InvoiceMaker

Invoice & Finance Terminology Glossary

Clear, concise definitions of the terms used across the InvoiceMaker tools and guides. Bookmark this page for quick reference.

Last updated 2026-09-17.

Accrual basis
Accounting method where revenue and expenses are recorded when earned/incurred, not when cash moves. Contrast with cash basis.
Accounts payable
The client's department that processes and pays invoices. Your invoice must satisfy their requirements to avoid delays.
Accounts receivable
Money owed to you by clients. Your invoices are your accounts receivable until paid.
APR (Annual Percentage Rate)
The yearly interest rate, not including compounding. Used as the basis for daily rate calculation: APR ÷ 365.
Bad debt
An invoice you have written off as uncollectible. May be tax-deductible depending on jurisdiction.
Basis points (bps)
One hundredth of a percentage point. 100 bps = 1%. Used for precise rate differences.
Billable hours
Hours you can charge to a client. Non-billable hours (admin, proposals, learning) go into overheads.
Cash basis
Accounting method where revenue and expenses are recorded only when cash is received/paid. Simpler but less accurate for profitability.
Change order
A written agreement to modify the scope, timeline, or fee of a contract. Required before starting out-of-scope work.
Compound interest
Interest calculated on the principal plus previously accrued interest. Grows faster than simple interest.
Cost of goods sold (COGS)
Direct costs attributable to the production of the goods/services sold. In the Margin Calculator, this is the “Direct cost” field.
Credit note
A document issued to reduce or cancel a previously issued invoice. Has its own sequential numbering (e.g., CN-2026-0001).
Daily rate
The interest rate applied per day. Derived from annual rate (APR/365), monthly rate (monthly/30), or stated directly.
Deposit
An upfront payment (often 30–50%) made before work begins. Reduces risk and improves cash flow.
Due date
The calendar date by which payment must be received. Always write the actual date (19 Sep 2026), not just “Net 14”.
Economic nexus
A US sales tax concept: if your sales into a state exceed a threshold (typically $100k or 200 transactions), you must register and collect tax there.
Gross margin
(Revenue − Direct Cost) / Revenue × 100. Profit as a share of the price. The Margin Calculator shows this as “Gross margin”.
Gross profit
Revenue − Direct Cost. The absolute money left after direct costs. The Margin Calculator shows this as “Gross profit”.
GST (Goods & Services Tax)
A value-added tax used in Australia, Canada, India, Singapore, New Zealand, and others. Mechanically similar to VAT.
Input tax / Input credit
The VAT/GST you pay on business purchases that you can reclaim from the tax authority (if registered).
Invoice
A formal payment instruction issued after work is complete (or at a milestone). Creates a legal obligation to pay.
Invoice number
A unique sequential identifier. Never reuse or skip numbers. Recommended scheme: INV-YYYY-NNNN (e.g., INV-2026-0042).
Late payment interest
Interest charged on an overdue invoice. Can be statutory (set by law) or contractual (agreed in the contract).
Markup
(Revenue − Cost) / Cost × 100. Profit as a share of cost. Always a higher percentage than margin for the same profit.
Milestone
A defined delivery point in a project that triggers a payment. Each milestone should have its own invoice.
Net margin
(Revenue − Direct Cost − Overheads) / Revenue × 100. Profit after all costs as a share of revenue. What accountants usually mean by “margin”.
Net profit
Revenue − Direct Cost − Overheads. What actually reaches the business once fixed costs are covered.
Net 7 / Net 14 / Net 30
Payment terms: payment due 7, 14, or 30 days after invoice date. Always write the actual due date on the invoice.
Overheads
Costs that exist regardless of any specific project: rent, software, insurance, admin time, your salary. Entered separately in the Margin Calculator.
Place of supply
The jurisdiction where a supply is deemed to occur for tax purposes. Usually the customer's location for services.
Pro-forma invoice
A preliminary invoice sent before work is done (e.g., to request a deposit). Not a tax invoice; does not create a tax point.
Purchase order (PO)
The client's internal authorisation number. Many finance teams will not pay without it. Ask for it at quote stage.
Quote / Quotation
A price estimate for a defined scope, issued before work starts. Not a demand for payment. Becomes the basis for the invoice.
Receipt
Proof that payment was received. Issued after payment. Does not create an obligation — it confirms one was settled.
Reverse charge
A VAT/GST mechanism where the customer (rather than the supplier) accounts for the applicable tax on a transaction. Whether reverse charge applies depends on the relevant tax rules and the type of supply.
Retainer
A recurring monthly fee for ongoing availability or a defined block of hours. Invoiced monthly, same line items each time.
Revenue
The price you charge the client (excluding tax). In the Margin Calculator, this is the “Revenue” field.
Sales tax
A single-stage tax on the final sale to the consumer, used in the US. Not reclaimable by the buyer. Rates vary by state, county, and city.
Simple interest
Interest calculated only on the original principal. Same charge every day. Formula: Principal × Daily Rate × Days.
Statutory interest
Interest rate set by law for late commercial payments. UK: 8% above BoE base. EU: 8% above ECB reference rate.
Subcontractor
A third party you hire to deliver part of the project. Their fee goes in “Direct cost” in the Margin Calculator.
Tax exclusive
Price shown without tax. Tax is added on top. Standard for B2B quotes. Formula: Gross = Net × (1 + Rate%).
Tax inclusive
Price shown with tax already included. Tax must be extracted by division. Standard for B2C prices. Formula: Net = Gross ÷ (1 + Rate%).
Tax point
The date when tax becomes due. Usually the invoice date for services, delivery date for goods.
Turnover
Total revenue in a period. Used for VAT/GST registration thresholds (e.g., UK £90k, AU $75k).
VAT (Value Added Tax)
A multi-stage tax collected at each stage of the supply chain with input tax reclaimable. Used in UK, EU, and many other countries.
Work in progress (WIP)
Work completed but not yet invoiced. Track separately from accounts receivable.
Zero-rated
Taxable at 0%. The supplier charges no tax but can still reclaim input tax. Common for exports and certain goods/services.

Definitions are for practical reference only. They are not legal or accounting advice. Terminology may vary by jurisdiction.