Is an Invoice the Same as a Bill?
All businesses have to deal with the financial and administrative side of things when running their enterprise. This includes making documents like invoices, bills, and receipts. These documents contain similar information about the customer's order to the vendor. However, they all serve different purposes. In this article, we discuss the differences between invoice and bill and see what applies in what situation. We hope you learn about the meaning and the functions of each of these documents.
Below, we’ll cover:
- Defining A Bill And An Invoice
- What’s the Difference Between an Invoice and a Bill?
- Billing V.S Invoicing: Use Cases
- Frequently Asked Questions
Defining A Bill And An Invoice
Invoice refers to an accounting document made by the business vendor for their client, detailing all the goods and services bought by the client and the cost of each item, and the applicable tax.
The invoice is used for the following purposes:
- An invoice represents the business transaction between the vendor and the client.
- It serves as a request for payment for all the goods and services rendered to the client by the vendor.
- The invoice documents important details for record-keeping and auditing purposes.
A bill refers to a document that details the amount owed by the customer for all the goods and services purchased by them. A bill can be written or printed out as a statement of charges.
A bill is used for the following purposes:
- A bill is generally issued right before a payment is made.
- A bill is a record of the transaction for both the client/buyer and the vendor for all the goods and services bought.
- The bill also serves as proof of ownership for the goods and services purchased by the client.
- When you issue a bill, it is mandatory to enter the transaction in your accounting book, which helps immensely with auditing.
Now that we have the basic definitions out of the way, it is time to know why these documents are different and where you should be using them.
What’s the Difference Between an Invoice and a Bill?
While they are used to present similar information, a bill and invoice are used for different purposes and situations. An invoice is generated when a business is providing a service to a customer. It represents a payment request. Whereas a bill represents a document for the client detailing all the goods and services they have to pay for. The invoice turns into a bill for the client.
Billing V.S Invoicing: Use Cases
There are different situations and use cases for billing and invoicing. As a business enterprise, it is crucial to know the difference between documents.
An invoice can be given when the client has made an order and requests an invoice to know the total costs of the purchase. The invoice works as proof of sale and requests for payment from your end as a business vendor. You can send an invoice when you get a bulk order from another company. The invoice is often used when there is a resale opportunity and reorder of goods and services.
A bill, on the other hand, is a document that represents the transaction that the client has to make to pay for the goods and services bought. Bills are often used for a one-off order. They serve as proof of purchase for the client and record the purchase in their personal record books.
This is the cycle of documents for a bill and an invoice:
The business vendor sends the invoice to the client/customer- The client/customer receives the invoice as a bill- The client/customer pays the amount owed- The business vendor records the proof of payment with a receipt.
The cycle clearly demonstrates how an invoice transforms into a bill as the document changes hands.
Hopefully, this article has helped you understand the critical differences between a bill and an invoice. These are essential business documents that every enterprise needs to get right. While MS Office has a wide range of templates, we encourage you to try other free online templates like the one from WeInvoice.
WeInvoice has a wide array of templates as well as invoice generators, making the process of billing and invoicing very simple. With templates from WeInvoice, you save time and energy in designing a whole new invoice or bill.
Frequently Asked Questions
What is the best way to send a bill or invoice to a client?
The most professional way to send an invoice is via email or by post. We also advise you to attach a brief note describing the essential points of your invoice. We recommend you send your bill and/or invoice in a PDF format to ensure that it is safe from tampering.
What kind of template should I use for drafting my bill/invoice?
You should draft your bills and invoices in a way that suits your needs and requirements. If you are a freelancer, you should choose templates designed to present a services bill. Similarly, if you are a small business, you should look into a shipping or sales template to record your payment. You can either use the in-house designs on MS Office or go to WeInvoice for a wide choice of templates. WeInvoice gives you free downloadable templates that can be used for multiple purposes.
Where should I be making my invoice/bill?
We suggest you use MS office or online templates on WeInvoice to make your bills and invoices. Making your financial documents on these platforms is easy, stress-free, and fast. We have universal formats that are acceptable everywhere. Creating an invoice on Excel helps you keep and present all the necessary information in a presentable format.
You can save the spreadsheet in multiple formats and share the invoice with clients easily. Similarly, WeInvoice helps you generate invoices and bills quickly with their pre-made templates.