Billing versus Invoicing: What’s the Difference?Download Now: FREE GST 2023 GuidebookDownload Now: FREE Employment Pass ChecklistDownload Now: Free Incorporation Checklist
Entrepreneurs often struggle to understand the difference between billing and invoicing. In this article, we will clear up the confusion and explain exactly what a bill, and an invoice is, and the difference between them.
What is a Bill?
A bill is a document that states the total amount that owed by a customer for the products or services purchased. A seller gives the customer the bill at the time at which the product or service is provided. A bill is legal evidence for both the buyer and seller that a transaction took place.
What is an Invoice?
An invoice is a legal document that is also a professional request for the collection of money. Businesses can provided it to their clients after the requested service has been completed, a significant milestone of the service, or the delivery of a product.
Invoices generally contain the following information:
- When the payment is due
- When the service was completed, or goods were purchased
- The cost per unit, payment terms, shipping charges, and any other terms related to the transaction
- The name and description of the goods or services rendered to the customer
- The invoice number
- Business and customer contact information
What Are the Main Differences between Billing and Invoicing?
Bills are most commonly used for one-time and up-front payments. Grocery stores, merchandise stores, restaurants, and other retailers where the customer pays the money upfront, typically use bills. For example, a restaurant gives you the bill for your meal and you have to pay it before you leave.
On the other hand, businesses can use invoices for either one-time or recurring payments. They can also issue invoices for goods and services sold on credit.
Can a Bill Be an Invoice?
Yes and no. Specifically, a business sends an invoice to a customer, while the customer receives it as a bill.
Now that we have outlined the main differences between invoicing and billing, here are four tips to improve your invoicing system:
Tip 1: Offer Subscription Pricing
When you offer subscription pricing, clients are automatically billed every week, month, or at any other frequency they prefer. This significantly improves your invoicing system and helps your company maintain a more balanced cash flow throughout the year.
Tip 2: Accept Online Payments
One of the most significant impacts that technology has had on our lives is the option of online payments. If your business does not accept online payments through methods like wire transfer, credit cards, EFT, PayPal, among others, you are making it more difficult for your customers to pay you easily. Furthermore, the more difficult it is for customers to pay you, the less likely it is that they will do so.
Being a business owner is already challenging enough, so we recommend saving yourself extra trouble by adopting online payments.
Tip 3: Use Invoicing Software to Automate your Invoices
Invoicing software allows you to automate your invoice generation so that, amongst other things, they are sent out on a fixed, recurring schedule (e.g. on the first day of the month). This saves you a lot of time when managing relationships with repeat clients of your company.
Moreover, since invoicing software allows you to automate much of the process. As such, there is a far lower chance that the wrong payment or contact information will be entered, thereby improving your invoicing process and increasing the likelihood that you will be promptly paid.
Tip 4: Give Discounts for Early Payments
An effective way to increase the chances that your customers pay you promptly, is to offer them discounts for paying their invoice early. However, do be sure to agree on the discount amount and time frame for the discount to be applicable, before the customer completes the transaction.
Sprout with Us!
Sprout Asia wants you to focus on what you do best, while we take care of the rest. That is why we offer budget-friendly accounting services, so that our experts can keep tabs on your invoices and manage your finances with ease, so you never miss out on a due invoice.
Feel free to reach out to us with any questions you may have about our services, and we will respond to you within 24 hours.