Last editedJan 20222 min read
When your business makes a sale, it’s important to put the transaction in writing. Both invoices and statements offer a way to track debts between buyers and sellers, but how do they differ and when should each be used? It all boils down to timing. We’ll cover the key difference between an invoice and a statement below.
What is an invoice?
An invoice is a document submitted from a business to a customer or buyer. It provides the details of a transaction, outlining the goods and services provided and how much payment is owed. Here’s a quick rundown of what information you’ll usually include when writing and submitting an invoice:
Header with title and vendor contact information
Customer name and number
Invoice number for tracking in the system
Purchase date
Product name and number
Quantity and per-unit cost
Subtotal
Sales tax (if applicable)
Final total
At the bottom of most invoices, you’ll also see any payment terms along with payment methods and additional instructions.
What is a statement?
While an invoice relates to a specific transaction, a statement can cover multiple transactions. It’s a document used when buyers owe the business money on account. The statement is a current report showing the customer’s account status, reflecting payments already made and outstanding invoices.Â
While invoices contain specific details relating to each transaction, statements aren’t usually so detailed. It will show an itemised list of transactions for the statement period including:
Date of each transaction
Invoice number and total
Credits and debits
Ending balance
Payment terms
The purpose of statement vs invoice
The difference between an invoice and a statement primarily boils down to intent. When an invoice is sent to the buyer, it serves two main purposes:
To give the buyer details about the cost of each item purchased
To ask the buyer for payment
By contrast, the statement is sent to give a wider overview of account activity for the term in question. It also serves the following purposes:
To show the customer where they stand with their account
To ask for a payment on account
Statements will be sent out at regular intervals, usually monthly.
In addition to purpose, there are a few additional differences to be aware of when looking at a statement vs invoice:
Detail: An invoice offers more details about specific sales, while a statement offers an itemised list and grand total.
Timing: Statements are issued at regular intervals, while invoices are sent at the completion of any sale.
Accounting: An invoice must be recorded in accounts payable, but a statement is pure informational and doesn’t need to be recorded.
When to use a statement vs invoice
Whether you’re a buyer or a seller, it’s important to keep track of all your paperwork including invoices and statements. The key thing to remember in terms of timing is that invoices are sent out for each transaction. They’ll include the date that an order is either processed or shipped. The date on a statement simply refers to the day when the statement was issued; not when the transactions occurred.
Some confusion can arise if you wait for the statement to arrive, because payments may have been received for individual invoices after the statement was issued. It’s important to have a tracking system in place so you know which bills have been paid. Hold onto any receipts and credit card statements as proof of payment.
Ideally, customers will pay invoices as soon as they’re received rather than waiting for a multi-invoice statement. The invoice should be marked as paid in your accounting system, including the date of payment.
Automated software can help by streamlining the collection process. Are you aware that you can collect invoice payments automatically using GoCardless’s payment software? Reduce the amount of time you spend chasing payments and ensure thatyou get paid on time, every time.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.
