We live in an era where money talks and a business can’t be without proper management of finances. Part of this starts with understanding the distinct differences between various types of documents that make up any financial transaction process, and without them, no deal or purchase order can be made. There are lots of financial documents but the ones we’re discussing today are 2 that most of us have been mistakenly using as one without realizing the difference, Invoices and Bills. So, what are they and how do they differ?
Get your knowledge tested as we differentiate between both.
What is An Invoice?
An invoice is a term used to describe the document a seller or a service provider issues and sends to a buyer or a service requester. It could be in paper form, digital, PDF, or even electronic. The concept remains the same even if the invoice form differs. The issuance of an invoice can happen before the purchase order is paid and includes the pricing offer and the requested amount, due date, and more.
It’s a formal request for payment from the seller to the buyer, and the amount has not been paid yet as the due date is set according to the time agreed on. This could be in a few days, weeks, or months as long as both parties agree on it.
At this point, the invoice is sent to the buyer displaying essential details such as the cost for the billed items, the terms & conditions for the sale, quantity, prices, buyer & seller contact information, description of the services or products sold, and taxes applied to all items.
What is A Bill?
Just like an invoice, a bill is a formal financial document. However, a bill is issued to notify the buyer of what’s due now instead of what’s due later. Unlike invoices, bills are issued and paid instantly at the same time. To help make things clear, it’s similar to what happens when placing an order at a restaurant or cafe. You place the order, receive the bill immediately, and pay for it instantly. Options like paying later are not available as everything has to be done at the same time.
And while an invoice entails a detailed description of the seller’s and buyer’s details along with the purchase details, a bill comes in a much simpler form. It usually includes basic information such as the total price, any applied taxes, and the purchase date.
Why Knowing This Matters?
Knowing this matters as E-Invoicing is now mandatory in Saudi Arabia and invoices have been categorized into Tax Invoices and Simplified Tax Invoices. In our context today, Simplified Tax Invoices are somewhat the equivalent of what we call a bill. They’re not 100% the same, however, it’s worth mentioning that according to ZATCA’s regulations, a Simplified Tax Invoice should come in a certain form and include more details that were not originally required in instantly issued bills.
So, what are we trying to get at right?
What we’re trying to say is that the form of a traditional bill is gradually changing in Saudi Arabia to make it more modified and include more essential details but without replacing what an invoice originally does. So, you could somewhat call it an upgrade that has been triggered by the E-Invoicing revolution happening not only in Saudi Arabia but all around the Globe.
In A Nutshell,
To quickly wrap things up, invoices and bills are both financial documents that are issued to share details about a purchase of a product or a service between a seller and buyer. However, the fine line can be noticed in the payment time for the due amount and the details listed in the issued document. To put it simply, it’s somewhat a comparison of what is due later (invoices) V.S what is due now (bills).