Calculating an invoice total correctly avoids disputes, ensures you collect what you're owed, and keeps your accounts receivable clean.
Invoice total formula
Subtotal = sum of all line items (quantity × unit price) After discount = Subtotal × (1 − discount%) Tax = After-discount × tax rate% Total = After-discount + Tax
Applying discounts: before or after tax?
Always apply discounts to the pre-tax amount. Tax should be calculated on the discounted price, not the original. Some jurisdictions explicitly require this; applying tax before discount is incorrect and will overcharge your client.
When to add late payment fees
Include payment terms on every invoice (e.g. "Net 30, 1.5%/month late fee"). Late fee = outstanding balance × monthly rate × months overdue. A $5,000 invoice 60 days overdue at 1.5%/month = $5,000 × 1.5% × 2 = $150 fee.
Invoice numbering best practice
Use sequential invoice numbers (INV-001, INV-002...) or date-prefixed (2024-INV-001). Never reuse a number — it creates accounting confusion and can flag tax audits.
Build your invoice calculation with the invoice total calculator.