Is Invoice and Bill - the Same Thing?

An invoice and a bill are two terms that are usually used interchangeably. However, there is a clear difference between these two documents. Nevertheless, companies and individuals often use these documents to perform a wide range of financial transactions. In the financial world, invoices and bills are used differently and perform different functions.

Difference in Meaning

An invoice is a financial document created by a business and sent to a client, which spells out the transaction details between the two parties. Each company typically has its unique template for its invoices. This template can be used to create different types of invoices, depending on needs. Depending on the type of invoice, a set of elements must be present on the document to be valid. Also, such features may not be changed under any circumstance. Alterations to an invoice can render it null and void, which may translate into legal problems.

Invoices are issued to clients when goods or services are delivered. It usually contains all the important details of a transaction, including a detailed breakdown of cost per item, discounts, taxes, and the total due amount. For instance, a contractor that performs a repair job within your house would likely send you an invoice once the job is completed.

A bill, on the other hand, is a document, which provides a client the total amount due for services rendered or products purchased. A business owner usually gives its clients bills at the instance of purchase. For example, a bill is given to you immediately after eating a meal in a restaurant. The business expects you to instantaneously pay for the service or goods using cash or a card.

Elemental Differences

Between the two documents, each is composed of different elements. The differences are presented below.

Document Number

All types of invoices require a unique invoice number for it to be a valid document. If a supplier generates and transmits an invoice without a unique invoice number, it cannot be used for a financial transaction. Clients need not bother using such an invoice for payment to prevent future problems. However, a bill does not need a bill number. A bill can be a simple piece of paper that carries the total due without any breakdown.

Dates

An invoice needs to have dates. Three dates are usually found on an invoice: invoice date, delivery date, and invoice due date. The absence of the invoice date can render an invoice invalid. It is not a requirement for a bill to contain dates. However, in some cases, a bill may have the date of issuance.

Seller and Buyer Information

Valid invoices contain seller and buyer information details. Such information includes business name, addresses, contact details, and more for both the seller and buyer. However, a bill usually doesn’t require either info for it to be valid. Nonetheless, some bills may contain the seller’s name, sign, or logo.

Due Dates

An invoice has a due date that is often different from the date the business sent it. The business writes the due date as Net 30, Net 60, or Net 90. That means the receiver has 30 or more days, depending on the number to repay the amount they owe.

A bill is due the moment the business issues it and the recipient have to clear it immediately.

Frequency of Issue

Businesses issue invoices for services that the buyer is likely to buy again, in a consistent manner. For instance, a business with a recurring monthly subscription to accounting software can receive an invoice.

However, if the same business buys a customer dinner, the hotel or food delivery business will write a bill for them. In that regard, a business needs to issue a bill for it to get paid faster.

Credit Transactions

Businesses invoice their clients when those clients get goods or services on credit. However, if the clients are doing one-time transactions, then the business will issue an invoice. Issuing a bill means the business will get paid faster.

Business Relationship

Invoices are issued when the business and customer have established a business relationship, and have a contract. On the other hand, a bill can be issued to a random customer that has no contract with the business.

Statement vs. Invoice

An invoice is not a financial statement, but an invoice appears in the financial statement as accounts receivable. A financial statement is a record of all transactions within a fiscal period. It includes an income statement, cash flow statement, and a balance sheet.

Statement vs. Bill

A statement is issued to itemize invoices that a client has not paid, but a bill indicates a single payment that a client has to pay. Therefore, a bill is treated as accounts payable, but a statement isn’t recorded as an accounting transaction. Therefore, a statement is issued for informational purposes only.

Invoice vs. Bill – Customers and Businesses

In summary, from a business perspective, an invoice is generated and sent out. On the other hand, a bill is received for goods or services the business has received. Therefore, sending out an invoice means the business will get paid while receiving a bill means the business will pay for something.

And from a client’s perspective, a bill means they need to pay for a service of goods immediately. Often the bill indicates how much needs to be paid, and once the customer pays, they can receive a receipt.

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