June 06, 2016

Bills vs. invoices: do you know the difference?

Bookkeeping-101

Bills vs. invoices: do you know the difference?

The words “bill” and “invoice” are often used interchangeably, but their meanings differ subtly. All invoices are bills, but not all bills are invoices. 

What is a bill? A bill is a document that indicates how much a buyer owes to a seller. It is a written, itemized list of charges. Bills include information about the amount owed and the goods supplied or services rendered.

What is an invoice? An invoice is a type of bill with a couple specific characteristics:

  1. Invoices always state payment terms, such as the due date for payment and acceptable payment methods. Invoices also contain specifics about the quantity sold, price, and tax details. Bills often contain some of this information, but not always.
  2. Invoices are formal demands for payment. A seller might send a buyer a bill simply to let them know how much they owe without necessarily requesting payment yet. If a seller sends an invoice, they are demanding payment by the due date indicated in the invoice.

Now you know the difference between an invoice and a bill. However, it’s worth noting that usages of “bill” and “invoice” vary based on norms and customs in different countries, industries, and even individual companies.

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