The Similarities and Differences Between Invoices and Bills
When it comes to owning your own business and handling finances, there are a lot of terms that are often mixed up and confused with one another. One of these pairs is invoices and bills. Although these two terms may have similarities, they also have their fair share of differences. It is important to know the difference between an invoice and a bill to successfully keep track of your finances and to contribute to the financial success of your business.
An invoice is a document that a buyer will forward to a seller with the details of a sale. Oftentimes it will come with a list of the products and services purchased including prices and descriptions of the products and services. Invoices follow a specific template as they are considered to be official legal documents. They are accounted for by a number on each invoice, and many services will show when a party has viewed or taken action on an invoice.
A bill is also a document that summarizes the particulars of a sale between a buyer and a seller. The main difference is that a bill is a more generic term and doesn’t necessarily hold as much information. A bill can be a variety of different types of documents whereas an invoice follows a specific template, allowing room for more details. It is important to remember that an invoice is a bill but a bill isn’t always an invoice.
Invoices and bills are both financial statements that record the details of a sale between a buyer and a seller. Both of these are sent from one party to another with the intent of receiving a payment in return for the product or service purchased.
While it may not seem important to know the difference between two very similar terms, it is imperative when completing transactions in a business environment. An invoice contains specific information that is not necessarily in the generic bill such as a unique invoice number, the date that the invoice was issued, the due date of the invoice payment, the business name, address, and contact information, the customer’s contact information, details and prices of the goods and services provides, and the total amount due. Invoices also include specific information about taxes and deductions.
On the other hand, bills tend to leave out details and contact information about the customer. While bills do include prices and taxes, many bills aren’t numbered, and if they are they aren’t used for tax and accounting purposes but rather the business’s own records. Bills are often issued for transactions that are paid as soon as the buyer makes a purchase while invoices are often issued for sales provided on credit and are expected to be paid at a later date.
Whether you are issuing an invoice or a bill, you should be meticulous in ensuring that the correct details are listed. An estimated 15% of invoices are paid late due to the information on the invoice being incorrect. Another tip: be sure that if the invoice is being issued to a buyer in a different region to research the policies and requirements of that specific region, as some policies vary.
Navigating the differences between two important documents that are seemingly the same can be difficult, but putting in the time and effort to do so can help you to be more mindful of your transactions and bookkeeping habits.
Hire JDM for your bookkeeping needs and allow us to navigate the differences between your invoices and bills!
