Glossary and answers for trade businesses

Glossary

AI-assisted invoicing

AI-assisted invoicing uses artificial intelligence to organise spoken or written job details into an invoice draft. An AI invoice generator can help prepare descriptions and arrange charges, but you still need to check the customer, quantities, prices, VAT treatment and payment terms before sending.

Billable hours

Billable hours are the hours you have agreed to charge a customer for your work. They may differ from the total time spent on a job, depending on whether travel, preparation or other activities are included in the agreement. Show the chargeable hours and agreed hourly rate clearly on the invoice.

Billing period

A billing period is the span of time an invoice covers, such as a week, four weeks or a calendar month. Showing the start and end dates helps customers understand which visits or services they are paying for. Four-week billing and calendar-month billing follow different schedules.

Call-out charge

A call-out charge is a fee for attending a customer’s location. It may cover travel, an initial assessment or a set amount of labour, depending on what was agreed. Explain what the charge includes and identify any additional work or materials that will be billed separately.

Credit note

A document that reduces or cancels an amount charged on an earlier invoice. It records an adjustment, such as an overcharge, returned goods or an agreed price reduction.

Day rate

A fixed charge for a full day of labour, as opposed to an hourly rate or a fixed price for the whole job.

Deposit

An upfront payment towards the total price of a job, often used to secure a booking or cover initial costs. It is deducted when calculating the remaining balance.

Estimate

An approximate price for a job based on the information available. The final cost may change if the work, materials or time needed differs.

Invoice

A document requesting payment for goods or services. It sets out what the customer is being charged for, the amounts charged and the total owed.

Invoice draft

An invoice draft is a working version of an invoice that you can review and edit before issuing it to the customer. It gives you the opportunity to correct names, descriptions, quantities, prices and payment details. Check the draft against the work completed and the charges agreed.

Invoice due date

The invoice due date is the date by which payment is expected under the agreed payment terms. It may differ from both the invoice date and the date the work was completed. For example, an invoice issued on 3 September could have an agreed payment deadline of 17 September.

Invoice number

A unique reference assigned to an invoice. It helps you track payments, organise your records and identify the right invoice when speaking to a customer.

Itemised invoice

An itemised invoice breaks the total bill into individual charges, usually showing a description, quantity, rate and amount for each. This helps the customer understand what they are paying for. For example, an invoice might show labour, supplied parts and an agreed travel fee on separate lines.

Job sheet

A job sheet records work planned or completed for a customer, including details such as dates, time spent, materials and notes. It provides a useful record when preparing an invoice or answering a customer’s question. A job sheet records the job; an invoice requests payment.

Labour rate

The amount charged for time spent carrying out work, usually expressed as an hourly or daily rate. Materials, parts and other expenses may be charged separately.

Line item

An individual entry on a quote or invoice showing a particular charge. It usually includes a description, quantity, unit price and total for that item.

Livery extras

Livery extras are services or items charged in addition to a customer’s usual livery package. Depending on the agreement, these might include extra grooming, clipping or exercise sessions. Identify the service, date and agreed charge so the customer can distinguish extras from work already included in their package.

Net 7, net 14 and net 30

Net 7, net 14 and net 30 mean the full amount is due within 7, 14 or 30 days of the starting point agreed in the payment terms, commonly the invoice date. Showing an exact due date alongside these terms makes the payment deadline clearer.

Net amount and gross amount

In an invoice’s VAT breakdown, the net amount is the price before VAT and the gross amount is the price including VAT. For example, where a 20% VAT rate applies, £100 net plus £20 VAT equals £120 gross. The applicable rate depends on the goods or services supplied. See GOV.UK VAT rates.

Outstanding balance

The amount still owed after payments and credits have been applied. An outstanding balance becomes overdue when its payment deadline has passed.

Overdue invoice

An overdue invoice has an unpaid balance after its payment deadline has passed. An outstanding invoice is one that has not been fully paid, but it may still be within its payment terms. Check incoming payments and any agreed changes to the deadline before following up an overdue balance.

Part-payment

A part-payment pays off some of an amount owed while leaving a balance outstanding. For example, a £100 payment against a £250 invoice leaves £150 to pay. Record the amount and date against the correct invoice so later reminders show the remaining balance accurately.

Payment reference

A payment reference is a number or piece of text used to identify a payment. Asking customers to use their invoice number as a bank-transfer reference can help you match the money received to the correct bill. Include the requested reference alongside your payment instructions.

Payment reminder

A payment reminder is a message about an approaching or missed invoice payment deadline. It usually includes the invoice number, amount outstanding, due date and payment instructions. Following up unpaid invoices is also called invoice chasing. Reminders may be sent manually or scheduled through software.

Payment terms

The agreed conditions for paying an invoice, including when payment is due and how it should be made, for example 14 or 30 days. They may also cover deposits, instalments or discounts for early payment. Terms should appear on the estimate as well as the invoice.

Pro forma invoice

A preliminary document showing the goods or services to be supplied and their proposed charges, often used to request payment in advance. It is not a VAT invoice and cannot be used to reclaim VAT.

Purchase order

A reference number issued by a commercial customer authorising the work. Many businesses will not pay an invoice unless this number is quoted on it.

Quote

A price offered for a specific job, setting out the work included and any conditions. Changes to the job may require an updated quote.

Receipt

A receipt acknowledges that a payment has been received. It may cover a part-payment or full payment, so it should make the amount received clear and identify any balance still due. An invoice requests payment; a receipt records a payment that has already been made.

Recurring invoice

A recurring invoice is an invoice issued at agreed intervals for an ongoing service, such as weekly yard cover or monthly cleaning. Each invoice should reflect the current billing period, including changes to visits, prices or extras. Check repeated details before issuing the next bill.

Remittance advice

A notice from a customer explaining a payment, usually showing the amount and which invoices it covers. It helps you match the payment to the right invoices.

Retention

A percentage of the job value held back by the customer until the work has been signed off, and sometimes for a defect period afterwards. Common on larger construction contracts.

Scope of work

A description of the work a business will carry out for a customer. It makes clear what is included in the price and what is excluded.

Snagging

The list of small defects or unfinished items identified at the end of a job that must be put right before final payment.

Stage payment

A payment due at an agreed point during a job, such as when materials arrive or part of the work is completed. Stage payments spread the total cost across the project.

Travel charge

A travel charge is an agreed customer charge for travel connected with providing a service. It may be a fixed fee, a mileage-based amount or a charge for travel time. Explain how it is calculated and whether it is included in the job price or charged separately.

Variation

A change to the work set out in the original quote or agreement. It may affect the price, materials or completion date.

VAT domestic reverse charge

A VAT rule for certain construction services where the customer, not the supplier, accounts for the VAT. The invoice shows no VAT charged but must state that the reverse charge applies.

VAT invoice

A VAT invoice contains the information required to record a sale for VAT purposes, including the supplier’s VAT registration number and the relevant VAT details. Its requirements differ from those of a non-VAT invoice. See the GOV.UK invoice requirements.

Voice invoicing

Voice invoicing means using spoken job details to help prepare an invoice. Also called voice-to-invoice, it allows you to describe the customer, work, quantities and agreed charges aloud, then use software to organise the information into a draft. Review and complete the draft before sending it.