Throughout the business world there are interchangeable concepts and terms. However, when it comes to how and when you are to be paid, it pays to know the actual terms. For instance, the terms statement and invoice are often used interchangeably, but have different meanings. The two are similar in certain ways, but they are different as well. So what is the difference between a statement and invoice? The main difference is an invoice generally lists the cost of service(s), while a statement is a summary of covers multiple invoices. Here is a more in depth explanation of the differences and what you need to know in business about both statements and invoices.
What is an Invoice?
An invoice is what is given to the customer upon completion of the job. It maintains information about both the seller and the buyer. It is a detailed document with addresses of both parties along with a list of products or services rendered. The invoice will specify payment terms and exactly when the money is due, generally upon receipt. Detailed invoices can show the cost per unit or service and is a way for the buyer to see exactly what they were given and where each part of their payment is intended to go.
What is a Statement?
A Statement is very different from an invoice. It is a summary of all services rendered and previous invoices maintained by the customer. Statements can have multiple invoices within one statement to show the customer what was paid and what is still due. Examples of statements include those given by banks and credit card companies that show transactions and what has been paid since the last billing cycle. A statement will also have the customer’s overall balance to be paid along with any past due charges and outstanding payment still waiting to be paid.
Which Effects Accounting
When in any type of business, accounting is essential. Having a record of what is due to your company will ensure you know when and where money is coming from. Invoices generate an immediate change to the accounting books while statements do not. An invoice is to be paid at a set time and is generally accounting for one or a few services, while a statement is sent for multiple services or purchases.
Reminding and Action
Statements are often sent to customers to remind them that payment is due and to show all transactions is a summary based system. Invoices are action based. Upon receipt of an invoice, payment is expected by the invoice date. Statements are often given an extended period of payment and are generally used by larger companies. Invoices tend to be smaller and utilized by smaller companies. Invoices are for immediate action, and statements are for a reminder. Those are the two main differences between these common terms.
Statements and invoices have their place in any business. Invoices are kept by the seller for accounting purposes and to maintain inventory along with payments expected. Statements are merely sent to the customer as a reminder of their need to pay. It is important that any business person understands both terms and utilizes them properly with transactions.
No matter the size of your business, you can use statements and invoices effectively. However, larger companies such as credit card companies and banks are who use statements most often. For instance, when you receive a monthly bill for utility services, that is an invoice and when you bank sends you a record of your transactions, that is considered a statement.