What is the Difference Between Billing and Invoicing?

Friday, 11 Mar 2022

Billing and invoicing can become confusing because working professionals in Melbourne often interchange them. Since they are similar financial documents, they can often make the entrepreneur puzzled. Inability to differentiate between them can lead to accounting blunders and miscalculations.

Expert Bookkeepers Melbourne can effectively keep the bills separate from the invoices to manage financials accurately. While most of us struggle to find differences between the two, keeping them separate and spotting the dissimilarities to avoid mistakes is essential.

They may be used interchangeably, but there are times when only one term is appropriate. So, here is everything you need to know about billing and invoicing to understand which document needs to be sent to the clients and suppliers.

 What is a Bill?

A bill informs the customers in Melbourne about the amount of money they owe to the business for the goods and services received from them. It can be printed, handwritten or digital, and the customer makes the payment only after receiving the bill.

It is sent to receive payment and allows the buyer to check the total cost and as a reminder for payment. The bookkeeper ensures that the bill mentions the transaction correctly and the customers pay for it.

What is an Invoice?

An invoice is a descriptive statement about each product or individual service sold by the seller to request payment from the customer. It offers a breakdown of the total cost. It has a defined deadline for the payment, and the bookkeeper uses the invoice to keep track of the receivables.

The document follows a template and is a legal statement needed for recordkeeping purposes by the business in Melbourne and determines the total sales. Invoices are issued when the goods are sold on credit. The invoice is called an outstanding invoice during the waiting period for the payment.

If the customer doesn’t pay by the due date, the invoice becomes overdue. In worst cases, a pile-up of these overdue payments can turn into a bad debt for the business in Melbourne. Thus, the bookkeeping company keeps following up with the customers by sending reminders to make the payment.          

Points of Difference Between Billing and Invoicing

  • Generating the Documents

A bill is generated after the purchase of goods and services to get an upfront payment as the transaction is completed. They are usually used for cash transactions.

On the other hand, an invoice can be generated by the bookkeeping professional before or after the supply of the goods or services in Melbourne. The invoice is sent to request the payment for the goods and services that are delivered by a specific date.

  • Details Included

Bills have a short description of the transaction that includes the total cost and the taxes charged on the purchase. It also has customer information.  

Invoices are more detailed and have itemised costs for the goods purchased. Other information includes the date of issuing the invoice, invoice number, the payment deadline, name of the supplier and contact information, taxes, total cost and payment options.

  • Recording the Statement

Bills are usually not numbered by the bookkeeper. However, invoices need to be numbered as these need to be tracked while filing income tax in Melbourne for the business. Without their unique numbers, the invoices cannot be tracked. 

  • Usage of the Documents

While bills are needed to keep a record of the transactions taking place in the business, invoices are used by the bookkeeper to reconcile bank statements, generate financial reports and pay business taxes. Invoices are legal documents that are needed for accounting purposes and getting payments on time from the customers.

  • Examples

Customers get instant bills at retail stores, beauty salons, and restaurants when they buy a product or get serviced by them. Conversely, invoices are issued for credit transactions and have a defined due date for payment. In some cases, invoices are generated by the bookkeeper a while after the goods have been purchased, such as suppliers in Melbourne selling stock to business owners and asking for payment within the next 30 days.

Can A Bill Be Called an Invoice?

While most business professionals make the mistake of using the same term for every purchase document, it is vital to understand that the primary difference between them is that the bill needs to be paid instantly. For example, even if you receive an itemised bill after shopping at the supermarket in Melbourne for monthly groceries, it is not an invoice because you have to make the payment there and then.  

Accounting software allows bookkeepers to automate the task of issuing bills and invoicing. The bookkeeper must include a secure digital signature of the supplier in the invoice to authenticate it. If there is a dispute between the two parties, the invoice can be used as a legal document to prove the transaction. Since invoices are generally reoccurring, they can also contain the list of previous payments made by the customer.    

Conclusion

Small business owners must be aware of these small differences between a bill and an invoice that bookkeepers in Melbourne use to maintain accuracy and up-to-date books.   

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