Invoices and Bills: What is the difference?

. 6 min read
Invoices and Bills: What is the difference?

The terms invoice and bill are used interchangeably with the assumption that they refer to the same document. We are here to tell you that’s not true. If you are a product supplier or service provider or someone who hires people/companies, invoices and bills are standard practice for you, and it is imperative to know the difference. We will also be looking at the best practices for creating invoices and bills.

What is an invoice?

An invoice is a document created by businesses to be sent to their clients that comprise accounting details. With an invoice, clients learn about the cost of the service rendered and the products purchased from the business. In addition, it explains the scope of work. It means how much work has been provided by a business to its customer and more.

Not only that, with the help of an invoice you can mention your terms and conditions. In this way, you can offer better clarity to your customers about your way of doing business.

businessman checking the invoice on laptop

Just assume you can to make sure that every customer you deal with offers you a 100% or at least 50% advance. So with the help of an invoice, you can add this point in your terms and conditions and hence everybody would know about it.

The primary reason behind creating an invoice is to ask for payments from the clients. A business can make changes in their invoice as per their requirements, For example:

  • If the business wants to receive complete payment for a service provided in advance, they can create an invoice.
  • If a business wants to get the payments in parts, they can add terms and conditions to their invoice and get paid accordingly.

One of the most significant benefits of invoices is that you can mold them as per your requirements. Also, with the help of an invoice, you can give your clients a deadline to submit the payment, and you can keep the invoice as a record for your books.

What is a bill?

A bill is a document that lets you know how much money a customer owes a business. Whether the customer is buying a pen or a car, a bill can get generated by every small to large item.

A bill can be used to keep as a record for bookkeeping purposes.

The difference between a bill and an invoice: Could a single document be both?

Here’s the connection between an invoice and a bill most people are unaware of: whenever you receive an invoice from a supplier or a service provider, you enter it in your books as a bill to be paid.

An invoice and a bill convey the same information about a customer’s payment to a business, person, or service provider. Hence, they can be used interchangeably in some instances. For instance, if you sold a pen to a customer, you could hand them an invoice or a bill for the purchase they made. The final purpose is that the customer is aware of the charges incurred and the deadline for payment.

Let’s talk a bit about why these two documents exist. Oddly enough, the primary thought behind creating two different terms was to rid confusion. Invoices are used explicitly by people linked with businesses and clients’ services. On the other hand, bills are linked explicitly with government works or products from stores. So a mention of invoices is a clear indicator that the speaker is referring to a business document.

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Know more details on invoice vs bill through these facts about invoices

These facts about invoices can help you, as a business, offer a better experience to your clients and avail yourself of their advantages:

  • The earlier you share the invoice, the faster you get paid.
  • In the case that your invoices are not cleared, send polite email reminders.
  • Traditional paper invoices are becoming obsolete in the age of e-invoicing.
  • E-invoicing serves the same purpose but is sent to clients via online means. They may choose to print the invoice.
  • There are several ways to create invoices, but online software is ideal. You would only have to fill in the details in the invoice templates.
  • Purchase orders are often confused with invoices. A purchase order is an order sent by a client and is subject to change. An invoice is created after the purchase order is finalised.

Essential facts about bills

Several vital aspects to bills are:

  • Bills are records with which users can fill in taxes.
  • ‘Bills’ is a word used explicitly by specific working sectors only.
  • Several terms and conditions can be added to invoices, but bills specifically discuss the final amount for all the services rendered or products purchased.

Tips for creating better invoices

Are you struggling to create better invoices? Better invoices ensure more accessible and faster payouts.

  • Make sure the invoice is a reflection of your brand. It helps your clients view your brand as professional.
  • Make it easy to understand. What is essential gets lost in complex invoices.
  • Always define the rules through your invoice. Add your terms and conditions whenever you create an invoice; these will help you get paid on time.
Man using tablet computer with invoice location icon on a virtual screen

Tips for billing customers

We hope that our article on Invoice vs Bill  answered all your questions. For more such informational content, keep visiting OkCredit. Also, here are a few tips that you should keep in mind while creating bills for your customers:

  • Be mindful of your language when creating bills. Your customers read them thoroughly.
  • Use better tools for creating better bills.
  • Make it easy for your customers to pay you.

Also Read:

1) Pros and Cons of Cheque payments
2) All You Need to Know About Electronic Checks
3) Digital Payments: Definition and Methods
4) Differences between E-checks and Paper Checks

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Q. Are invoices and bills the same?

Ans. No, An invoice is a document created by businesses to be sent to their clients that comprise accounting details. With the help of an invoice, the clients learn about the cost of the services rendered and the products purchased from the business. It defines the scope of work that means how much work has been or is going to be provided by a business to its customer, and more.

While a bill is a document that lets you know how much money a customer owes a business. One notable difference between an invoice and a bill is that you can add your terms and conditions in an invoice, but you can’t do the same with a bill.

Q. Can an invoice and a bill be interchanged?

Ans. Yes, you can use them interchangeably in some instances.

Q. Why were two different words created for the same thing?

Ans. Invoices and bills were created to reduce the confusion as business-linked discussions consider invoices, while other sectors use bills.