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A bill and a receipt are used in two entirely different situations. A bill is presented when money is owed, while a receipt is given when an amount owing has been paid. Put another way, a bill is a request for payment, while a receipt is the acknowledgment of payment received.
Generally, bills are used for purchases made on credit, and receipts follow cash payments for goods or services. For instance, when a customer is paying for groceries, the clerk will total the items and hand the customer a receipt immediately after he or she receives the payment. A person who has an account with a telephone company, on the other hand, is likely to receive a bill about the same time each month with the specific amount owing. If the previous month's bill hasn't been paid, the amount will usually be added onto the current one, with perhaps an interest charge if the due date has long passed. This method of a bill and a receipt is used for consumer as well as business situations.
In business, a bill is usually known as an invoice. The term net 30 days is commonly used in companies to indicate that the invoice is due to be paid in total within 30 days of the time of purchase of good or services. A bill and a receipt may be used in different transactions for a customer who has an account with a company. If the customer is making a larger purchase, he or she may want to use credit and be billed, but if for just one or two items, paying cash and keeping the receipt for proof of payment may be preferred.
Invoices or bills are typically prepared using computer software in office environments, while many receipts are created on cash registers in stores. Receipts may also be handwritten at the time of a cash payment such as when a landlord receives the monthly rent from a tenant. Unlike cash register receipts or invoices, a handwritten receipt isn't often itemized, but rather just includes the total amount. Invoices and receipts that are itemized usually first show the net amount, then have any taxes added or discounts subtracted before the total is placed at the bottom. Yet, the totals on a bill and a receipt will always mean different things.
The total amounts on all types of receipts indicate funds paid. The total amounts on every kind of bill signifies that the amount is still owing unless an invoice is stamped "paid." Rather than use a paid stamping or marking on a bill, most businesses today indicate on a separate statement, or on upcoming bills, that the previous amount owing was received.
Invoice Vs. Bill
Invoices and bills have similar purposes, but they’re not the same thing — at least not exactly. An invoice is a business document requesting payment that contains a detailed breakdown of the items provided. Often, invoices are used for clients that have a net 30 days payment arrangement with your business. The term “bill” is more general. Bills are used to show that payment is owed, but usually, this payment is expected immediately.
To understand the differences in invoice vs. bill vs. receipt, it’s helpful to look at a few business examples. First, think about a clothing manufacturer that has a contract with a retail store to produce and deliver apparel every month. Every time clothes are produced and shipped, the manufacturer would send an invoice to the retailer. This would detail the products sent, product numbers, quantities, product prices and total costs of the order. The retail store would likely have 30 days or 60 days to pay depending on the agreed-upon terms.
Invoices are often used in long-term business relationships where clients can make purchases on credit. This is different from walk-in sales where customers are required to pay on the spot.
A restaurant would generally use bills and receipts instead of invoices. After the client receives food and finishes eating, the service brings the bill. This document shows the items ordered and the total amount that needs to be paid. Unlike invoices, bills need to be paid immediately. Once the customer has submitted payment, whether with cash, credit card or mobile app, the server provides a receipt. The receipt gives the customer proof of payment and also creates a record for the business of sales made.
Invoices and Bills: Does the Difference Matter To Customers?
Some business accounting software may have invoice forms and bill forms set up differently. Other software may use invoices and bills interchangeably. Does the difference matter? Not as long as the document contains all of the information your customers want and your business needs.
For example, construction companies may offer long-term services that are invoiced at the end of a months-long project. In this case, an invoice with net 30 payment terms is a likely choice. The same company may also offer services to homeowners, such as roofing, siding and driveway pouring. For these short-term projects, the contractor generally expects payment right away upon completion.
There’s no need for the construction company to use different forms for each situation; the same invoice document can work for both clients by inputting the correct information. Businesses provide invoices and customers view them as bills to be paid.
When Should You Send an Invoice?
Usually, your business would send an invoice to customers after delivering an order. For local customers, your delivery drivers may provide a copy of the invoice and get a signature from one of the employees of the business. In the case of using a shipping business, you can mail the invoice the same day you send the order.
For services performed, you can give the client an invoice as soon as you complete the work. The terms need to state whether payment is expected on work completion or within a certain amount of time afterward.
With some long-term projects, such as commercial construction that last months or years, you may reach an agreement for periodic billing. This type of ongoing billing would mean sending an invoice each time certain project milestones are reached. This can help your company get an influx of capital to continue funding work on the project. Some businesses use invoicing based on periods, billing for work performed every week, two weeks or month.
What Information Should an Invoice Contain?
You can customize your invoices to your business’s services, products and needs. The following are some general guidelines of fields and information you should include:
- Invoice number: The document number
- Billing info: Contact information for your business and client’s business
- Invoice terms: Details for when payment is expected and late fees
- Date: Date of sale and date of billing
- Items: Description of each item sold and quantity
- Services: Description of services provided and cost
- Pricing: Unit price and total item price for the quantity
- Subtotal: Total bill before discounts, shipping fees or taxes
- Total: Full amount owed on the bill, including taxes and other considerations.
Is the Bill Number and Receipt Number the Same?
Bill numbers and receipt numbers are two different things. The bill number refers to the specific document requesting payment. The receipt number refers to the proof of payment you were provided after paying the bill. Sales receipts are sometimes called payment receipts.