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Glossary

Plain-English definitions for the words on your invoices — billing terms, tax forms, payment methods, and business structures. No jargon, no fluff.

• 1099

  The US tax form reporting payments made to non-employees.

• Accounts payable

  Money the business owes to its suppliers.

• Accounts receivable

  Money owed to the business by its customers.

• Accrual accounting

  Recording income when earned and expenses when incurred.

• ACH transfer

  Low-cost electronic bank-to-bank payment (1–3 days).

• Amount due

  The final total the customer must pay on an invoice.

• Bad debt

  Receivables deemed uncollectible.

• Balance due

  The amount still owed after deposits or partial payments.

• Billable hours

  Hours worked that can actually be charged to a client.

• Break-even point

  The sales level where revenue exactly covers costs.

• Cash accounting

  Recording income and expenses only when cash changes hands.

• Cash flow

  The movement of money into and out of the business.

• Cash payment

  Payment in physical currency — immediate and final.

• Check payment

  Payment by paper check through the banking system.

• Collections

  Third-party recovery of seriously overdue invoices.

• Contractor

  A self-employed worker hired per project, not on payroll.

• Credit note

  A document reducing the amount a customer owes.

• Debit note

  A document increasing the amount a customer owes.

• Deposit

  An upfront partial payment made before work begins.

• Digital wallet

  Phone-based payment (Apple Pay, Venmo, Cash App).

• Discount

  A reduction from the listed price, shown on the invoice.

• Due on receipt

  The invoice is payable immediately upon receipt.

• Dunning

  The systematic process of following up on overdue invoices.

• Early payment discount

  A discount for paying well before the due date (e.g. 2/10 net 30).

• EIN

  The IRS identification number for a business.

• Estimate

  A pre-work price approximation given to a client before the job starts.

• Expense

  Any cost incurred in running the business.

• Freelancer

  An independent professional selling services to multiple clients.

• Gross profit

  Revenue minus the direct costs of delivering it.

• Hourly rate

  The price charged per hour of work.

• Invoice

  A formal bill requesting payment for work done or goods delivered.

• Invoice factoring

  Selling unpaid invoices at a discount for immediate cash.

• Invoice number

  The unique sequential identifier on each invoice.

• Invoice template

  A reusable pre-formatted invoice layout.

• Late fee

  A penalty charged when an invoice is paid after its due date.

• Ledger

  The master chronological record of all business transactions.

• Line item

  A single billed product or service row on an invoice.

• LLC

  A business structure shielding owners' personal assets from business debts.

• Markup

  The percentage added to cost to arrive at the selling price.

• Mileage

  The deductible cost of business vehicle use, per mile.

• Net 15

  Payment due in full 15 days after the invoice date.

• Net 30

  Payment due in full 30 days after the invoice date.

• Net 60

  Payment due in full 60 days after the invoice date.

• Net profit

  Revenue minus all expenses — the bottom line.

• Payment gateway

  A service that securely processes card payments.

• Payment terms

  The agreed rules for when and how an invoice must be paid.

• Per diem

  A fixed daily allowance for business travel costs.

• Profit margin

  The percentage of revenue kept as profit.

• Proforma invoice

  A preliminary invoice sent before delivery, often for customs or approval.

• Purchase order

  A buyer's formal authorization to purchase goods or services.

• Quote

  A firm, fixed-price offer for a defined scope of work.

• Receipt

  Written proof that a payment was received.

• Reconciliation

  Matching internal books against bank statements to catch errors.

• Recurring invoice

  An invoice generated automatically on a repeating schedule.

• Refund

  Money returned to a customer after payment.

• Retainer

  Advance payment reserving a professional's future availability.

• ROI

  Profit from an investment as a percentage of its cost.

• Sales tax

  A percentage tax on sales, collected by the seller for the government.

• Sole proprietor

  A one-person business with no legal separation from its owner.

• Subcontractor

  A contractor hired by another contractor to handle part of a job.

• Subtotal

  The sum of line items before tax, discounts, or deposits.

• Timesheet

  A log of hours worked, by date, client, and task.

• VAT

  A consumption tax charged at each stage of production (common outside the US).

• W-9

  The IRS form collecting a contractor's taxpayer information.

• Wire transfer

  A fast, irrevocable bank-to-bank transfer for large or urgent payments.

• Work order

  A document authorizing specific work to be performed.

• Write-off

  Formally removing an uncollectible amount from the books.