Open Invoice Explained: Everything You Need to Know

If you’re handling books or helping a business manage money, understanding this is a must. The idea is simple, but it plays a big role in everyday accounting and bookkeeping.

So, what exactly is an open invoice? How is it different from a paid one? And how do businesses keep track of them using software like NetSuite? Keep reading—we’ll walk through everything step by step.

What is an Open Invoice?

Let’s start simple—how do we define open invoice in everyday terms? It’s a bill that’s been sent but not yet paid. When a business sends an invoice to a customer, it becomes open until payment is made. That means money is still expected, and the deal isn’t finished yet. You might also hear people call it an unpaid invoice or pending invoice. They all mean the same thing.

Here’s an easy example: imagine you hire a plumber. The plumber fixes your sink and sends you a bill. If you haven’t paid that bill yet, it’s called an open invoice. Once you pay it, it becomes a closed invoice.

So why should you care about open invoices? If you run a business, they tell you how much money you’re still waiting for. If you work in accounting or use tools like NetSuite ERP, you’ll see these invoices every day. They help track who owes what, and how long they’ve owed it.

Many companies list open invoices in their reports or accounting software. You’ll see the customer’s name, the date, and the amount owed. Some systems, like NetSuite, also show how many days it’s been unpaid.

Knowing how to define open invoice helps everyone—from small shop owners to big companies. It’s a simple idea, but it plays a big part in how money moves in business.

How Does an Open Invoice Work?

When a business sells a product or service, they often don’t get paid right away. Instead, they send an invoice with a payment due date. Until that payment is made, it’s called an open invoice. This lets the buyer know they still owe money.

Open invoices are tracked by businesses to make sure payments come in on time. Each one shows who owes money, how much, and when it’s due. If the payment deadline passes, it becomes overdue.

Let’s say a design agency finishes a logo for a client and sends a $500 invoice. If the client hasn’t paid yet, that’s an open invoice. Once the money is received, the invoice is marked as closed.

Tracking open invoices helps businesses stay on top of their cash flow. It also helps avoid missed or forgotten payments.

Open Invoice Meaning in Bookkeeping

In bookkeeping, the open invoice meaning is simple—it’s a bill that hasn’t been paid yet. It shows that money is still expected from a customer. Bookkeepers use it to track what the business should receive.

These invoices sit in the books until the payment is made. Once paid, they’re moved out of the open invoices list. It helps keep the records clean and up to date.

If you don’t track them, you might forget who still owes you. That’s why knowing the open invoice meaning matters in daily bookkeeping.

Key Components of an Open Invoice

Every invoice open includes a few important details. These help both the business and the customer understand what’s owed.

Here’s what you’ll usually find:

• Invoice number – A unique ID that helps track the invoice.
• Date issued – The day the invoice was created.
• Payment due date – The deadline for the customer to pay.
• Customer name and contact – Who the invoice is for.
• List of items or services – What was sold, including prices and quantities.
• Total amount owed – The full price the customer needs to pay.
• Payment terms – Rules about how and when to pay.

When all these parts are clear, the open invoice is easier to manage and track. It avoids confusion and helps keep payments on time.

Common Types of Open Invoices

Not all open invoices are the same. They can look a bit different depending on the deal and payment terms. Let’s go over a few common types you might come across:

• Standard open invoice – A regular bill sent after goods or services are delivered.
• Recurring open invoice – Sent on a schedule, like monthly, for things like subscriptions or services.
• Partial payment invoice – Shows that some money has been paid, but not the full amount.
• Milestone invoice – Used in big projects, where payment is due after each phase or step is done.
• Overdue open invoice – A bill that wasn’t paid by the due date and is now late.

Open Invoice vs. Closed Invoice: Key Differences Explained

So, what’s the real difference between an open invoice and a closed invoice? It’s all about payment.

• Open invoice – This means the customer still needs to pay. The money hasn’t been received yet.
• Closed invoice – This means the payment has been made. The invoice is marked as paid.

Think of it like this: an open invoice is a to-do item. A closed invoice is checked off the list.

In bookkeeping or software like NetSuite, these statuses help track unpaid vs. paid bills. Simple labels, but they keep your records clean and updated.

The Process of Open Invoicing

Wondering how open invoicing works from start to finish? It’s a step-by-step flow that’s easy to understand.

• Step 1: A product or service is delivered – The work is done or the goods are sent.
• Step 2: An invoice is created and sent to the customer – It includes the amount owed and the due date.
• Step 3: The invoice becomes open – It stays open until payment is received.
• Step 4: Reminders may be sent – If the due date is near or passed, follow-ups can help.
• Step 5: Payment is received – Once paid, the invoice is marked as closed.

This is how open invoicing works in most businesses. Software like NetSuite or QuickBooks helps automate these steps, so nothing is missed.

Tips for Finance & Accounting Teams

Handling open invoices the right way can make a big difference in your daily work. Here are some easy tips to help finance and accounting teams stay on top of things:

• Send invoices on time – Don’t wait. The sooner you send it, the sooner you get paid.
• Set clear due dates – Make sure every invoice shows when payment is expected.
• Use reminders – Gentle follow-ups help reduce late payments without hurting client relationships.
• Track everything with software – Tools like NetSuite help manage and sort open invoices quickly.
• Review unpaid invoices often – Check your list weekly to catch delays before they become bigger problems.

With these simple habits, teams can keep the open invoice list short and the cash flow steady.

Conclusion

Understanding what an open invoice means can really help you stay in control of your business finances. It shows what’s still unpaid and helps you keep track of money that’s on the way.

Whether you’re using NetSuite accounting, QuickBooks, or Sage Accounting, these tools make it easier to manage open invoices. They help you send invoices, set due dates, track unpaid bills, and follow up when needed.

No matter the size of your business, keeping an eye on open invoices helps avoid surprises and keeps your cash flow steady. It also makes life easier for accounting and finance teams.

So next time you look at your books, remember—an open invoice isn’t just a number. It’s a sign that your work is done, and payment is just around the corner.