Invoice vs Bill

Do You Know the Difference?

Invoice and bill get thrown around interchangeably. And generally, we know what someone is talking about.

But, bookkeepingly speaking (I'm making that a word), they are different things. An invoice is sent to your clients to let them know what they owe you so they can pay you in the future.

A bill is what you get from a vendor that tells you what you owe. Then, you pay the vendor in the future.

While using them interchangeably in discussion doesn't really matter, it makes a big difference in your books. An invoice is considered income and will be categorized that way on your P&L. A bill, on the other hand, will be classified as an expense. So, make sure you use the correct form or category when entering transactions into your books.