Bills vs Receipts vs Invoices: What's The Difference?
If you use our system, you may be familiar that we have various options for you in terms of creating financial records or documents. You can create proforma invoices, which we recently discussed here, as well as credit notes, prepayment invoices, estimates bills, receipts and more. We will focus on bills, receipts and invoices here as many users get confused on their differences and which one to send out.
The main difference between an invoice and a bill depends on who is sending the document. The document is being sent out from a business or individual (such as a freelancer) to another company that it is seeking compensation from, then it is an invoice. However, the recipients of the invoice or the company that gets invoice refers to the invoice as a bill or can create a separate bill showcasing the transaction and recording it in its books.
The other main difference between these two terms is that when an invoice is sent out, the company or individual is asking for payment and often giving the customer a deadline or payment terms on the invoice. On the other hand, a bill is recorded immediately after a payment has been made or right up front during the time the service or product is obtained and payment is processed.
Think of going shopping and receiving a bill from a store. The store owner wants to be paid immediately rather than invoice you and expect a payment at a later date.
A receipt, on the other hand is proof of payment. It is not a bill for the payment or an invoice where the payment is due at a later date, but proof that it has previously been made (the payment). Thus, it is similar to both an invoice and a bill, but the payment has already been conducted.
As you see it is easy to confuse all of these three terms, but there are some clear differences to watch out for. It is worth also remembering that our system offers all three options for you to use if you choose.