QuickBooks - Bills and Invoices - What's the Difference?

QuickBooks has done a great job making double-entry accounting accessible to many people. But sometimes people still get confused over the terminology. One area of confusion is the difference between Invoices and Bills in QuickBooks. In our day-to-day interactions we may use these terms interchangably, but in QuickBooks they mean entirely different things.

Invoices in QuickBooks

"Invoices" are accessed by following this path:

Customers > Create Invoices

"Invoices" are sent to customers. They record revenue (sales) on the books, and they record that customers owe the amount of money that appears on the invoice.

There is a payment screen associated with invoices, where customer payments are recorded. Recording payments in this screen shows that the customer owes less money, and also records that more cash has been aquired. The payment screen for customer invoices is called "Receive Payments," and is accessed by following this path:

Customers > Receive Payments

First, invoices are generated using the Create Invoices screen. Then, as payments are received from customers, the payments are applied against the invoices by using the Receive Payments screen.

Bills in QuickBooks

"Bills" are accessed by following this path:

Vendors > Enter Bills

"Bills" are received from vendors. They record expenses (or costs or inventory), and they record that the business owes the vendor the amount of money that appears on the bill.

There is a payment screen associated with the bills, where payments made to vendors are recorded. Recording payments in this screen shows that the business owes the vendor less money, and also records that there is less cash by paying the vendor. Or, if the vendor bill was paid with a credit card, this screen shows that there is more credit card debt on the books. The payment screen for vendor bills is called "Pay Bills," and is accessed by following this path:

Vendors > Pay Bills

When vendor bills are received, they are entered using the Enter Bills screen. Then, as they become due, they are paid using the Pay Bills screen.

Home Page Confusion for Bills and Invoices

Starting with QuickBooks 2006, Intuit added a Home Page. Access it by following this path:

Company > Home Page

In the Home Page, QuickBooks graphically shows how money should flow through the business.

One point of confusion on the Home Page is where the arrow goes from Enter Bills, down to Invoices. Although the arrow is a lighter color than other arrows, if people are not aware of the difference between bills and invoices, it may seem that invoices must be created after entering bills. However, for most users this is not the case.

When to Create a Customer Invoice After Entering a Vendor Bill

Users only need to create a customer invoice after entering a vendor bill in one specific instance: when there were expenses on the vendor bill that need to be invoiced to a specific customer. For example, if there are reimbursable expenses (direct pass-through with no markup), or other expenses requiring a markup, these can be marked Billable in the Enter Bills screen, and put onto a specific customer's invoice.

Final Thoughts

Once QuickBooks users understand the difference between Bills and Invoices, and how they can be used in tandem, many problems can be avoided.

About the Author: Jennifer A. Thieme is a Certified QuickBooks ProAdvisor who loves to help people with QuickBooks. She brings unique insight, clear instructions, and over ten years of experience to all of her QuickBooks articles. Owner of Solid Rock Accounting Services, Jennifer's clients enjoy these same benefits on a personal and regular basis. You can too - visit http://www.jenniferthieme.com and contact Jennifer today.

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