Whether you send a bill or an invoice, these documents connect you with your customer. They help to build a relationship and show that a transaction between the parties has taken place.
They can help you to understand behaviours, where you can then use this information to make credit processes more efficient, as well as to help reduce the number of “invoice not paid” situations.
Encouraging payment, protecting your cash flow, and building trust, at Direct Route, we advocate for ensuring you get these documents right.
This means starting with a clearer understanding of the differences between the two and when a bill should be used compared to when an invoice should be issued.
What is an invoice?
An invoice is a detailed document that describes exactly the goods and services that have been provided to a customer, along with a breakdown of prices, quantities, clear and transparent payment terms, dates, contact details of both parties, invoice number, issue date, how customers can pay, and more.
One of the most notable differences between an invoice and a bill is that invoices are primarily used for business-to-business transactions.
Invoices are an essential document for accounting records and allow you to monitor sales, manage and keep track of stock, and record accounts receivable.
Acting as proof that a transaction has taken place, invoices are issued typically after the goods/services have been received. They are a required part of your business, acting as proof of income, and for companies registered for VAT, you are legally required to produce and provide invoices for services provided, making them a legally binding document.
What is a bill?
A bill, on the other hand, is a document that is issued immediately after the goods or services have been provided, requesting payment instantly.
Bills are typically used in business-to-consumer transactions (retail outlets) as they are straightforward and will only contain a summary of the goods purchased along with the amount due.
Differences of invoice and a bill
When we look at invoice vs bill documents:
- Invoices are commercial documents that outline the goods and services purchased and the amount due for payment. Bills are much more informal documents found in many retail businesses that request payment upon purchase.
- Invoices are much more detailed than bills, containing every small piece of information to ensure payment is made within the set timeframe (commonly net 30 days). Whereas, as bills are issued at the point of sale, they will only contain basic information about the sale.
- An invoice is an important sales document that must be kept and filed for business and accounting purposes. Providing a record of the products sold, invoices are an official document. However, bills are very generic, hold basic information, and are suited for a one-time use.
- Bills are for B2C, and an invoice is for B2B customers.
- Invoices can be generated before or after the customer has received the goods or services, whereas a bill is issued at the point of sale and used as proof of purchase.
- Invoices can be repeated if a subscription product has been purchased, compared to a bill, which is much more informal and for a one-time use.
- With bills, the money owed is due on receipt of the goods, i.e., immediately. This differs from an invoice, where the goods might have been received before the invoice is issued, with a due date set, generally at 30 days from issue.
Similarities between invoices and bills
- Both ask for payment and provide information on money owed.
- Both help with financial record-keeping.
- Both build a contractual relationship with the customer.
Credit process best practices
To avoid a company not paying their invoice situation it’s important that you have reasonable credit control processes in place to manage invoice production and follow up.
For example:
Invoice regularly – once products and services have been sold, don’t hang around, make sure to issue the invoice straight away.
Clear communication – make sure all of the information required is included on the invoice, and be clear with your wording – avoid using jargon wherever possible.
Set clear payment terms and dates – net 30 days is the most common.
Offer incentives, such as early payment discounts, etc.
Introduce personalisation
Follow up – if there is a late payment of an invoice, what is your protocol? How is this followed up?
Offer various ways to pay – remember there isn’t just a one-size-fits-all.
Work with a professional collections team to help take some of the pressure from collecting outstanding and overdue invoice payments.
Company not paying invoice
If the number of overdue invoices is beginning to pile up and your cash flow is adversely affected, speak to the team at Direct Route today.
Helping you collect outstanding and overdue invoices successfully, we use our skills and expertise to tailor a collections solution that is suitable for you.
Email our team today at memberbenefits@directroute.co.uk to see how we can help you.