Invoicing comes with its own vocabulary. This glossary explains the terms US freelancers, independent contractors, consultants, and small businesses commonly see when preparing estimates, sending invoices, tracking expenses, collecting payments, and organizing records.
The definitions are written in plain English and focus on practical use. Tax and legal rules vary by state and business situation, so use this page as a starting point rather than professional advice.
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Accounts payable is the money a business owes to suppliers, contractors, lenders, or other vendors for goods and services it has received but has not yet paid for.
Accounts receivable is the money customers owe a business for invoices that have been issued but not yet paid. An unpaid customer invoice normally remains in accounts receivable until payment, credit, write-off, or cancellation.
An accounts-receivable aging report groups unpaid invoices by how long they have been outstanding, such as current, 1–30 days overdue, 31–60 days overdue, and more than 60 days overdue.
Accrual accounting records income when it is earned and expenses when they are incurred, even if money has not yet changed hands. Under this method, an issued invoice may be recorded as revenue before the customer pays it.
An Automated Clearing House (ACH) payment is an electronic bank-to-bank transfer processed through the US ACH network. ACH transfers are commonly used for invoice payments, direct deposits, and recurring withdrawals and are usually different from wire transfers and card payments.
The amount due is the amount the customer is currently expected to pay. It may equal the invoice total or the remaining balance after deposits, credits, discounts, or partial payments.
The balance due is the unpaid portion of an invoice after subtracting payments, credits, refunds, or other adjustments from the total amount.
A bill is a payment request viewed from the buyer’s side. A seller sends an invoice; the customer receiving it may refer to the same document as a bill.
A billing address is the customer address associated with an invoice or payment account. It may differ from the service location, mailing address, or shipping address.
Bookkeeping is the routine process of recording and organizing a business’s financial transactions, including invoices, payments, expenses, receipts, and bank activity.
A card processing fee is the amount charged by a payment processor for accepting a credit-card or debit-card transaction. It may include a percentage of the payment, a fixed fee, or both.
Cash accounting records income when payment is received and expenses when they are paid. An unpaid invoice generally does not become recognized cash-basis income merely because it was sent.
A chargeback occurs when a cardholder disputes a payment and the card issuer reverses or investigates the transaction. The seller may need to provide invoices, contracts, delivery records, or other evidence.
A client is a person or organization that purchases professional services. In invoicing software, “client” and “customer” are often used interchangeably.
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A commercial invoice is a customs document used in international trade. It describes shipped goods, their value, origin, buyer, seller, and other information customs authorities may use to assess duties and taxes.
A contractor is a person or business engaged to perform work under an agreement rather than as a regular employee. Worker classification depends on the actual relationship and applicable law, not only the label used on an invoice.
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Cost-plus pricing sets a selling price by adding an agreed markup or fee to the cost of labor, materials, or other expenses. The supporting invoice may show the underlying costs and the added margin separately.
A credit memo, also called a credit note, reduces the amount a customer owes. It can correct an overcharge, recognize returned goods, apply a negotiated discount, or reverse part of an invoice without deleting the original record.
A CSV export is a plain-text data file that organizes records into rows and columns. It can be opened in spreadsheet software or imported into bookkeeping and reporting systems.
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Currency identifies the monetary unit used on an invoice, such as USD, CAD, EUR, or GBP. It should be stated clearly when the seller and customer operate in different countries.
A custom tax formula is a user-defined tax calculation that combines one or more rates or rules. It may be useful when a standard state or local tax formula does not match a specific transaction.
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A customer is the person or organization buying goods or services. In professional-service businesses, the same party may be called a client.
A data export creates a downloadable copy of selected business records, such as invoices, clients, expenses, or tax details, for analysis, backup, portability, or use in another system.
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An invoice delivery status shows what happened after an invoice email was sent, such as queued, sent, delivered, opened, bounced, or failed. A delivery or open signal does not necessarily prove that the customer reviewed every invoice detail.
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A deposit is money collected before all goods or services are delivered. It may reserve time, cover initial costs, or reduce the amount due on the final invoice.
A discount reduces a price or invoice amount. It may be a fixed amount, a percentage, an early-payment discount, a volume discount, or a negotiated adjustment.
A draft invoice is an invoice that has been saved but not finalized or sent. It can normally be edited without creating the same expectations as a delivered invoice.
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The due date is the date by which the customer is expected to pay an invoice. It may be a specific calendar date or calculated from terms such as Net 15 or Net 30.
Economic nexus is a state-defined level of economic activity that can require an out-of-state seller to register, collect, and remit sales tax even without a traditional physical location in that state. Thresholds and measurement rules vary by state.
An Employer Identification Number (EIN) is a federal tax identification number issued by the IRS to identify many businesses and other entities. It is not the same as a state sales-tax permit.
An estimate is an approximate projection of the price or effort required for proposed work. Unlike a fixed quote, the final price may change when the scope, quantities, time, or costs become clearer.
An expense is a cost incurred while operating a business, such as software, supplies, travel, professional services, rent, or payment-processing fees.
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An expense category groups similar business costs for reporting and bookkeeping, such as office supplies, software, travel, meals, advertising, or professional fees.
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Fixed-fee billing charges an agreed amount for a defined service or deliverable rather than billing strictly by hours or units.
Form 1099-NEC is an IRS information return generally used by a payer to report qualifying nonemployee compensation. The filing rules, thresholds, exceptions, and deadlines should be checked for the applicable tax year.
Form W-9 is a US tax form a payer may request from a contractor or vendor to collect the legal name, federal tax classification, address, and taxpayer identification number needed for information reporting.
The gross amount is the total before specified deductions or reductions. Depending on context, it may mean revenue before expenses or an invoice amount before discounts, credits, fees, or withholding.
An hourly rate is the price charged for one hour of work. An hourly invoice usually multiplies the rate by approved or recorded hours.
An independent contractor is a self-employed person or business that provides services to another party while generally controlling how the work is performed. Classification depends on the facts and applicable federal and state rules.
An invoice is a formal payment request that itemizes goods or services provided, the amount owed, the parties involved, and the payment terms.
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The invoice date, also called the issue date, is the date the invoice is created or formally issued. Payment terms are often calculated from this date.
Invoice factoring is a financing arrangement in which a business sells eligible accounts receivable to a factoring company for earlier access to cash, usually in exchange for fees and other conditions.
An invoice number is a unique identifier assigned to an invoice. A consistent sequence makes invoices easier to track, search, reconcile, discuss with customers, and support with records.
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An invoice status indicates where the document is in its lifecycle, such as draft, sent, delivered, viewed, overdue, partially paid, paid, void, or written off.
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An invoice template controls the reusable layout and presentation of an invoice, including the logo, colours, typography, headings, columns, notes, and payment information.
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An itemized invoice lists goods, services, hours, quantities, rates, discounts, taxes, and other charges as separate line items instead of showing only one total.
A late fee is an additional charge that may apply when an invoice is not paid by the agreed deadline. The fee and conditions should be communicated clearly and must comply with applicable contracts and law.
A line item is one separately described product, service, time entry, expense, discount, or charge on an invoice.
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A marketplace facilitator is a platform that facilitates sales for third-party sellers and may be required by state law to collect and remit sales tax on facilitated transactions.
A merchant is a business or individual accepting payment for goods or services. In card processing, the term often refers to the party holding the merchant account.
Net 15, Net 30, and Net 60 mean the full invoice balance is due within 15, 30, or 60 calendar days of the agreed starting date, commonly the invoice date unless the contract states otherwise.
Invoice notes are additional instructions or context, such as a thank-you message, service details, payment instructions, project references, warranty information, or tax explanations.
An online payment is a payment made electronically through a card processor, bank-transfer service, digital wallet, or other internet-based payment system.
An overdue invoice is an unpaid invoice whose due date has passed. A business may follow up with reminders, late fees, collection procedures, or a payment arrangement where appropriate.
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A partial payment pays only part of the invoice balance. The unpaid remainder stays outstanding until it is paid, credited, refunded, written off, or otherwise resolved.
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A payment link is a web address that takes a customer to a hosted page where an invoice or specified amount can be paid electronically.
A payment method is the way a customer pays, such as ACH transfer, card, check, cash, wire transfer, or another agreed method.
A payment processor is a service that handles electronic payment authorization, routing, settlement, and related transaction functions between the customer, seller, banks, and card networks.
A payment reminder is a message sent before or after an invoice due date to remind the customer about an upcoming or overdue balance.
Payment terms explain when and how an invoice must be paid. They may include the due date, accepted methods, currency, deposit requirements, late-fee conditions, early-payment discounts, and installment arrangements.
A PDF invoice is an invoice saved in Portable Document Format so its layout is preserved across devices and it can be downloaded, printed, attached, or archived.
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Physical nexus is a connection with a state created by activities such as maintaining a location, inventory, employees, or other physical presence. The exact rule varies by state and activity.
A pro forma invoice is a preliminary document that resembles an invoice but is generally used to communicate expected prices, terms, or shipment information before the final commercial transaction. It should be clearly identified to avoid confusion with a payment demand.
A progress invoice bills for a completed stage, milestone, percentage, or approved portion of a longer project rather than waiting until the entire project is finished.
A purchase order is a buyer-issued document authorizing specified goods or services at agreed terms. A seller may place the PO number on the corresponding invoice to help the buyer match and approve it.
Quantity is the number of units, hours, items, sessions, days, or other measurable amounts being billed on a line item.
A quote is an offer to perform specified work or supply specified items at stated prices and terms. A quote is usually more definite than an estimate and may have an expiration date.
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Quote-to-invoice conversion creates an invoice from an accepted quote while reusing the customer, line items, prices, taxes, and notes. The invoice normally receives its own invoice number and payment due date.
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A receipt records that payment has been made. An invoice requests payment; a receipt confirms payment.
A recurring invoice is generated or sent on a repeating schedule, such as weekly, monthly, quarterly, or annually, for ongoing services or subscriptions.
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A refund returns money to a customer after payment, usually because of a cancellation, return, overpayment, duplicate payment, or billing correction.
A resale certificate is documentation a buyer may give a seller to support a qualifying tax-exempt purchase of items intended for resale. Requirements and acceptable forms vary by state.
Retainage, also called retention, is a portion of a construction or project payment withheld until specified work, closeout, or acceptance conditions are satisfied.
A retainer is an advance fee paid to reserve professional availability or fund future work. The agreement should explain whether it is refundable, replenished, earned immediately, or applied against future invoices.
Revenue is the amount earned from selling goods or services before subtracting business expenses.
Sales tax is a state or local tax that a seller may need to collect from a customer on a taxable transaction and remit to the appropriate tax authority. Rates and taxability vary by jurisdiction.
A sales-tax jurisdiction is the state, county, city, district, or other authority whose tax rules may apply to a transaction.
Sales-tax nexus is a sufficient connection between a seller and a state that can create an obligation to register, collect, and remit applicable sales tax. Nexus may be physical, economic, or based on other state rules.
A sales-tax permit, sometimes called a seller's permit or sales-and-use-tax license, is a state registration that authorizes or requires a business to collect and remit sales tax.
The service date is the date work was performed or a billing period began or ended. It may differ from the date the invoice was issued.
A customer statement summarizes account activity over a period, such as invoices, payments, credits, and the remaining balance. It is not normally a replacement for the individual invoices.
The subtotal is the sum of line items before specified taxes, credits, discounts, shipping, fees, or other adjustments are applied.
A tax breakdown shows each tax component, rate, and amount separately instead of displaying only a combined total.
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A tax formula is the rate or combination of rates used to calculate tax on an invoice. In the US, the correct result may depend on the state, local jurisdiction, product or service, customer, and sourcing rules.
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A tax-exclusive price does not include tax. Applicable tax is calculated and added to the subtotal.
A tax-exempt sale is a transaction on which sales tax is not collected because the buyer, product, service, or use qualifies for an exemption under applicable state law and any required documentation is maintained.
A tax-inclusive price already contains the applicable tax. The invoice may show how much of the total represents tax.
A taxable sale is a transaction subject to sales tax under the rules of the applicable jurisdiction.
A Taxpayer Identification Number is an identifying number used for US tax administration. Depending on the person or entity, it may be an EIN, Social Security number, ITIN, or another recognized identifier.
Time-and-materials billing charges the customer for documented labor time plus materials or other agreed costs, sometimes with a markup or not-to-exceed cap.
A timesheet records hours worked, dates, tasks, projects, and sometimes rates or approval status. Approved entries can support an hourly invoice.
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The unit price is the amount charged for one unit, hour, item, session, day, or other billing measure.
Use tax generally complements sales tax and may apply when taxable goods or services are used in a state but the proper sales tax was not collected by the seller. Rules vary by state.
A void invoice is an invoice retained in the record but marked as invalid or cancelled so it is not treated as collectible. Keeping the record can preserve numbering and audit history.
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A wire transfer is a bank-to-bank payment sent through a wire network. It is typically faster and more expensive than a standard ACH transfer and may be useful for large or international invoice payments.
A Word invoice export is an invoice downloaded as an editable .docx document. It is useful when the recipient or business needs to revise wording, add internal information, or archive the invoice in a familiar office format.
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A work order authorizes or describes work to be performed, including scope, location, labor, materials, and scheduling. It supports operations, while an invoice requests payment.
A write-off removes or reduces an amount that a business no longer expects to collect. The accounting and tax treatment depends on the business’s accounting method and circumstances.