Difference Between Bill and Invoice

The terms bill and invoice are used interchangeably. Even though their primary purpose is to record a transaction, there are slight differences based on their usage, context, and payment terms. Listed below are key differences between invoices and bills. 

Types of Invoices Under GST

Under Goods & Services Tax, there is a new set of invoices, including some from the regular invoices. The types of invoices under GST include – 

1. Tax Invoice or GST Invoice
2. Bill of Supply
3. Delivery Challan
4. Credit Note
5. Debit Note
6. e-Invoice
7. e-Way Bill
8. Receipt Voucher
9. Refund Voucher
10. Payment Voucher
11. Supplementary Invoice

GST Invoice or Tax Invoice

As per Section 31 of the CGST Act, a registered seller supplying taxable goods must generate a tax invoice. A tax invoice is a detailed record of a transaction between a seller and a buyer. Besides the regular invoice details, a tax invoice must include the respective tax rates like GST, CGST, IGST, etc.

A tax invoice for the sale of goods must be generated before or at the time of delivery. However, for supplying services, GST invoices can be issued before, at, or even after the time of supply. 

Bill of Supply

A registered seller supplying exempted goods or services or both or paying tax under a composition scheme should issue a bill of supply instead of a tax invoice.

Delivery Challan

A delivery challan is issued when goods are transported from one place to another but not necessarily because of a sale.

Receipt Voucher

A registered seller issues a receipt voucher upon receiving an advance payment for any supply of goods or services.

Refund Voucher

A refund voucher is generated when a seller fails to supply the goods after generating a receipt voucher. Which means after receiving an advance payment. In such cases the seller issues a refund voucher against the received advance. 

Payment Voucher

A registered seller paying taxes under reverse charge shall issue a payment voucher while making a payment to a supplier.

Supplementary Invoice

A supplementary invoice can be used to revise an invoice due to an upward change in the product or service price. It must be issued within 30 days of the price revision by the goods or services provider. 

e-Invoice

e-Invoice is a digitally signed and verified document used for B2B transactions. It contains all the details, like that of a sales invoice, but is validated by the government tax portal. 

e-Way Bill

According to Rule 138 of CGST Rules, an e-way bill is mandatory for the movement of goods valued above a specified limit within India. The movement of goods could be for supply or reasons other than supply.

How to Create an Invoice

An invoice can be created in different ways. Some of the most common ways to create invoices are listed below – 

• Manual – Pen & Paper-based Invoices
• Online Invoice Templates
• Online Invoice Generator 
• Word Processing Tools – Word, Excel, Docs
• Billing Software

How to Create Invoices Manually 

Manual invoices are handwritten paper bills. Despite the advancement of technology, some businesses still rely on pen-and-paper methods to create bills. This method might seem easy and convenient, but just entering the product names, prices, and the total amount on a blank paper does not make it a valid bill. It might act as a reference document for the customer to know the prices, but for accounting purposes, it is of no use. Hence, it is highly recommended not to create paper bills. 

Creating Invoices Using Word, Excel, and Docs

Instead of using paper bills, you can use word processing software like Word, Excel, and Google Docs to create invoice templates of your choice. This method provides you with an option to tailor your invoices to your needs. You can create invoice formats in Word, invoice templates in Excel, invoice formats in PDF, and bill formats in Docs. Once you create a template using any of these tools, you can either fill the templates online or take a printout of them and fill them out manually. 

Creating Invoices Using Invoice Templates

If you don’t want to take the hassle of creating invoice formats from scratch, you can use ready-to-use invoice templates available online. You can download such invoice templates, take a printout of the same and use them to create bills. However, even while using the templates, you need to enter the information manually using a pen and hand it over to your customers. 

Creating Invoices Using Online Invoice Generators

To completely avoid pen and paper-based invoice creation, you can rely on free online invoice generators. These free tools help businesses to generate printed invoices. Choose a reliable online bill generator, pick a template that suits your needs, enter the required information in the bill, and print or download the invoice. Online-generated invoices look professional compared to hand-written invoices and paper bills. 

Invoice Creation Using Billing Software

All the methods mentioned above have their own drawbacks. While manual bill generation is not possible in a hectic billing environment, relying on free resources with your business information is not a secure option. One solution that can effectively overcome all the challenges posed by all the invoice generation methods is to have billing software in place. 

A billing software, preferably cloud-based, is a very handy tool for businesses to generate invoices without much trouble. With auto-populated data options, the software significantly minimises data entry and other billing errors. As in cloud software, the data is end-to-end encrypted and is securely stored in remote servers, you don’t have to worry about the safety and security of your business information.

The cloud-based setup also makes it an affordable billing solution for businesses of all sizes, especially small and medium enterprises. 

Invoice Management

Creating an invoice is just the beginning of the invoice management process. Every business, along with creating accurate invoices, must ensure that – 

• Invoices are delivered to the clients promptly

• Payment terms are communicated effectively

• Flexible payment options are provided

• Invoice status is being tracked

• Payment reminders are being sent

• Proper invoice record keeping is in place

• Dispute resolution is in place to handle any invoice-related discrepancies

• Reports are generated to analyse invoice data
• Key performance indicators are tracked to identify areas for improvement

Effective invoice management is crucial for maintaining healthy cash flow, enhancing customer satisfaction, and ensuring compliance with financial regulations. 

Invoice Sharing With Clients – Different Methods in Use

Invoice sharing is part of invoice management. Choosing the right method/s to share invoices is crucial to ensure timely delivery and prompt payments. An effective invoice-sharing method not only improves the cash flow of a business but also helps in maintaining positive client relationships. Let’s now explore different ways to share invoices.

Physical Invoices

Physical invoices or hard copies of invoices are issued to clients who prefer to have physical documentation. This method prints invoices, and the hard copies are handed over to the clients. The handing over can be done directly, through post, or by courier. 

e-Mailing Invoices

Electronically mailing an invoice is a commonly used method as it offers a secure platform to share invoice information. Once the invoice is created, it can be sent to the client’s e-mail address as an attachment. While sharing invoices through emails, attaching them in PDF format is recommended. 

Using Secure File Sharing Services

You can also use file-sharing services like Dropbox, Google Drive, or OneDrive to share invoices securely. This method is more helpful when sharing larger files and to share multiple invoices simultaneously. Once the invoice is generated, you can upload it to any of the file-sharing apps, and get a shareable link with appropriate permissions (view or edit) and expiry dates. You can share this link with your customer or choose an option to send an email notification. 

Through WhatsApp

One of the easiest ways to share invoices is through Whatsapp. It hardly takes any effort to share an invoice using this popular messaging channel. Once the invoice is generated, share it as an attachment to your client’s Whatsapp number directly. You can attach any kind of format, like Docs, Sheets, PDFs, etc., in WhatsApp.