Invoicing and Billing: The Twin Pillars of Business Finance

‘Invoicing’ and ‘billing’ are the widely used terminology in accounting. Normally, they are used interchangeably even in accounting practice, but the reality is that both the terms are distinctively different. This revelation might shock you, or you may think we are factually incorrect, right? Read this blog until the end and decide what is right and wrong. 

What is an Invoice? 

An invoice is a document that a supplier shares with a buyer for the goods or services rendered. Whether a freelancer or managing a multinational company, this document can help you manage cash flows, track sales, and maintain up-to-date records. 

Format of Invoice 

• The word ‘Invoice’ should be the heading and must be displayed prominently 
• Seller’s name, address, and contact information
• Buyer’s name, address, and contact information
• Invoice date and number
• Description of goods or services rendered
• Quantity of the item
• Price of each item or service
• Any applicable GST 
• Discounts (if applicable)
• Fees (if applicable)
• Total amount due
• Payment terms and due date
• Payment methods accepted

Types of Invoices

Invoicing is an integral part of business operations as well as accounting. There are different types of invoices, depending on the application; details are as follows: 

1. Standard Invoice: 

A generic invoice includes details such as buyer’s and seller’s information, item description, price, and payment terms.

2. Commercial Invoice: 

This type of invoice is generally used in international transactions and includes details such as country of origin, harmonized system code and country of origin.  

3. Proforma Invoice: 

A proforma invoice is an invoice sent to the potential customer before providing goods or services. It serves as an estimate, helping the buyer determine the cost of goods or services to be rendered. 

4. Recurring Invoice: 

A recurring invoice is used when goods or services are provided at a regular time interval, such as monthly or quarterly. 

5. Credit Invoice: 

When an error in the invoice previously occurred, a credit invoice is issued to correct such errors. Also, in a case where goods are returned but payment is not refunded, a credit memo invoice is issued. 

You can generate all the above types of invoices using our online invoicing software. 

Also know about common invoicing mistakes you should avoid

What is a Bill? 

In business transactions, a bill is a document that a supplier sends to the consumer to obtain payment immediately for the goods or services rendered. This document serves as proof of transaction between the two parties, stating the amount to be paid and applicable taxes. 

What is Billing? 

Billing is the process of generating bills, sending them to the client, and collecting payments. 

Types of Bills 

There are various types of bills a business may encounter in day-to-day operations, details of which are as follows: 

1. Purchase bill

The vendor issues This type of bill to the buyer against the goods or services sought. 

2. Utility bill 

Utility companies issue utility bills to collect payment for electricity, gas, or water consumed in a given time period. 

3. Subscription bill

This type of bill is issued at regular intervals against the goods or services purchased by the supplier. 

4. Tax Bills: 

This types of bills are issued by tax authorities to get payment of unpaid taxes. 

5. Credit card bill

At a predetermined date of the month credit card companies issue credit card bills for payment against the credit availed by the customer during the given period. 

Online billing software like Munim Accounting & Billing helps you generate almost all the types of bills a business may require. 

Format of Bill 

• Name and contact information of the supplier
• Date of bill
• Invoice number (for tracking) 
• Description of goods or services provided
• Quantity of goods or services
• Unit price 
• Applicable GST
• Total amount due
• Payment terms, including due date 
• Acceptable payment methods
• Any applicable taxes or fees
• Any discounts or credits applied
• Buyer or bill recipient’s contact information

Difference Between Invoice and Bill

Invoice	Bill
Issued by a supplier to seek payment	Payment is released after receiving the bill
Can be issued before or after the goods are supplied	Issued after goods or services are delivered
Invoices are issued by mainly service-industries, online retailers	Bill are issued by restaurants, retail outlets and super markets
Serves as a formal request to release payment	Payment is paid upfront
Detailed information about the transaction is provided	Very limited information about the transaction is provided
Primarily used in B2B transactions	Primarily used in B2C transactions
Used to track sales and manage cash flow	Used to track expenses

Over to You 

That was all about the difference between invoice and bill. We hope after this blog you understand the clear distinction between them. If you are looking for invoice software for small businesses then you should consider check out Munim Accounting and Billing software. It has all the features that you need to generate invoices and bills. Also, you can share invoices via Whatsapp. 

FAQs on Invoicing and Billing 

Is the invoice number and bill number the same​? 

From a formal accounting perspective, invoice number and bill number are different and so is the meaning of the numbers. However, oftentimes invoice and bill are used interchangeably, particularly in small business, in that case both numbers would have the same meaning.  

Can invoice date and e-way bill date be different​?

Yes, the date of an invoice and the date of an e-way bill can vary, not an issue. It is advisable to generate e-way bills before goods are dispatched. 

What is the difference between a bill of supply and a tax invoice​?

The difference between bill of supply and tax invoice is as follows: 

Tax invoice: It is used in regular GST transactions for taxable supplies. 

Bill of supply: It is used by businesses under the composition scheme or for exempt, or non-GST goods or services. 

What is bill discounting​? 

Bill discounting is the process of getting financial support against the unpaid invoice but at a discounted rate. This service is provided by the banks, NBFCs and private companies. 

What is billing reconciliation​? 

Billing reconciliation is the process of matching invoice data with bank statements to ensure that all the payments are received timely. During the process if any unpaid invoices are found then a reminder is sent to the client.