Invoice & Freelance Glossary

Spreading the cost of an intangible asset (like a loan or patent) over its expected useful life.

A standardized billing format (AIA G702/G703) used by architects and contractors for progress invoicing.

The process of matching your internal financial records against your bank statement each month.

A government-issued permit allowing you to operate a business legally within a specific jurisdiction.

A surety bond guaranteeing a contractor will enter into the contract and post a performance bond if awarded the bid.

Hours worked on a client project that can be charged to the client according to an hourly rate.

Sending multiple invoices to different clients at once, often automated to save time on recurring billing.

A categorized list of every account (assets, liabilities, equity, revenue, expenses) in your books.

The original purchase price of an asset, used to calculate capital gains or losses when the asset is sold.

A document modifying the original contract terms — usually to add, remove, or change scope or cost.

A secure online dashboard where clients can view invoices, make payments, and interact with your business.

A document that reduces the amount a customer owes, often issued to correct an overcharge or provide a refund.

A customs document used for international shipments that details the goods, value, and origin.

A contract where the client pays for all costs plus an agreed-upon markup or fee for profit.

Every transaction is recorded in at least two accounts (one debit, one credit) to keep books balanced.

An electronic proof of purchase sent or stored digitally rather than printed on paper.

A request for payment from a construction loan or line of credit, typically tied to project completion stages.

Employer Identification Number — a nine-digit tax ID number the IRS assigns to businesses for filing taxes.

A digitally sent invoice that meets specific legal standards for tax and commercial record-keeping.

A form employees or contractors submit to be reimbursed for out-of-pocket business expenses.

A contract clause excusing parties from obligations when extraordinary events (disasters, war) prevent performance.

The time between when you issue an invoice and when the payment clears your bank account.

A contract where the client pays a set total amount regardless of the actual time or resources the work takes.

Goods and Services Tax — a broad consumption tax applied to most goods and services sold domestically.

The master set of accounts that records all financial transactions of your business.

Revenue minus the cost of goods sold, expressed as a percentage — shows profitability per dollar of sales.

A tax deduction for the portion of your home used exclusively and regularly for business.

A contract provision where one party agrees to compensate the other for certain damages or losses.

A legal transfer of intellectual property rights from the creator to another party, often in a contractor agreement.

A detailed receipt listing each individual item purchased, its quantity, price, and any applicable taxes.

An invoice sent mid-project to collect payment for work completed before the final project deliverable is due.

A record of a financial transaction in your accounting system, showing debits and credits.

Limited Liability Company — a business structure with pass-through taxation and personal asset protection.

A legal claim against property that gives a creditor the right to seize the asset if a debt is not paid.

A legal document that releases one party from liability for injuries or damages the other party may incur.

A deduction for business-related driving expenses based on a standard IRS mileage rate.

A legal tool contractors and suppliers use to secure payment for labor and materials provided to a property.

Total revenue minus all expenses — the bottom-line profit (or loss) your business made in a period.

A legal agreement restricting a person from working for a competitor or starting a competing business.

Profit from core business operations after subtracting operating expenses from gross profit.

A service that securely transmits payment data between a customer, merchant, and the bank.

The backend system that handles credit card and ACH transactions from authorization to settlement.

A confirmation document sent to a customer proving that a payment has been received.

An automated or manual notice sent to a customer alerting them that a payment is due or overdue.

An agreed schedule for a customer to pay an outstanding invoice in multiple installments over time.

A surety bond guaranteeing a contractor will complete the project as specified in the contract.

A formal document a freelancer or contractor sends to a potential client outlining the work, timeline, and cost.

The average wage rate paid to workers in a specific geographic area or occupation as determined by the government.

A document listing final tasks a contractor must complete before a project is considered finished.

An invoicing method where you bill a client at defined milestones as work progresses rather than all at once.

Advance tax payments self-employed individuals make four times a year to cover income and SE tax.

Cumulative net income that a company keeps (does not distribute as dividends) over time.

A contract where a client pays upfront to reserve a contractor's services for a defined period.

A document a client sends to potential contractors soliciting detailed bids for a specific project.

A payment sent to settle a debt, typically a transfer of funds from a customer to a business.

Payment made to cover money spent on behalf of a business, such as for supplies or travel.

A portion of a contract payment withheld by the client until a project is fully complete.

An IRS form for self-employed individuals to report profit or loss from their business operations.

An unincorporated business owned and run by a single individual with no legal separation from the owner.

A person or company hired by a general contractor to perform specific work under the main contract.

Uncontrolled expansion of a project's scope beyond what was originally agreed — often causing budget overruns.

An invoice generated by the client (not the supplier) for payments made to a supplier or contractor.

The income range at which you are taxed at a specific rate in a progressive tax system.

A dollar-for-dollar reduction in your actual tax bill, directly subtracting from taxes owed.

The total amount of tax you owe to the IRS or a state tax agency for a given tax period.

An internal report listing all general ledger accounts and their balances to check that debits equal credits.

A contract provision defining the conditions under which either party may legally end the agreement.

A billing method charging for labor at an hourly rate plus the cost of materials used on the project.

Value-Added Tax — a consumption tax levied on products at each stage of production based on the value added.

An invoice that has been canceled before payment, typically to correct an error or stop a duplicate bill.

An IRS form employers send to employees reporting annual wages and the taxes withheld from them.

Current assets minus current liabilities — the money available to run your day-to-day business.