Interim Invoice: What It Is, How It Works, and When to Use It

An interim invoice is a financial document that companies and contractors provide to clients to request partial payment for a project. This is often used on long-term or large-scale projects to help manage cash flow more effectively rather than asking for a lump sum after completion.

Interim invoices are provided multiple times during the course of a project, so it’s important to know how to create one properly. In today’s post, we’ll discuss everything you need to know about an interim invoice, share the best strategies for creating one, and provide a step-by-step guide to help you draft this document with ease.

Let’s get started!

Key Takeaways

• An interim invoice is a document used to bill a client for partial payment of an incomplete project. This is often issued at recurring dates or after passing specific milestones.
• Interim invoices are often used by companies in the construction, consulting, event planning, or manufacturing industries.
• The key benefits of using interim invoices include improved cash flow, reduced payment delays, better client relationships, and enhanced project management.
• When creating an interim invoice, it’s important to use a professional template, communicate with the client, set payment terms, and proofread the document thoroughly.

What is an Interim Invoice?

An interim invoice is a recurring invoice issued to a client to charge partial payment on a project before it is completed. This usually accounts for a percentage of the total amount but can also represent the specific cost of a product or service.

Interim invoices are often provided after completing a specific stage or milestone in the project, and the client is billed for the services provided during that time. This amount is then subtracted from the total amount due, with the remaining balance paid once the project is completed.

Keep in mind, however, that a receipt isn’t an interim invoice, meaning you would still need to provide a separate document if your client asks for one.

Interim Invoice vs. Regular Invoice

While an interim invoice and a regular invoice serve the same function, their purposes and timing can greatly vary.

For one, the purpose of an interim invoice is to collect payment for a specific phase of the project. Because these payments are issued multiple times throughout the duration of the project, an interim invoice ensures that your business receives regular payments for an ongoing service.

Meanwhile, the purpose of a regular invoice is to provide a comprehensive bill for all the services provided during the project. Because of this, regular invoices are only sent once the project is completed.

When Are Interim Invoices Used?

Interim invoices are often used in long-term projects that benefit from broken-down payment schemes, such as the following:

• Construction. Using interim invoices is common in construction services due to the project’s lengthy timelines and substantial costs. While you can also use a construction invoice in this situation, an interim invoice is the better choice if you want to bill the client per project milestone and maintain ongoing payments.

• Event planning. Events like weddings and conferences can require a significant amount of money upfront to cover vendor bookings, catering, and location reservations, so it’s common for businesses in this industry to use interim invoices.

• Consulting. Freelancers who signed on for long-term contracts can use interim invoices to ensure they get paid regularly during the project.

• Manufacturing. Companies that manufacture custom products may use an interim invoice to bill their client for the labor and materials used during various stages of the production process. They may also use a pro forma invoice to inform their client of these expenses in advance and allow some room for negotiation.

4 Key Benefits of Using Interim Invoices

Using interim invoices, as opposed to other types of invoices, can offer several key benefits, including:

#1. Improved Cash Flow

One of the biggest advantages of using interim invoices is to ensure continuous cash flow into your business. This is especially useful in industries where projects can take months or years to finish or involve substantial upfront costs for materials and equipment, which can strain your company’s financial resources.

By issuing an interim invoice, you can cover the project’s ongoing expenses without relying on credit lines or loans and ensure steady progress. Alternatively, you can bill clients through AIA Billing, which is specifically tailored to the construction industry.

#2. Reduced Payment Delays

Since interim invoices break down the total cost of a project into multiple installments, they can encourage clients to pay on time. Moreover, regular invoicing ensures that any pay discrepancies or misunderstandings can be resolved right away, preventing further delays.

If you notice that your client has been late in paying their previous invoices, consider initiating a conversation to figure out the root cause of the problem. If they are experiencing financial trouble, it may be best to put the project on hold before the expenses escalate and you end up with significant debt.

#3. Better Client Relationship

Offering flexible payment terms through interim invoices can help you build better client relationships and attract new customers. Moreover, since each invoice comes with a detailed breakdown of the costs and the completed work so far, it helps foster trust and transparency between client and customer.

Clients can also use interim invoices to track what they have paid for and minimize misunderstandings due to sudden product costs or unclear labor charges.

#4. Enhanced Project Management

While an interim invoice and receipt both show a list of the products and services that a client needs to pay for, only the former can help enhance project management.

Since interim invoices can coincide with project milestones or deliverables, they can be a great way to monitor the project’s progress. This can help you avoid potential delays and overspending so you can complete the project in a timely manner and reinforce your professionalism as a company.

How to Create an Interim Invoice in 5 Simple Steps

If it’s your first time creating an interim invoice, using Paystub.org’s invoice generator is a great way to expertly craft an official document in seconds.

Let’s go over the steps below:

#1. Add Your Business Details

The first step to making an interim invoice is to add your company’s details to your selected invoice template.

This information includes:

• Business name
• Business email
• Business complete address
• Business number

When done, make sure to recheck your information and avoid any typos or missing commas. If you have a company logo, you have the option to upload it as well to personalize your invoice and make it more recognizable.

#2. Add Your Client’s Details

Next, you’ll need to add your client’s details, such as their name, complete address, and contact number. However, keep in mind that the recipient of the invoice can change depending on the project.

For instance, event planners would likely address the invoice to their client directly, while a consultant may need to address the invoice to the company’s HR or payroll department. It’s important to confirm this detail with your client beforehand to avoid any delays.

#3. Estimate the Cost

After the general details are filled in, the next thing you have to do is fill out the interim invoice billing section.

Here, you can add the payment terms and a complete breakdown of all the services and materials involved. Simply type out each item, provide a brief description, and add its price and quantity.

If you are working on multiple projects at once, consider making a unique invoice number for each one to help you keep track of the invoices made per client. Interim invoices involve multiple documents over the course of the project, so it can be easy to get confused without a proper numbering system.

#4. Send the Interim Invoice

When done, you can view the interim invoice example at the bottom of the page and select a new template or color if you want to; all the information you have entered won’t be removed, so you can switch between templates easily.

When everything looks good, you can check out and download your invoice, then send it to the client.

#5. Send the Final Invoice

As the project nears completion, you’ll have to send a final invoice to your client. Fortunately, you can follow the same steps for creating interim invoices that we outlined above to draft this document. This time, however, you’ll have to detail all the expenses and services involved in the project from start to finish.

Your client can cross-reference this information with your previous interim invoices, so be sure to double-check each item before downloading and sending the file.

4 Expert Strategies for Creating and Sending Interim Invoices

When creating interim invoices, it’s important to keep these expert strategies in mind:

#1. Use Professional Invoice Templates

An interim invoice template, like the one from our invoice generator, will greatly improve your efficiency and allow you to maintain a professional image when dealing with clients.

Our templates are also designed to include all the essential elements an invoice needs, such as your company logo and information, an invoice number, and the scope of the project. This can reduce your chances of forgetting crucial details, which can lead to payment delays.

Moreover, providing standardized interim invoices makes it easier for you and your client to keep track of completed and pending payments so you can avoid disputes later on.

#2. Proofread the Invoice

While using templates can speed up invoice creation, it’s still important to proofread every document before sending it to the client. Any errors, such as incorrect dates or client information, can lead to a rejected invoice and further payment delays.

Make sure to review the breakdown of the services and their respective costs to ensure that they correspond to the agreed-upon amounts. It’s also important to cross-reference your invoice with your contract or agreement to verify any additional details.

#3. Communicate with Your Clients

Regularly communicating with clients is crucial when creating interim invoices, as it ensures that both parties are aligned on the payment terms and invoicing schedule.

Once you have confirmed all the necessary details, include a brief message in your email before sending the invoice. Here, you can summarize the progress made during the specific project milestone and list some major items that the payment covers. While this information is also listed on the invoice, providing additional context can help reassure clients that all the charges align with completed work.

#4. Set Payment Terms

Lastly, it’s vital to set clear interim invoice payment terms so your client understands what is expected of them and when. These terms should include the payment due dates and accepted payment methods.

It’s best to be upfront about your payment expectations to avoid misunderstandings and delays later on. You can also state any late payment fees that will apply after 30 days after receiving the invoice.

Final Thoughts

An interim invoice is an essential document for companies that handle large-scale projects, as it allows them to bill their clients periodically to ensure a steady cash flow. This not only reduces payment delays but also helps keep your clients well informed and engaged throughout the project.

Fortunately, you can easily create professional interim invoices with Paystub.org’s invoice generator. Our tool simplifies invoice creation by providing you with ready-made templates and automated calculations; all you have to do is input all the necessary details and download your finished document.

Interim Invoice FAQ

#1. What is the difference between an interim invoice and a partial invoice?

The difference between an interim invoice and a partial invoice is that the former is used to charge for partial payment for a project, regardless of the amount of work done, while the latter is used to bill specific goods or services that have already been provided.

#2. Are interim invoices legally binding?

Yes, interim invoices are legally binding. Just like other kinds of invoices, this is an official document and can be used to demand payment from a client and pursue legal action.

#3. What elements should an interim invoice have?

The elements an interim invoice should have are the period and scope of the project, the agreed-upon rate, the payment terms, and any taxes, discounts, or additional fees that will affect the total amount due.