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What Is Invoice Definition?
Difference: Invoice Vs. Billing

Earning money and paying bills is the main motivator that makes people work. If there are no bills to pay at the end of every month, many people will happily quit work. As a business owner, you might be sending out bills at the beginning of every month or you might send out invoices. But, do you know the difference between invoices and billing? To start with, we are going to tell you about the invoicing definition in the first section. We have also mentioned some bonus tips for making invoicing online that will help you get paid easily from your clients. So, keep reading until the end of these tips.

The Invoicing Definition

Invoices are simple documents sent by a business owner, entrepreneur or a freelancer to their customer. As per invoicing definition, it is kind of a declaration of the total amount that the buyers need to pay in exchange for any products or services. It is a record of the sales made or the services given to the purchaser by a particular business.

Most importantly, an invoice specifies the terms of the deal between 2 parties and gives information about the payment methods and the last due date for the payment.

Traditionally, some old school people send invoices on paper in writing. However, in recent times, computer-generated invoices are printer friendly or sent via email. This allows businesses to maintain records of all their transactions digitally.

Moreover, the main indicator of any successful business is to see how fast money comes in. Invoices help with this. However, it isn’t always simple. Allow us to break down the reasons, types, and major elements.

How to Use an Invoice?

Have you ever wondered what are the benefits of making an invoice or what purpose it serves? Here are 4 major reasons why people use an invoice for their business:

  • For maintaining records
  • For easy tax filing
  • For legal proof
  • For business analytics

What are the Various Types of Invoices?

Based on the invoicing definition, here are some invoicing examples that will help you understand the types of invoices businesses can generate and send to their clients.

Various Types Of Invoices

01. Standard Sales Invoice

The standard sales invoice is the kind of invoice that businesses create and sent to the clients for sale of their merchandise or services. Different industries can easily adapt it to their needs because of the flexibility of the format. This is the most common type of invoice in use for purchase orders.

02. Credit Invoice

The businesses generate a credit invoice or credit memo to correct a previous calculation error for purchase orders, provide a refund to the client or for giving a discount to their customers. A credit invoice will always have a negative amount, like -$200.

03. Commercial Invoice

Some businesses create a commercial invoice when they make a sale of their goods or services internationally based on purchase orders. It contains details that are necessary for the clearance of shipment on the borders.

04. Timesheet Invoice

This type of report needs to create when the customer is charged on an hourly basis. The total number of hours, the tasks carried out and the per hour rate should be there in the timesheet. This helps the customer understand how much they are charged and for what work.

05. Expense Report

Expense reports include extra expenses such as traveling cost, food and hotel, fuel expenses, cell phone charges, and any other additional expenses. An employee can send such a report to his employers or a company can directly send this to the client.

06. Pro Forma Invoice

Pro forma is a cost estimation that is sent by a company to its clients before beginning the work. This type of invoice helps the client understand the approximate amount that one will need to pay them when they complete the project. However, it does not serve as a contract or as an obligation for the buyer to supply the complete balance in advance.

07. Interim Invoice

If a project is too long and is lasting for some months, it becomes difficult for everyone to keep track of the expenses. For this reason, the company keeps sending interim invoices after regular intervals. It helps in creating a final statement for the project and keeps an account of the transaction.

08. Final Invoice

The addition of all the previous receipts’ amounts is the final invoice sent to the customer at the end of the project. This is an in-detail list of all the costs and deductions made during the project and the actual amount that the customer has to pay.

09. E-Invoicing (Electronic Invoicing)

An e-invoice is a digital file with data in a structured format that the buyer’s system can comprehend for a particular purchase order. There is no need to manually add data to this file by either of the parties to understand the bill.

10. Digital Invoicing

Businesses can create digital invoices digitally only and generate them with the help of an online invoicing system. It is usually available in PDF or Word format, but it can also be a scanned paper bill.

Billing vs invoicing: Major Difference between Billing and Invoicing

Although both terms are often used interchangeably, there are some key differences that set them apart from each other. We consulted experts in the invoice finance industry and the following are the major differences between the two.

InvoicingBilling
It is the term used by businesses that are collecting payments from their clients.Clients usually refer to the invoices as bills when they are making the payment.
Invoices usually include the name and address of the customer.Bills are usually general in nature and just contain the amount and details, without any personalization factor.
Invoices have an extended credit limit and the customer makes the complete payment a few days after receiving the invoice for a product or service.Bills are mostly paid upfront and immediately, with no extension on the credit limit.
Lawyers, accountants, wholesalers tend to send invoices to their clients.Bills are usually given at restaurants or salons.

Elements of an Invoice

Important Elements of an Invoice

01. Invoice Number

The invoice number is the serial number of a purchase order. It helps you ensure that you can easily find the invoice whenever needed for any legal reasons.

02. Invoice Date

Often, companies have a credit limit for a particular number of days. For this reason, it is important to add the date in the invoice itself. With the help of dates, the customers can figure out how much they need to pay and if the calculations are right or not.

03. Payment Terms

Businesses need to mention payment terms or conditions here, if there are any, then those can be mentioned here. Example: Please make the full payment within 15 days of receipt for your purchase orders in cash. This helps improve inventory control and synchronization. These terms will work as reference data for the customer in case they forget about the information you provide when they purchase product s from you.

04. Billing Company Details

It is important to mention the name of your company (or your name, if you are a freelancer who is working individually) and your address.

05. Customer Information

If you know the name of the person you are sending the invoice to, then it is better to include their name on it. You should also mention their address and contact details.

06. Line Items

This section is the main focus of the invoice since it contains the list of the total products sold or services rendered to the customer. Businesses need to write the name of the product or service on the left side and the amount is mentioned on the right.

07. Other Billable Expenses

If your company charges anything extra for expenses such as traveling, food or other miscellaneous expenses, then you will need to mention those things here.

08. Subtotal

The total of all the line items and other billable expenses will display here along with any terms and conditions that you may have for your customers.

09. Taxes and other Costs

If the goods or services are taxable like GST (Goods and Services Tax), and VAT you need to mention them here under this section. Along with it, you can also mention any other costs like shipping or packaging costs.

10. Deductions

Perhaps you are giving a discount to the customer or they have a credit memo from your company, you will need to subtract such amount to ensure that you have the right total.

11. Total Due

This is the final total amount that the customer is going to pay, after deducting or adding the necessary details.

12. Payment Methods

You can mention the payment methods that you accept at the end to ensure that the customer doesn’t have any confusion. Also, mention any terms or conditions regarding the payment methods.

Tips For Making Better Invoices

  • Pick a good invoicing and billing software that serves your needs.
  • Establish payment terms and refund policies to avoid confusion in the later stages.
  • Professional and error-free invoiced designs should be used to help you create a better impression on your clients.
  • Be polite and use words like thank you and please. For example, you can include sentences like, “Please make the complete payment within 15 days. Thank you for your cooperation.”
  • Take outside help if needed for creating the invoices, for accounting purposes or for collecting money from defaulters.

Frequently Asked Questions

1. What are invoicing details?

The details included in an invoice document like date, address, line items, amount, and taxes.


2. What is the process of invoicing?

Invoicing process is the entire process that business owners implement when generating invoices for their clients or customers.


3. How long do invoices take to process?

Business owners can set up their own terms, provide discounts for early payments and a penalty for late payments. However, if no terms are there between the businesses and the client then the payment should be made within 30 days.

For Easier Payments and Better Work

Now that you know the key elements, it is easier for you to generate your own invoices for your customers. It is the most important thing that this process will help you to receive payments faster, manage finances, streamline workflow and also reduce any mental pressure regarding payments.

We at MixBit always try to provide you with more details on invoicing. By using our tips for creating better invoices, it becomes possible for you to send correct details to your customers.


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