What Is an Interim Invoice?

What is an interim invoice?

An interim invoice is used to request payment for part of a project while the work is still in progress. The total project cost is divided into several payments rather than being invoiced entirely at the beginning or end.

Interim billing is particularly useful for projects that take several weeks or months to complete because the business can receive payment as different stages of the work are delivered.

For example, a contractor completing a £20,000 project could issue interim invoices as agreed stages are completed before sending a final invoice for the remaining balance.

When are interim invoices used?

Interim invoices are commonly used for larger projects where waiting until completion for the entire payment would be impractical. They can help businesses maintain cash flow while giving customers a clear record of how much of the project has already been billed.

Businesses and professionals that may use interim invoices include:

• construction companies
• contractors
• consultants
• architects
• engineers
• designers
• software developers
• project managers
• marketing agencies

How does interim billing work?

Interim billing divides a larger project into smaller payment stages. The timing and value of each payment should normally be agreed with the customer before the project begins.

Payments may be linked to specific project milestones, percentages of completed work, hours worked during a billing period, or another agreed schedule.

Each interim invoice should make it clear which stage or period is being billed so the customer can understand what the payment relates to.

What should an interim invoice include?

An interim invoice should contain the normal information needed to identify the business, customer, project, and amount being requested. It should also explain which part of the project the invoice covers.

A clear interim invoice commonly includes:

• unique invoice number
• invoice issue date
• business details
• customer details
• project name or reference
• description of completed work
• billing period or milestone
• quantity or hours where applicable
• rates and charges
• tax information where applicable
• payment terms
• payment due date
• amount currently due

Interim invoice example

An interim invoice example could involve a business completing a £12,000 project across several stages. The customer and business may agree that payments will be requested as specific milestones are completed.

The first interim invoice could request £3,000 after the initial stage, followed by another £4,000 when the next stage is completed. Further interim payments could then be requested as the remaining work progresses.

Once the project is complete, the business can issue a final invoice showing the total project value, previous payments, any additional approved charges, and the remaining balance.

Interim invoice vs final invoice

The main difference between an interim invoice and a final invoice is when each document is issued during the project.

An interim invoice is issued while work is still ongoing and requests payment for a particular stage, period, or amount of completed work. A final invoice is normally issued once the project reaches completion and requests any remaining amount due.

If interim payments have already been made, the final invoice should clearly account for them so the customer can understand how the remaining balance has been calculated.

Interim invoice vs deposit invoice

An interim invoice and a deposit invoice both divide payment into more than one stage, but they are generally used at different points in a project.

A deposit invoice usually requests an initial payment before work begins or before goods are supplied. An interim invoice is normally issued after the project has started and relates to work completed during the project.

A large project could use both. The business might request a deposit before starting, issue interim invoices as work progresses, and then send a final invoice when everything has been completed.

Milestone based interim invoices

One way to structure interim billing is around project milestones. Instead of invoicing according to a fixed date, payment becomes due when an agreed stage of the project is reached.

For example, a construction project might have separate billing stages for initial site work, structural work, installation, and completion. A design project could instead use payments for research, initial concepts, revisions, and final delivery.

Describing the milestone clearly on each invoice helps the customer connect the requested payment with the work that has been completed.

Why businesses use interim invoices

Interim invoices can make larger projects easier to manage because the business does not need to wait until the entire project is complete before receiving payment.

They can also make large costs more manageable for customers by dividing the total project value into several smaller payments.

Keeping each stage clearly documented creates a record of what has been billed, what has already been paid, and what may still become due before the project is finished.

Keep track of previous interim payments

When several interim invoices are used for the same project, accurate records become particularly important. Each invoice should have its own unique invoice number and clearly identify the relevant project or billing stage.

Businesses should keep track of amounts already invoiced and payments received so they do not accidentally request the same amount twice.

When the final invoice is prepared, previous payments can be accounted for when calculating the remaining balance owed by the customer.

Create an interim invoice

To create an interim invoice, include your business and customer information, identify the project, describe the work being billed, and enter the relevant quantities, rates, taxes, payment terms, and amount due.

Make it clear that the invoice relates to a particular stage or billing period rather than the entire project. This helps prevent the customer from confusing an interim payment with the final project balance.

InvoiceAtlas can be used to create a professional invoice for a project payment and download the completed document as a PDF for free.