"A statement" provides a summary of transactions that occurred within a specific period and serves as an up-to-date report that does not legally bind clients to make payments.
In contrast, "An invoice" is a legal document that contains particular transaction data and demands payment.
Just landed nice sales? Congratulation!
Now comes the exciting part—billing.
Billing is the process of sending a document that shows what the customer owes you for the goods or services you provided. If you run a business, you have no choice but to know how to bill your customers properly.
You might come across two main types of billing documents: statements and invoices. If you’re struggling to decide between the two, breathe, we’re here to help.
In this article, we will outline what they are, what are the major differences, and when to use which.
What Is a Statement?
A statement is a report that summarizes the transactions between a business and a customer during a specific period, usually monthly, quarterly or bimonthly.
A statement does not request payment; it simply informs the customer’s account status.
Since it’s an informational document, parts of a statement can be inaccurate if the timing overlaps with when the customer has already made a payment.
What Is an Invoice?
An invoice is a document sent by a business or a seller (or refer to as an issuer), to a customer to request payment for products or services provided. An invoice describes the transaction in full, including detailed information on the products and services purchased and the entire amount owed. This document is the issuer's asset and the customer's responsibility, meaning customers are obligated to pay.
An invoice can be for a single sale or on a regular or contractual basis, which is called a recurring invoice. An invoice either comes with the products or service or is later delivered through mail or email.
💡Tip: Following invoice payment, the business needs to provide them with a receipt. To learn more about this topic, you can also read our article about the key differences between an invoice and a receipt.
Key Differences Between a Statement and an Invoice
The main difference between a statement and an invoice is a statement covers multiple transactions and shows the account activity, while an invoice requests payment, capturing the particulars of each deal.
Several other differences between a statement vs. an invoice exist as well, such as the timings, details and payment terms. Let's explore those points in detail.
Below is a table covering the key purposes and functions of a statement and an invoice:
|Purposes and Functions||Inform an account status or remind a customer of outstanding numbers||Request payment|
|Details||Fewer details on products and services||Detailed information about the products and services|
|Timing||Regular intervals||Typically sent out immediately after each purchase of products or services|
|Payment Terms||Not necessarily included||Included|
Purposes and Functions
The purpose of a statement is to inform customers of transactions and balances. For the business, it is useful for budgeting, tracking past-due client accounts, estimating unrecoverable debt, and encouraging clients to pay invoices. Statements may additionally save firms time from answering account activity enquiries.
The primary purpose of an invoice is to request payment, as it holds the recipient responsible for the unpaid amounts. Additionally, it maintains an accurate record of sales revenue and helps in managing inventory, accounting, and tax records. An invoice also functions as legal proof of sale in case of disputes or audits.
💡Tip: There are various types of invoices suitable for usage in different purposes and industries. Check out our blog on the basics of invoices to learn which one suits your business.
A statement includes the statement date, balance, paid and unpaid payments, charges accrued throughout the period, and the ending balance at the end of the period. However, depending on the issuer's preference, it can also be a list of only outstanding amounts. Since Statement is a list of multiple transactions, the product and payment description in it isn’t as detailed as an invoice.
An invoice's fundamental components include the company's name, trading address, contact information, purchase date, purchased products or service descriptions, invoice number, final total, payment terms, and bank details. Other elements, such as discounts or additional instructions, may be incorporated depending on the parties agreements.
A statement is issued at regular intervals, like quarterly, monthly, bimonthly or as requested by the customer.
An invoice is usually issued after the products or services are successfully delivered.
However, some businesses, especially service-orientated ones such as consulting firms, may issue invoices prior to the service term in exchange for an advance, deposit, or partial payment.
Some invoices may also not be official and are used to communicate details, request preliminary confirmation or be used as a document submitted for custom purposes, this is called proforma invoices.
A statement doesn't typically include payment terms since they are unique to each transaction and already incorporated into its corresponding invoices, if any.
An invoice includes payment terms that specify the when and how of the payment process, usually encompassing due dates, potential discounts for early payment, and any additional fees for late payments.
When to Use a Statement vs When to Use an Invoice - With Examples
When it comes to a statement vs an invoice, the quick answer is you use a statement when you want to inform or remind customers about their account and you use an invoice when you want to create an obligation on the part of the customer to pay.
The detailed answer is as shown below:
When to Use a Statement
A statement can be used to inform, respond to requests or serves as a reminder.
Use a statement when:
- You have an ongoing relationship with your customers and you want to show them their account history to foster trust. This information lets clients track their financial well-being and stay informed, which is a powerful way to show transparency and accountability. This improves their satisfaction and loyalty to your company
- You want to outline details other than the amount overdue that are unique to your industry, like rewards, sales tax, monthly data usage, etc.
- Customers request an account summary.
- You want to remind your customer of the unpaid amount and payment due date without sending them a new invoice.
For example, a bank could send credit card statements to customers, displaying their ending balance, all the transactions, and any fees or charges incurred during the statement period.
Similarly, a utility company can show customers their monthly usage and current balance.
In healthcare, statements can help patients track their insurance payments, and e-commerce companies can send statements with order history, refunds/returns, and rewards balance to frequent users.
When to Use an Invoice
An invoice is typically used to collect payment after the products or services have been supplied. An invoice is usually sufficient for one-time purchasers.
Use an invoice when:
- You have completed a specific job or delivered a specific product and you want to collect payment from your customer.
- You want to give a customer a detailed breakdown of the goods or services provided, including the quantity, price, taxes, discounts, and grand total.
- You want to specify the terms and conditions, such as the payment requirement, late fees, and contact information.
For example, you can invoice a customer for products sold. Include the product information, quantity, price per unit, and final total. Or assume you're a web designer who has just finished working on a website for a client, you can invoice a client outlining the work you did, the charges, and payment details, such as when and how they should pay you.
When to Use Both an Invoice and a Statement
Not sure if you should utilize both? There are actually occasions for it.
Use an invoice and a statement when:
- You provide ongoing services and a customer has multiple outstanding invoices.
- You want to combine the benefits of both documents and provide your customer with a comprehensive overview of their account status and payment obligations.
- You want to increase your chances of getting paid on time. An invoice serves as a request and a statement serves as an extra reminder.
For example, a fitness studio that offers classes or personal instructions subscription can use both invoice and statement. Invoices can be sent for booked sessions, and a statement can be sent at the conclusion of the subscription period, displaying all sessions attended payments made, and any outstanding balance.
💡Tip: A statement can have invoices listed. But it’s the invoices that hold recipients accountable, not the statement. If you are dealing with customers’ overdue bills, read more in our article about how to chase unpaid invoices.
Do you pay an invoice or a statement?
Is it possible to use a statement as an invoice?
Which comes first, the invoice or the statement?
Why are invoices and statements important?