Incoming invoices, outgoing invoices—and what exactly is a pro forma invoice again? As an entrepreneur, you will encounter a wide variety of types of invoices, which are used for different purposes.
When you need to use which of these types of invoices and what you should keep in mind for each, we have summarized for you in our blog post!
The term invoice types refers to the various document formats that companies use to bill for goods or services. Depending on the recipient (B2B or B2C), the invoice amount, or the timing of the service, the legal requirements for invoicing differ according to the Value Added Tax Act (UStG). Choosing the correct invoice type is crucial for bookkeeping and input tax deduction.
In your day-to-day business, you may encounter various types of invoices. They all have different purposes and therefore different invoicing requirements. To help you keep track, we have briefly summarized the most important invoice types here:
Let’s take a closer look at the different types of invoices. What are they used for, and what obligations do you need to consider? We provide the answers below:
In principle, an invoice is always issued by the service provider to the service recipient. Depending on whether your company is the one receiving or providing a service, a distinction is made between incoming and outgoing invoices. An incoming invoice for you is an outgoing invoice for the other company. An outgoing invoice for you is an incoming invoice for the other company or private individual.
As an entrepreneur, you receive incoming invoices. This means you are purchasing goods or receiving a service from another company. This can include purchased products, services rendered, and shipping costs. Classic examples of incoming invoices include invoices from your suppliers or from a shipping service provider for delivering packages from your online shop.
You issue an outgoing invoice to a private individual or another company. (We explain exactly when you are legally required to do so in detail in our article on Invoicing requirements in e-commerce. Tools such as Billbee can support you in this process. You are billing for a specific amount for a service, such as products purchased from your online shop or a service provided by your company.
If the invoice is an incoming invoice, you must check it for factual, mathematical, and legal accuracy before payment. For the factual check, you can compare the delivery note with the invoice to ensure that what was billed is what was actually delivered. For the mathematical check, you verify the values shown on the invoice. For the legal check, you ensure that all mandatory information required by Section 14 (4) of the German Value Added Tax Act (UStG) is included.
In accounting terms, incoming invoices represent liabilities to other companies, while outgoing invoices represent receivables from other companies. When an invoice amount is paid, the liabilities decrease (e.g., when you transfer payment as the receiving company for an incoming invoice) or the receivables decrease (e.g., when a customer transfers payment to you for an outgoing invoice).
Legally, you are required to adhere to specific retention periods. For example, quotes, customs documents, and export papers must be kept for 6 years. In contrast, invoices, as well as bank statements and other documents like delivery notes, must be kept for 10 years. For invoices, it does not matter whether they are incoming or outgoing; both must be retained for 10 years. If you use Billbee, you can easily have your outgoing invoices automatically archived in cloud storage, for example.
Your outgoing invoices also provide the basis for your dunning process. Based on the outgoing invoices you have created and sent, you can issue payment reminders and formal dunning notices. Ideally, you should use a tool like Billbee to support you in this area so that you don't have to constantly keep track of all outstanding outgoing invoices yourself.
The small-amount invoice makes everyday life easier. If the gross amount of an invoice does not exceed €250 , simplified mandatory information applies (§ 33 UStDV).
The installment invoice is a special form of invoice. An installment invoice can be either an incoming or an outgoing invoice. In the private sector, installment invoices are primarily known from electricity providers.
However, installment invoices are also frequently used in a business context, especially for large and long-term projects. If an order is carried out in several steps or an agreed partial service of a project has been completed, an installment invoice can be issued for this partial service. It is important that the installment invoice is clearly labeled as such. Such a project is then concluded with a final invoice. This must also be labeled as such and list all installments already made from the installment invoice.
An installment invoice followed by a final invoice has advantages for both parties. The company providing the service receives payments at certain intervals, so they do not have to pre-finance goods and services. Recipients of the service, on the other hand, can pay large invoices in smaller partial amounts. This aims to ensure that both parties remain liquid throughout the duration of the project.
In classic online shops, installment invoices are generally not used. Typical industries include construction companies, electricity and gas companies, and the manufacturing of expensive goods (e.g., expensive industrial plants).
Cancellation invoices, often called correction invoices, are used to fix incorrectly issued invoices. Be careful not to confuse cancellation invoices with credit notes!
The accounting logic behind a cancellation invoice is that you cannot simply delete an incorrect invoice from your records. A clean cancellation process is a fundamental requirement if you want to prepare your bookkeeping accurately for your tax advisor. Cancellation invoices exist to correct these errors in your accounting. They always show a negative amount, which reduces the claim against your client. This means that when you issue a cancellation invoice to a customer, you are crediting them for the amount of a previous invoice. It also means that a cancellation invoice must always be preceded by an original invoice. Furthermore, you must include the same mandatory information as you would on a regular outgoing invoice.
But what exactly are credit notes? In everyday language, cancellation invoices and credit notes are often used interchangeably, but that is incorrect. The significant difference is that a credit note shows a positive amount, whereas a cancellation invoice shows a negative amount. Additionally, a credit note is not preceded by an invoice and is issued by the recipient of the service to the provider. This means you cannot and must not use a credit note to correct a previously issued outgoing invoice; that is what cancellation invoices are for.
Learn more about the difference between a cancellation invoice and a credit note from our partner, sevdesk.
Another special type of invoice is the pro forma invoice. These are often used for informational purposes only and therefore do not contain a payment request. Consequently, no payment obligation arises upon receipt of a pro forma invoice.
A pro forma invoice is frequently used for international transactions or when shipping goods free of charge. It is often mandatory for customs purposes – you can find out more in our guide to international shipping and export documents. In this case, the pro forma invoice serves as proof of the goods. However, a pro forma invoice cannot be converted into a regular outgoing invoice, as it is generally used only for tax purposes, such as for gift shipments, sample deliveries, or replacement parts.
Since January 2025, e-invoicing in the B2B sector has been mandatory in Germany (with transition periods). An e-invoice is not just a simple PDF, but a structured data set (e.g., in the XRechnung or ZUGFeRD) format that can be processed automatically by machines.
As an entrepreneur, you need to be able to receive and process these types of digital invoices today. Tools like Billbee help you meet these requirements in a legally compliant manner, ensuring you are prepared for digital tax audits.
Cash sales generally do not apply to online retail unless you operate a brick-and-mortar store. Receipts and vouchers from physical retail are also a type of invoice.
In the case of cash sales, outgoing invoices are not issued in the strict sense, but they must still be recorded in your bookkeeping. Receipts and vouchers are used for this purpose.
Billbee is the ideal tool to support you in creating and sending your outgoing invoices. Instead of spending hours every week manually creating and sending error-prone invoices, you can have them generated automatically and then sent to your customers via email with a personalized message of your choice.
The risk of errors in outgoing invoices is reduced because Billbee receives the data directly from your online shop. Importing orders from your shop (e.g., from Shopify, Shopware, or many other shop systems) or from a connected marketplace (e.g., Amazon, eBay, or other marketplaces) works completely automatically.
With the help of automation rules, you can streamline your invoicing in no time, as shown in the video:
Try simplifying your invoicing with Billbee now. Test Billbee for 30 days free of charge, with no obligations and full access to all features!
Cover photo by Nataliya Vaitkevich on Pexels
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