While invoicing and billing are intertwined, they are distinct business processes. The difference between them comes down to scope: invoicing is only one part of the billing process. Knowing how these two work together in the payment process can help you avoid confusion when you direct your team and handle financial obligations.

As billing and invoicing software gains popularity, the market is expected to grow from $12.64 billion USD in 2025 to $22.14 billion USD by 2034. Below, we’ll explain how invoicing and billing are used differently, how Stripe can help with them, and common misconceptions about them.

What’s in this article?

• What is invoicing?
  
• What is billing?
  
• How are invoicing and billing used differently?
  
• What are common misconceptions about invoicing and billing?
  
• How does Stripe help with invoicing and billing?
  

What is invoicing?

Invoicing is the process of creating and sending an invoice to a customer or client to request payment for goods or services provided. An invoice typically includes detailed information such as an invoice number, date of issue, business and customer information, a description of goods and services, and payment terms. Invoices are formal requests for payment and important financial documents for recordkeeping, accounting, and tax purposes.

What is billing?

Billing is the overall process of managing owed payments. It includes the invoicing process and additional steps such as tracking transactions (sales or services rendered to customers), calculating amounts due, and monitoring and processing incoming payments.

How are invoicing and billing used differently?

Invoicing involves a business asking for payment in exchange for a product or service. The business sends a document (an invoice) that outlines how much the customer owes. A freelancer, for example, might send an invoice to a client after completing a project, or a store might generate an invoice for a bulk order from a customer. In essence, invoicing is about charging a customer for a transaction.

Billing encompasses the overall process of tracking, organising, and managing what customers owe. It includes invoicing as well as activities such as tracking accounts, sending payment reminders, and recording when payments are made. Billing is essentially about the entire system of payment management.

What are common misconceptions about invoicing and billing?

While invoicing and billing are common business terms, there are some common misconceptions about each process.

They’re the same thing

Many might think invoicing and billing are interchangeable, and while they do overlap, they ultimately describe different business processes. Confusing the two can lead to messy accounting and miscommunication.

Invoices guarantee payment

An invoice is just a request for payment. Payment delays or non-payment can be common issues, especially with freelancers or businesses that work on credit terms. The money isn’t guaranteed until payment has actually been completed.

Automation fixes everything

While invoicing and billing tools offered by platforms such as Stripe can provide automation, they don’t solve every problem. If you don’t set clear terms, double-check details, or address disputes promptly, even the most automated system Won’t save you from errors or payment delays.

Invoices are only for big companies

Some small businesses or freelancers might think they don’t need to issue invoices and can simply ask for payment in an informal way. But this approach can hurt the business’s reputation, make it harder to track Income, and complicate Tax filing.

Billing is just for utilities and subscriptions

Some might associate billing with utilities or recurring charges, but it applies much more broadly. Any business that invoices for goods or services needs a billing process. Businesses that ignore this might fail to properly track what they’re owed.

All payment terms are the same

Some businesses might be operating under the assumption that invoices should always have a standard 30-day payment term. In reality, businesses should customise their terms to the transaction type, client relationship, or cash flow needs. And offering flexible options or incentives for early payment can make a big difference.

Invoices have to be paper forms

Some might think invoices need to be physical documents. But digital invoices are faster and easier to track, and customers often prefer them.

Customers understand what to do

Some businesses might assume their customers know how to handle an invoice. But unclear or overly complicated invoices can cause confusion and payment delays. invoices should always include simple language and instructions on how to pay (including due dates and penalties).

You don’t need to track paid invoices

Even after an invoice has been paid, you should still track it. A record of paid invoices helps with making tax deductions, resolving disputes, and building trust with suppliers.

How does Stripe help with invoicing and billing?

Stripe integrates invoicing and billing into one unified platform. This means you can manage everything – one-off invoices, recurring subscriptions, payment tracking, and tax compliance – without needing to switch between tools. Here’s how Stripe can help with both invoicing and billing processes:

• Flexible billing models: Businesses can implement one-time charges, recurring charges, or a mix of both. It’s also easy to create prorated charges or trials, if needed.
  
• Customisable invoices: With Stripe, you can easily create professional, branded invoices. You can customise templates to include your logo, colours, and payment terms.
  
• Tax handling: Stripe integrates tax calculation directly into its billing system and automatically adds the correct tax rates based on the customer’s location.
  
• Automated invoicing: Stripe can automatically generate and send invoices to customers. For recurring customers, you can set up automated schedules or subscription payments, whether they’re for a flat monthly fee, usage-based pricing, or tiered plans. You can upgrade, downgrade, and cancel these subscriptions as needed.
  
• Invoice payment options: Customers can pay directly through Stripe invoices, with payment options including credit cards, bank transfers, digital wallets, and more.
  
• Payment security: Stripe is PCI-compliant and has strong security features to protect sensitive payment information. This can help reduce the burden of compliance and ensure customer data is handled securely.
  
• International payments: Stripe supports payments in multiple currencies and languages, which is especially helpful for businesses that operate internationally. It automatically handles currency conversions.
  
• Analytics and reporting: With Stripe, you get detailed reporting on all your invoicing and billing activity. This includes tracking revenue, monitoring unpaid bills, and forecasting Income.
  
• Reminders and dunning management: Stripe automates payment reminders for unpaid invoices and automatically retries failed payments on a set schedule.