Whether it’s an invoice or a bill, both are the vital part of a business. No sale of a product or service can take place without releasing the invoice and bill. Both have legal identities, too, in the eyes of the law.
If the seller does not deliver the product mentioned in the invoice, the customer can claim back the money or loss. Similarly, if the customer does not make the payment on time, the seller can get the money, presenting the bill on a legal platform.
Is there any difference between an invoice and a bill?
Invoice and bill are indeed used interchangeably, but both have some differences. Whether you run a business or you are a customer of many products in the market, you should know this difference. Read further to know what is the difference between a bill and an invoice
Invoice vs Bill – Let’s know what separates them?
Several points can separate invoices and bills. But before we know the difference, knowing the meaning of both is essential.
Invoice – An invoice is a bill of due payment sent or given by the seller to the consumer. But it is also a transaction document given by the seller after receiving the payment as proof.
Bill – A bill is an authentic document that authenticates the sale of a product or service. It has the mention of the product sole and the total due amount that the customer has to pay to the seller.
|The seller sends an invoice with all the necessary details. Product sold, price, added tax, etc.
|When a customer receives an invoice, it becomes a bill. The details will be the same as the invoice. The difference occurs due to the person receiving it.
|Businesses can use an invoice to obtain invoice finance. The purpose of the funds is business growth.
|A customer receives a bill, and he can never use it to obtain funds. He just needs to pay for it.
|A seller can also receive a bill, but only if it purchases anything from another business. For example – a fast fashion company purchases raw materials from another business owner. After purchase, the fashion company will receive a bill.
|A customer will always receive a bill and will pay a bill. There is no change in his role, as he is not a business owner either, doing some other business. Only a business can generate an invoice.
|Invoices are issued before the customer makes the payment. It is a formal request to the customer to make a payment.
|Bill is issued after the payment, and it works as substantial evidence for sales ledges in a business.
|Some details can be different in an invoice than in a bill. These are the name of the item sold, quantity, applicable taxes (if any), and discounts.
|Bills include the amount owed, applicable taxes, payment terms or fees.
|Invoices help businesses to keep track of the amount due from the side of the customer. Also, it gives an overview of the total products sold to varied customers.
|Bills help customers keep an account of their payments. They can match the product mentioned in the document. It also helps businesses keep a record of the amount paid.
|An invoice is an invoice until it is in the hands of a business or business owner.
|An invoice turns into a bill the moment it reaches the hands of a customer who is supposed to make the payment.
Uses of an invoice
An invoice has many benefits for a business and knowing them is even more beneficial. Take a look at the points below.
- Record of pending payments – it is vital to know about pending payments. One missed payment can derail the balance of profit and loss. No business can afford to miss the payments.
- Pledge to obtain funds – If a business is going through a money crisis, invoice can be pledged to obtain working capital loans. It is quite a common funding source called invoice finance.
- Legal protection against fraud customers – If a customer does not make the payment at the right time, the invoice acts as the legal shield. A business owner can present it even in court if any issues happen.
- Time-saving – Nowadays, sellers release online invoices, which is always beneficial when it comes to saving time. It is why businesses sell things abroad and receive payments online conveniently with the help of invoices.
Benefits of a bill
A bill, too, has many uses. However, it can never be used to obtain invoice finance or growth capital loans, but there are many other uses. These are there–
- Customers have a legal proof of payment made – A bill is proof that he has paid a bill. It is because a bill is a document of a payment made by the buyer.
- Match the product in the bill – A customer can match the product mentioned in the bill. Sometimes due to a mistake, the product mentioned in the bill differs from the one in the invoice or received by the customer.
- A legal document – Yes, the bill has significance as a legal document. If the customer thinks the seller has ditched him, he can use it in court. Also, it is proof that he has taken all the protection for the payment.
- Save time and money – Online billing saves time, and by showing a bunch of bills, an old customer can also get a good discount on future purchases. Thanks to billing, getting credit points or shopping vouchers is a common trend.
After grabbing the information above, you will surely be able to gather some good points of difference between an invoice and a bill. We know the confusion is widespread. It is good to find a closure to this confusion. An invoice is an essential document for a business. On the other hand, a bill is an important piece of paper for a customer. But both have legal authenticity and can be used to claim the right in case of any issue.
Harry Kane is a financial writer and author who has covered wide topics related to business loans and finance for the last decade. He has been working as the Chief Contributor in finding out deals on various business finance products covered by Thebusinessfunds, a reputed business loan broker firm in the UK. The primary work of Harry is to analyse the loan requirements of various businesses according to their circumstances and affordability. He directly communicates with the loan aspirants and guides them to get the right loan matching their needs. He has a vast experience in finance writing, working with many major business firms in the UK. At Thebusinessfunds, Harry also used to write well-researched blogs covering the financial problems of business loan aspirants and providing relevant solutions. He is a postgraduate with MSc. in Banking and Finance.