Can’t spot the difference between an invoice and a statement?
Thus, not knowing the difference, you might make an accounting mistake that costs you monetary, time, and above all, your reputation as a business owner.
But, as both the documents have differences and similarities too, no one can blame you for not knowing.
You are not alone.
Therefore, we have compiled a statement vs invoice comparison to tell apart the main differences and similarities between the two.
So, without any further ado, let’s get started.
Table of Content
What’s An Invoice?
An invoice is a document to request payment. It is generated for every trade. It is generally issued at the end of the trade by the seller to the buyer.
The invoice serves the purpose of initiating the payments from the buyer.
An invoice includes the details of the goods or services sold in the specific transaction. This consists of detailed information about all the goods and services rendered, the date of the trade, the due date, and other essential payment instructions.
When is it Issued?
Generally, it is said that an invoice is issued to the customer at the end of the business. Which is just an assumption and not correct in every case.
Since a sales invoice is a payment request, a business issues invoices whenever they need the payment.
Now this depends on business to business and on every business-customer contract too.
Whatever may be the case is, the time of invoicing is priorly agreed in the contract at the time of closing the deal.
So, most businesses do invoice the customer at the end of the trade, but some businesses especially in the service sector, such as contractors, consulting agencies, and freelancers might issue invoices before the service period for collection of an advance, deposit, or partial payment.
What Does An Invoice Look Like?
An invoice has all the necessary invoice details a customer wants to verify the invoice effortlessly.
So, starting from the beginning, it has:
- invoice as the title
- date of invoicing
- invoice number
- to (details of the customer)
- from (details of the seller)
- shipping address
- line items
- discounts and taxes (if any)
- total accounts payable
- due date
- payment instructions
- terms and conditions
Is that too much to remember?
Don’t worry, we have a ready-made invoice template for you to just download and fill in.
What’s A Statement?
A statement establishes the credits and debits made by a customer in his/her account with the business in a particular time period.
In simple words:
A statement is a record of all the individual sales transactions that occurred between the customer and the vendor.
When a customer has a long relationship with a business, instead of saving a sales receipt pile, they can save this document as proof of all the invoice payments made in a given time period.
Moreover, the statement also records the refunds, and paybacks by the vendor to the customer.
For example, a bank account summary is nothing but a financial statement between the customer and the bank. And similarly a credit card statement.
When is it issued?
The statement is issued in three scenarios, which are:
- At previously set intervals
- When the customer demands it
- When the authorities want to audit the account
Let’s talk about these scenarios in a bit more detail.
At previously set intervals
Generally, when a customer and the seller have a long-term trade relation, the statements are generated at time intervals. And these fixed interval statements include all the customer payments and refunds which occurred between the period of the last statement and the present date.
The time period for generating statements is called the statement period. This statement period is commonly a month.
However, it can be a week or a day based on the nature and number of transactions occurring daily.
When the customer demands it
A statement might also be issued at a given point of time for a given period when demanded by the customer.
The customer is rightful to demand a statement at any time to know the current balance in the customer’s account and revise all the transactions.
When the authorities want to audit the account
This is the rarest occasion and businesses would wish it never comes. The IRS might ask you for the statement of a particular account.
This is most commonly in three cases
- They suspected unlawful transactions
- Your account has been reported
- For random audits
What Does a Statement Look Like?
A statement is a summary of all the transactions in a given time. Therefore, it contains:
- statement as the title
- statement date
- statement time
- statement number
- to (customer contact details)
- from (seller contact details)
- itemized transactions
- account balance
We know it’s easier said than done. Many small business owners, especially the new beginners might find this complex. They have greater chances of making mistakes.
Thus, we have come up with a statement memo that you can edit easily. Just fill in your details here and you will be ready with a customized statement to share promptly.
Statement vs Invoice: Key Differences
We have described an invoice and a statement individually. That must have cleared a lot of smog for you.
Still, for better understanding, let’s see invoices and statements side by side and compare them both to highlight the main differences.
|Criteria for Differences||Statement||Invoice|
|What’s the Purpose?||To determine the account balance and list all the transactions of a given time period||To request payment|
|What does it signify?||All the transactions during the statement period||Trade between the seller and the buyer|
|What’s its role?||It just notifies the account holder||It obliges an action (i.e. to make the payment)|
|What’s the intent?||To notify and update the account holder of all the transactions||To collect payment|
|What’s the time of issuing?||Periodically||When the seller needs payment|
|What amounts does it show?||Amounts paid||Amount to be paid|
|What details does it have?||
|What’re the consequences of neglecting it?||
|How does it benefit?||
Now that we have a clear idea about how invoices and statements are different, let’s discuss how both documents are similar.
Similarities Between a Statement and Invoice
Although the statements and invoices are both different documents, they have a few similarities too.
Knowing these similarities would make you less confused and understand more details of the concept.
So, are you eager to know?
Here we go.
|Criteria for Similarities||How are they Similar?|
|What are they?||Legally binding documents|
|Who sends them?||Sellers send statements and invoices|
|What do they highlight the most?||due balance|
Other than these similarities, if an invoice is issued during a statement time of a statement, the statement shows the same transaction as the invoice as an entry.
Do you pay an invoice or a statement?
Invoice and statement are both distinct documents. You pay an invoice. The statement includes the statement amount just to notify you how much money you have as your balance.
Can a statement be used as an invoice?
A statement can not be used as an invoice as it does not state the payment terms and line items.
What is a statement in billing?
A statement is the transaction history in billing. It shows all the transaction debit or credit for a given interval. The best examples of a statement are bank statements and credit card statements.
Invoices and statements are different documents but with a few similarities, most small businesses who are new to accounting get confused between the two.
But we hope as we have defined both documents in this blog separately and compared them in detail, this would help you differentiate them easily and use them correctly.
So, if you are looking for creating professional invoices to get paid faster, all you have to do is start using InvoiceOwl that is a leading invoicing software. The software allows creating FREE invoices with a personalized touch. So, start your trial today and start repaying its’ benefits.