Business

Bill of Sale vs Invoice: What Are the Differences You Need to Know?

Panna Kemenes

21.11.23 (updated more than 1 year ago)

Read time 4 minutes

There are many important steps to complete after your business makes a sale. One important step in the process is determine whether you may need an invoice or bill of sale.

This blog post will provide more clarity to bill of sale vs. invoice comparisons and explain when it makes sense to use each of these documents.

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What Is the Main Difference Between a Bill of Sale vs Invoice?

Although these documents share similarities, there are some differences between a bill of sale and an invoice.

Below are some points highlighting invoice vs. bill of sale differences:

A bill of sale is used when a prompt payment is due and can be used by private individuals. On the other hand, invoices are used by businesses and freelancers, and can have more flexible payment terms.
Invoices often have unique information, such as an invoice number and tracking number. These details are used for accounting and tracking purposes.
A bill of sale is a legal proof of sale. Invoices, on the other hand, are not legally binding in themselves.

🔍 Read on to find out:
What Is a Bill of Sale? When Should a Bill of Sale Be Used? What Is an Invoice? When Should an Invoice Be Used? Summary: Key Differences Between Invoice vs Bill of Sale Receive international invoice payments with Wise Business

What Is a Bill of Sale?

A bill of sale is a legal document that proves that you sold an item to someone else. A bill of sale can hold up as a legal contract for purchase, and details the change of ownership of the item sold. You can use a bill of sale when you sell physical or digital products.

When you create a bill of sale, you should include detailed information about the transaction.

You should include a description of:

The product,
Buyer,
Seller,
Purchase date, and;
Purchase price.

This document can help protect the buyer and seller and provide a receipt for the transaction.

When Should a Bill of Sale Be Used?

A bill of sale is most often used when a vehicle is sold. In some states, it can be mandatory to sign a bill of sale when the seller is a private owner. For example, when someone sells their car to someone from a different state, they may need to sign a bill of sale.¹

It’s usually helpful to complete an absolute bill of sale when you sell an expensive item. This document can provide a clear trail after you pay for an item or receive a payment. It also protects both parties involved in the sale from any legal issues.²

If there are certain conditions to the sale before it is completed, then it is also possible to create a conditional bill of sale.

What Is an Invoice?

An invoice is a document that is used to request payment, and provides information about the product or service that the business provides. It includes information about the payment terms, such as the payment amount, due date, and any late fees or early payment discounts.

Invoices are sent from a business to a customer, establishing an obligation for the customer to pay. Invoices are not, however, legal documents in themselves. Other documents, such as a contract or customer order confirmation, are required to be able to demand payment of an invoice.

When Should an Invoice Be Used?

An invoice should be issued as a notification that the customer should pay the invoiced amount for the detailed products or services. You can issue invoices for physical or digital products and services.

Invoices are most commonly used by businesses or freelancers to request payment after a service has been completed, or a product has been sold.

You can invoice for some of these situations:

If you need a deposit or prepayment for a more expensive service
When a customer will immediately pay you
If you are working on a larger project with milestones
When you only expect the customer to pay after you finished the job
When you need to make recurring charges
If you want to offer flexible terms to your customers, such as a discount for early payments

💡You can create professional invoices with ease using the free invoice templates, invoice generator or free invoicing toolfrom Wise

Summary: Key Differences Between Invoice vs Bill of Sale

It can sometimes be difficult to understand the bill of sale vs invoice debate, as people often use these terms interchangeably. Both of these documents are commercial documents created by the seller, which include payment terms.

These points listed below can help you determine the difference.

Bill of sale:

Is used for legal proof of a sale.
Typically used for a one time, upfront payment. It does not offer flexible terms like some invoices might.
It will typically contain less detailed information.
Some common examples include the sale of vehicles, animals, equipment and furniture.

Invoices:

You can use an invoice when you sell a product or service on credit and then request the buyer to make the payment.
Invoices usually include more specific information, such as a payment due date, invoice number and other flexible payment terms, such as discounts.
Companies use invoices for accounting purposes and inventory and sales tracking.

Receive international invoice payments with Wise Business

One thing in common with both an invoice and a bill of sale, is that you’ll want to make sure they get paid on time.

With overseas customers, getting paid in a different currency can slow the process down. With Wise Business, though, your customers can pay in their local currency, taking the hassle (and cost) out of needing to convert before paying.

You can get local account details, such as a UK sort code and account number, even as a US citizen. Moving money between currencies is simple, too, and you’ll always get the mid-market rate you can see on Google.

Use Wise Business to get paid with ease

It’s free to register as a US business for an account, and there’s 24/7 support on hand to guide you through the whole process.

💡 For all you need to know about invoices, don't forget to read and bookmark the ultimate guide to invoicing from Wise!

🤓Want to learn more about invoicing? You’ll love these:
What is an invoice? Clear guide and examples How to pay an invoice: Everything you need to pay invoices on time How to write an invoice: Clear step-by-step guide How to send an invoice: Full guide and tips Invoice payment terms: How to use them, and what do they mean? Invoice vs receipt: What is the key difference? What is a proforma invoice? When and why should you use one? Purchase order vs invoice: What key differences should you know? Create and send your receipts by using our free receipt templates.

🤓Want to learn more about invoicing? You’ll love these:

Sources:

1.States that Require a Bill of Sale for Buying/Selling Cars - CarsDirect
2. What Is a Conditional Sales Contract? | Bizfluent

All sources checked November 20, 2023.

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