‘Invoice’ and ‘bill’ are two terms that are often thrown around by businesses, customers, and accountants alike, and it’s pretty common for the terms to be used interchangeably. However, while invoices and bills do have a few things in common, they aren’t entirely identical.
In this blog post, we take a closer look at the terms ‘invoice’ and ‘bill’, and we explain the difference between invoicing and billing.
How do you define ‘invoice’ and ‘bill’?
Before explaining the differences between an invoice and a bill, it’s important to understand how they’re both defined.
Definition of an invoice
An invoice is a document that a buyer sends to a seller to outline the details of a sale and usually follows a specific invoice template.
Invoices are considered to be official, legal documents, which means that there are certain ways that invoices should be handled. For example, you shouldn’t delete or edit an invoice that’s already been sent to a customer, and you need to be careful that your invoices are all numbered a complete, sequential order.
Definition of a bill
Like an invoice, a bill outlines how much money a customer owes a business. However, whereas an invoice refers to a very specific type of document that contains set pieces of information, a bill is more of a generic term that could apply to a number of different documents – including invoices.
Invoice vs. bill: main differences
One of the main differences between an invoice and a bill is the information it contains. As mentioned, invoices usually follow a set invoice template that includes:
- The word ‘invoice’
- A unique invoice number
- The date of issue
- The invoice due date
- Your business name or trading name, address, and contact details.
- Your customer’s contact details
- Details of the goods or services provided (including the price and a brief description)
- The total amount due
Invoices may also need to contain information about sales tax (e.g. VAT and GST) or industry-specific deductions, such as CIS.
On the other hand, while bills also include details about prices and taxes, they don’t usually contain information about the customer (except perhaps a table number if issued in a restaurant).
Similarly, while invoices must always be assigned an invoice number that is used for financial reporting, tax purposes, and accounting, many bills aren’t numbered, and if they are, these numbers are usually only used for the business’s own administrative records.
Another key difference between an invoice and a bill is that invoices are usually issued for sales provided on credit, whereas bills are more commonly used for transactions that are completed in one go (that is, the buyer pays when they make the order and receive the goods or services).
For example, if you get a haircut or order a meal at a restaurant, you’ll probably be given a bill that needs to be paid up-front, but if you commission a graphic designer to redesign your company’s logo, you’ll almost always be sent an invoice that needs to be paid at a later date.