payment.

Due Date

This is the specified date by which the invoice amount should be settled. It's crucial for both the seller, who expects payment, and the buyer, who might incur late fees if payment is delayed.

Deposit Invoice

A deposit invoice is a request for advance payment that covers a partial of the total product or service cost. This payment is used to cover initial expenses for the project or to reserve products and services. 


Electronic Invoice (e-Invoice)

A digital representation of a bill sent or received electronically. E-invoices are increasingly popular due to their efficiency, reduced environmental impact, and ability to integrate with other digital accounting systems. They can be automatically processed and matched with purchase orders, making the payment process faster and more accurate.


Gross Amount

This is the total amount on an invoice before any deductions, discounts, or adjustments are made.


Invoice Cycle

This term describes the regular interval at which invoices are generated, sent out, and, ideally, settled. For some businesses, this might be a monthly cycle, while for others, it could be bi-weekly or quarterly.

Invoice Date

This is the specific date when the invoice is generated and issued to the buyer. It's essential as it often determines the due date based on the net terms.

Invoice Financing

This is a financial solution where businesses can borrow money based on the amounts due from their customers. Instead of waiting for customers to pay their invoices, a company can get immediate cash through an invoice financing company. This helps improve cash flow, especially for businesses with long invoice cycles.

Invoice Number

An invoice number is a unique identifier assigned to each invoice issued by a business or person. Invoice numbers help in tracking payments, identifying specific transactions, and simplifying the accounting process. A well-organized invoicing system with consistent numbering can improve cash flow management and reduce errors.

Invoice Email

An invoice email is an email sent to request payment from a client, outlining the services provided and attaching the invoice document. In addition, it can be used as a reminder or follow-up for pending invoice payments.

Invoice Payment

An invoice payment is a payment that customers make to a business once the goods or services are fulfilled. Some common invoice payment methods include paying by cash or cheque, credit or debit card, bank or wire transfer, online payment, and automated bill payment.


Late Payment Fee

This is an additional charge that may be added to an invoice if the payment isn't made by the specified due date. It serves as a deterrent to late payments and compensates the seller for the delay.

Line Item

On an invoice, each distinct product or service listed is termed as a line item. It provides clarity by breaking down the total amount into specific charges.


Net Amount

After all deductions, like discounts or returns, are accounted for, the remaining amount due is termed the net amount.

Net Terms

These specify the period (in days) in which a buyer has to pay the seller after the invoice date. Common net terms include "Net 30" or "Net 60", indicating that payment is due 30 or 60 days after the invoice date, respectively. Understanding and negotiating net terms can significantly impact a business's cash flow.


Overdue Invoice

If an invoice isn't settled by its due date, it's considered overdue. Overdue invoices can incur late fees and can impact business relationships. Here is a detailed guide on how to chase outstanding invoices without losing clients.

Invoice OCR

Invoice OCR uses optical character recognition (OCR) technology to convert uneditable images or documents into machine-readable and editable data, reducing manual tasks and human errors. The invoice OCR accuracy rate should be about 98-99%, and human supervision is still necessary. 


Partial Payment

When the full amount of an invoice isn't settled, but a portion of it is paid, it's termed as a partial payment. This might be agreed upon between the buyer and seller or could be a result of financial constraints on the buyer's part.

Payment Gateway

A technology used by merchants to accept debit or credit card purchases from customers. It's a secure method for transferring payment information from the customer to the merchant and then from the merchant to the payment processor. In the age of online shopping, having a reliable payment gateway is crucial for businesses.

Payment Terms

The conditions under which a seller will complete a sale. They outline the terms of payment.

Pro forma Invoice

A pro forma invoice provides an estimate to a buyer for goods before they are sent. It is also commonly written as "proforma."

Purchase Order (PO)

A commercial document issued by a buyer to a seller indicating the products, quantities, and prices for products or services.


Recurring Invoice

An invoice that is sent on a regular schedule, such as monthly or annually. It's useful for businesses that have consistent billing cycles with their clients, like subscription services or lease agreements.

Remittance Advice

Remittance advice is a document sent by payers to inform payees that they have paid certain invoices. Remittance advice provides good communication for both parties involved in a transaction. It enables the payee to reconcile their accounts by matching payments with invoices, and it helps the payer keep track of their payment history.



This refers to the process where an invoice is cleared for payment. It involves verifying the invoice details, ensuring there are no discrepancies, and then processing the payment.


Tax Invoice

An invoice that includes all the details of a taxable supply. It's a critical document for tax compliance and should contain specific information, such as the supplier's tax registration number, the date of issue, a description of the goods or services supplied, and the total amount payable, including tax.


UOM (Unit of Measure)

The standard quantity or value used to measure and invoice goods or services.


VAT (Value Added Tax)

A consumption tax placed on a product whenever value is added at each stage of the supply chain. It's a tax on the amount by which the value of an article has been increased at each stage of its production or distribution. Different countries have varying VAT rates, and businesses need to be aware of these when selling internationally.


Withholding Tax

A tax deducted at source from the income due to a non-resident seller by the resident buyer. It ensures that tax is collected at the point of transaction rather than later on. The rate and applicability of withholding tax can vary based on the nature of the income and the tax regulations in the respective countries.


Zero-Rated Supplies

Goods and services that are sold without VAT but still allow the seller to claim input tax credits.


And there you have it! We hope this glossary has made the world of invoicing a bit clearer for you. Remember, whether you're sending or receiving invoices, understanding the terms can make the whole process smoother.

A graphic of Statrys' Invoicing Software.
Reviewed by
Bertrand Théaud
Fact checked by
Djon Ly

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