Is an Invoice the Same as a Bill? With Definitions and Examples

A pro forma invoice is an agreement between a buyer and seller to provide goods or services by a specified date and time. In contrast, sales invoices are for services that have been provided. Essentially, an invoice is a document detailing the specifics of a business transaction between a buyer and seller. It includes the product or service to be provided and the price to be paid, often in conjunction with a purchase order.

Invoicing might sound like a purely empirical task, but getting invoices done efficiently is actually a lot less formulaic than it seems. For products and services where the price tag isn’t set in stone from the beginning, a customer might request a quotation from a vendor to estimate the cost. Both bills and invoices are sent by the seller after a sale is made but before the payment goes through.

Specific terms of payment

The date of an invoice sets the countdown for the customer to fulfill his obligations. Since we have already talked about the meaning of an invoice, let’s outline how an invoice differs from other business documentation. As you can see, invoicing can fulfill a wide range of business tasks. It provides clear information on the order for both parties and leaves practically no room for fraud. Invoices can serve as reliable mediation of possible disputes between the buyer and seller. This way, the chances for fraudulent activity on both sides are considerably diminished. Recommerce is the selling of previously owned items through online marketplaces to buyers who reuse, recycle or resell them.

The computers are already packed and ready to be delivered since Mr. Smith has given his confirmation. In other words, a sales invoice is usually made in the final stage of the bargain, while a pro forma invoice does not necessarily guarantee a successful deal. This is why sales invoices have entries in the accountant book, while pro forma invoices don’t. They https://www.bookstime.com/ are typical for large-scaled projects where payments are carried on across multiple bills. It is convenient for the seller, as there’s no need to wait till the end of the project to collect the revenue. Customers can monitor their budget and regulate the cash flow considering the invoice data. Most often, invoices are for services rendered or goods delivered.

What is an Invoice? (Example and Template)

At Clover, our PCI-compliant payment processing solutions include powerful invoicing tools to help you get paid as quickly as possible. In fact, our invoicing feature already comes preinstalled in your Clover® Virtual Terminal.

It can also be useful to use an invoice template to keep a consistent, professional, and branded style. Past due or memo invoiceThis is a reminder invoice sent if a customer is late in paying. This demonstrates a commitment to a certain price, but the invoice is not yet What is an Invoice due for payment. Pro forma invoiceProvides an estimate or quotation before goods or services are purchased. An invoice and a bill are essentially the same, seen from different perspectives. Once the customer receives the invoice, it becomes a bill that they must pay.

What you can do with invoice software:

This makes it possible to find out when a good was sold, who bought it, and who sold it. Specialized SaaS companies ensure that invoicing is now automated, secure, and instant, so you can invoice on the move. Invoicing later evolved to hand-written invoices on animal skin, parchment, or paper. These invoices contained most of the elements of a modern invoice and used signatures or seals.

• An invoice is a document sent from a business to a customer or client requesting payment after a good or service has been delivered.
• Invoices are often referred to as “sales invoices”, “bills”, or “statements”.
• For instance, if a customer orders the same three items from you every month, you can set up a recurring invoice for those three items that goes out each month on a particular date.
• Manual, paper invoices are both slower to deliver and process at the other end.
• Some invoices come with a “pay now” option, allowing customers to use a variety of payment types to make an immediate payment.
• Most customers prefer to pay electronically and modern systems are built to accommodate them.

However, a contractor remodeling a home would likely work over several months, bill at set milestones, and have the customer pay for materials used. Electronic invoicing can decrease that stack of outgoing, paper invoices that just keeps growing.

Payment Terms and Conditions

This way, you can not only keep an eye on your cash flow but also estimate future earnings. Modern invoicing software products from SaaS companies enable you to automate, speed up, and manage the invoicing process so that you get paid on time.

Companies need to deliver invoices in order to demand payments. An invoice is a legally binding agreement showing both parties’ consent to the quoted price and payment conditions. It’s worth keeping in mind that invoice templates are not standardized. While most should include the same elements, modifying your invoice template to match your needs is still recommended.

Make note of any deposits or previous payments made by the customer

In the field of corporate accounting, the potential for fraud can never be entirely ruled out. Invoice fraud occurs whenever a criminal pretends to be a genuine supplier and asks a client business for “payment” for services or products that were never delivered.

The client will get an invoice with a link to submit the payment in one click. Besides, the mobile app has a reminder function so that none of the invoices will be forgotten by your clients.

Receipts defined

It is a summary of the goods and services that the buyer is planning on purchasing from the supplier. Tax invoice that clearly states the amount of tax it includes. On the other hand, if you’re not charging GST or VAT, you should issue an invoice that clearly states “No GST / VAT has been charged”. Depending on the invoice, this can be any amount of time, but standard times are net-30, net-15, and net-10.

• Traditionally, invoices were paper documents, but now are commonly sent electronically.
• However, when a company and its customer agree onterms and conditionsin a legal contract, they can be held accountable for payment in exchange for goods or services.
• Invoices must be time-stamped with the dates on which the goods were billed and the transaction was officially recorded.
• This, in turn, can help you to stave off added interest, fees, and other penalties.
• Once the customer receives the invoice, it becomes a bill that they must pay.

Fortunately, creating and managing these critical business documents doesn’t have to be difficult. An invoice is a document issued by a seller to their buyer that itemizes and sums the cost of their transaction. Beyond requesting payment, an invoice is used for keeping transaction records, accounting, tax documentation, and legal protection. Invoice payments are submitted by customers to pay for products and services. Invoice management involves sending invoices to customers, and managing payments of invoices received.

The billing address is the registered address of the company or customer. Recurring invoiceThis type of invoice is used for ongoing payments, such as rental contracts or ongoing services. TimesheetA timesheet-style invoice is used to bill a customer based on hours worked rather than goods or services provided. Invoices are an essential tool when it comes to internal controls. They ensure that all charges are approved by responsible parties, and that there’s a clear paper trail between payments and where they originated.

Five thousand years after the Sumerians invented invoices, we’ve added a couple bells and whistles to make record-keeping easy, but that much remains the same. Way back before indoor plumbing, paper, or even the alphabet was invented, humans were sending each other invoices to keep track of their accounts. Further implementations are underway in the Scandinavian countries as result of the North European Subset project. Implementations are also underway in Italy, Spain, and the Netherlands (UBL 2.0) and with the European Commission itself.

What Is the Definition of Invoice?

Including the order number on the invoice also allows the customer to file a comprehensive record of the transaction. This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. If the customer takes the extra time and arranges to pay by wire, they pay a wire fee to their bank, and the seller pays a fee for receiving a foreign currency wire.