What's the difference between an invoice and a bill?

Billing
Billing

Stripe Billing lets you bill and manage customers however you want – from simple recurring billing to usage-based billing and sales-negotiated contracts.

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  1. Introduction
  2. What is an invoice?
  3. What is a bill?
  4. What is the difference between an invoice and a bill?
    1. Differences
    2. Similarities
  5. Best practices for invoicing and billing
  6. How Stripe can help
    1. Stripe Billing
    2. Stripe Invoicing

Invoicing and billing do more than just help businesses balance their books – they affect every part of the organisation and relationships with clients and customers. Invoicing and billing can help businesses understand client and customer behaviours, increase process efficiency and use data to inform strategy.

The global e-invoicing industry is expected to grow by over 20% annually and reach US$24.7 billion by 2027, highlighting the importance of invoicing to the global economy. A thoughtful, well-informed approach to billing and invoicing can encourage quicker payments, increase financial stability and foster trusting, productive and enduring client and customer relationships.

Below, we'll explain how bills and invoices differ, how they work together and how Stripe can help businesses manage both.

What's in this article?

  • What is an invoice?
  • What is a bill?
  • What is the difference between an invoice and a bill?
  • Best practices for invoicing and billing
  • How Stripe can help

What is an invoice?

An invoice is a detailed record provided by a seller to a customer that lists the goods or services that have been provided, along with prices, quantities and terms of payment. Here are a few key attributes of invoices:

  • Purpose: An invoice is primarily used in business-to-business (B2B) transactions. It's often issued by the seller after the goods or services have been delivered.

  • Content: An invoice typically includes a detailed breakdown of the products or services provided, with multiple line items and a total amount due. It also includes the seller's and customer's contact details, an invoice number, its date of issue and payment terms (such as net 30 days). Invoices often state which payment methods are accepted.

  • Function: Beyond requesting payment, invoices are also important for accounting. They help businesses track sales, manage inventory and record accounts receivable. Businesses also use them as proof of transactions to fulfil legal or tax requirements.

What is a bill?

A bill is issued to immediately request payment for goods or services rendered. Here are a few key attributes of bills:

  • Purpose: A bill is most commonly used in business-to-consumer (B2C) transactions. It's a straightforward request for payment, typically used in retail or for direct services rendered to customers.

  • Content: Bills usually include contact information, a summary of the goods or services provided, the total amount due and sometimes the payment due date.

  • Function: The primary function of a bill is to inform the customer of the amount due in a transaction.

What is the difference between an invoice and a bill?

Invoices and bills are used in business transactions to request payment, but they serve slightly different purposes and are used in different contexts.

Differences

  • Context: Invoices are common in B2B dealings, where ongoing relationships and more detailed recordkeeping are important. Bills are more prevalent in B2C interactions, where transactions are more immediate and less detailed – think of a bill you would receive at a restaurant or from a car mechanic.

  • Level of detail: Invoices typically contain information that is necessary for accounting and legal purposes, such as payment terms and client details. Bills are usually simpler, providing just enough information to inform the customer what they owe.

  • Payment terms: Invoices often include payment terms; payment for a bill is typically due upon receipt or within a shorter time frame.

Similarities

  • Purpose: Both documents request payment for goods or services.

  • Financial tracking: Both documents are important financial transaction records, assisting with expense and revenue tracking.

  • Interactions: Sometimes businesses follow up a bill with an invoice for recordkeeping purposes. This happens most often in scenarios in which a quick service (such as a medical appointment) is later detailed in an invoice for insurance or tax purposes.

Because invoices and bills are relevant for different aspects of business finance and operations, they are both important for accurate financial tracking and recordkeeping.

Best practices for invoicing and billing

Understanding billing and invoicing is necessary for businesses to fine-tune their financial processes. Best practices can transform billing and invoicing from a back-office chore to an asset. These practices will increase accuracy, boost efficiency and elevate the customer payment experience:

  • Automated tracking: Implement advanced software that sends invoices and tracks their status. You'll be able to see at a glance which invoices are outstanding, which are paid and which are overdue. This real-time tracking helps you respond quickly to payment delays. In the same vein, automated billing systems help collect and keep track of payments.

  • Customised invoicing cycles: Instead of a one-size-fits-all approach, you can adjust invoicing cycles based on the client's preferences or the type of project. For longer-term projects, consider milestone-based invoicing, in which you invoice at different stages of the project rather than once at the end. This results in regular cash flow.

  • Dynamic invoicing: You can adapt your invoices based on the client or the type of work. This could mean changing the layout, level of detail or language used based on what you know about the client's preferences or industry standards.

  • Advanced payment terms: Instead of standard invoice payment terms, such as net 30, which means payment is due within 30 days of receipt, consider offering discounts for early payment or implementing late payment fees. This can encourage faster payments and ensure that you're compensated for delays.

  • Electronic invoice verification: Use technology to ensure that your invoices match client purchase orders and contracts. Automating this process reduces the chance of disputes and delayed payments because of discrepancies.

  • Direct communication channels: Establish direct lines of communication for billing and invoicing enquiries. This could be a dedicated email address or a client portal where they can view invoices and bills and communicate with your finance team.

  • Regular invoice audits: Periodically review your invoicing processes and look for patterns in payment delays or disputes. Use this data to refine your approach – for example, changing your invoice layout or altering your follow-up process.

  • Data analysis: Use data analytics to understand payment patterns and client behaviour. These insights can inform decisions regarding the best time to send invoices, the most effective follow-up strategies, how to structure payment terms for different clients and which payment methods you should accept.

  • Forward-planning for cash flow: Use your invoicing and billing data to forecast your cash flow. This entails analysing when payments are likely to come in and planning your expenses accordingly to avoid cash shortages.

  • Integration with other business systems: Ensure that your invoicing and billing systems integrate seamlessly with other business software, such as customer relationship management (CRM) and enterprise resource planning (ERP) systems. This allows data to flow smoothly across your business, reducing manual entry and potential errors.

  • Personalised follow-ups: Customise your follow-up messages based on the client and situation. A one-size-fits-all reminder email isn't as effective as a personalised message that takes into account the client's history and your relationship with them.

  • Client education: Sometimes payment delays happen over misunderstandings. Educate your clients about your invoicing and billing process when you start working together. Clear communication upfront can prevent issues later.

How Stripe can help

Stripe Billing and Stripe Invoicing provide businesses with comprehensive, flexible solutions for managing their invoicing and billing. From automating invoice creation to providing advanced reporting features, these tools address the varied needs of businesses. They help businesses increase the efficiency of financial operations, maintain consistent customer communications and verify compliance with financial recordkeeping requirements.

Here's how Stripe supports these business activities:

Stripe Billing

  • Automated invoice creation: Stripe Billing streamlines the creation of invoices. It automates invoice generation based on the billing terms set for each customer. This is particularly useful for businesses with a large client base or complex billing structures because it reduces the administrative work of creating invoices manually.

  • Flexible billing schedules: Businesses can set up variable billing schedules to fit their business models. Whether it's one-off billing, recurring subscriptions or usage-based billing (where charges are based on the level of service used), Stripe Billing handles various billing schedules with ease. This flexibility is key for businesses that offer a range of services or have a diverse customer base.

  • Customisation and branding of invoices: Stripe allows businesses to customise their invoices by adding branding elements, such as logos and brand colours. This customisation extends to the layout and information included in the invoice, allowing businesses to project their brand identity while still communicating clearly with customers.

  • Advanced reporting features: Stripe provides detailed reporting features that allow businesses to track their billing and invoicing activities. This includes real-time numbers for earned and unearned revenue, helping businesses monitor their financial health.

  • Integration with existing systems: Stripe's application programming interface (API) can integrate with a business's existing CRM, ERP or accounting systems. This means that invoices generated by Stripe can be automatically recorded in a business's primary accounting system for consistent, unified recordkeeping.

Stripe Invoicing

  • Streamlined invoicing process: Stripe Invoicing simplifies the process of sending and managing invoices. It allows businesses to generate and send invoices to their customers' email addresses quickly.

  • Payment terms and conditions: Businesses can set specific payment terms, such as due dates, on their invoices, and Stripe Invoicing will clearly convey these terms to the customer. This manages customer expectations, boosts transparency, fosters client trust and encourages timely payments.

  • Online payment integration: Invoices sent via Stripe include a direct payment link. Customers can pay these invoices online using their preferred payment method, making the process quick and convenient for both parties.

  • Multi-currency and language support: For businesses with a global customer base, Stripe Invoicing supports billing in multiple currencies and languages. This feature allows businesses to provide a localised payment experience to international customers.

  • Automatic payment reminders: Stripe Invoicing can send automatic reminders to customers for upcoming or overdue payments, reducing the manual effort involved in chasing payments.

  • Recordkeeping and compliance: All invoices sent through Stripe are stored and easily accessible for future reference, helping with compliance and audit processes.

Learn more about how Stripe can support billing and invoicing for your business.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accurateness, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular situation.

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