In this article, we’ll answer some of the most common questions about invoicing, such as is an invoice the same as a bill?
Invoicing, or billing, is a dense subject—there are rules, best practices, and time-saving tips that you have to pick up along the way as a freelancer or small business owner. This article can help fast-track your knowledge about billing.
See also: How to make a professional-looking invoice
Is an invoice the same as a bill?
Many people use the terms invoice and bill interchangeably, and that’s totally fine. However, there is actually a difference between the two terms.
A bill is a purchase document that you get when you’re going to pay straight away. For example, if you eat at a restaurant, you’ll get the bill at the end of your meal. The bill has information about prices, sales tax, and information about the restaurant.
You pay the bill straight away, so it doesn’t have information about payment terms or about you as the customer.
An invoice, on the other hand, is a purchase document that you receive when you buy something from a business and pay later. The invoice has a lot more information than a bill, including due date, payment terms, and customer information.
| Information | Bill | Invoice |
|---|---|---|
| The seller’s logo | ✅ | ✅ |
| The seller’s details | ✅ | ✅ |
| Invoice number | ✅ | ✅ |
| Invoice date | ✅ | ✅ |
| Information about what was purchased | ✅ | ✅ |
| The header ‘invoice’ | ❌ | ✅ |
| The buyer’s details | ❌ | ✅ |
| Due date | ❌ | ✅ |
| Payment instructions | ❌ | ✅ |
The word ‘bill’ can also be used by customers about the invoice they receive from you. See? Invoicing is a confusing subject. Start using free invoicing software today to make billing easier!
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Is an invoice and a receipt the same?
An invoice is sent once goods or services have been delivered, and is used to request payment from the customer. The invoice has information about how to pay, as well as a due date for the payment.
A receipt, on the other hand, is provided to customers that have paid. The receipt shows what was sold, how much was paid, and when the payment was done. You can send the client a receipt after they’ve paid an invoice, but more commonly, receipts are provided when the customer pays at the point of the delivery, for example in a shop.
See also: Invoice versus receipt—what’s the difference?
| Invoice | Receipt | |
|---|---|---|
| When is it sent? | After goods or services have been delivered, or in a package alongside goods that are shipped | After payment has been made |
| What is the goal? | To document the sale and request payment from the customer | To document the sale |
| When is it used? | Usually for B2B sales | Usually for B2C sales |
Is an invoice the same as a purchase order?
A purchase order is a document sent from the buyer to the seller, to request specific goods and services. You can think of it as a reverse invoice. The seller looks over the purchase order, and lets the customer know if they can provide these items at the specified prices.
Purchase orders are used for B2B sales.
Once the purchase order is approved, the seller provides the goods and services. Afterwards, they send an invoice to the buyer in order to request payment. The invoice shows much of the same details as the purchase order, but it’s sent from the seller to the buyer, rather than the other way around. It also has instructions for how to pay, as well as a due date for the payment.
There are many reasons for companies to use a purchase order:
- It makes the ordering process simpler and ensures that seller and buyer are on the same page, avoiding misunderstandings and errors
- A unique purchase order number is used all the way from the PO to the invoice and payment stage, which makes it easier to track orders
- You can more easily keep an overview of what you’re spending, and you can use the information from your purchase orders to create budgets
- By setting up POs in advance, you can ensure that you have funds in place before purchasing something
Is an invoice the same as a quotation?
You’ve probably guessed by now that the answer to this is no. A quotation, or quote, is an estimate of how much something will cost.
The seller can take the initiative to send a quotation to let their customer review the details and the costs before approving. The buyer can also ask the seller for a quote to review the costs, or to compare several offers.
A quote can be as simple as a figure shared in an email or in a meeting, or a more formal document that looks similar to an invoice, but without payment instructions and due date:
See also: Quote versus invoice—what’s the difference?
Want more in-depth information about invoices? Check out the interactive article What is an invoice?
