If you’re a freelancer looking to understand the difference between an invoice vs statement, you’ve come to the right place. As a part of managing your business finances, knowing when and how to use invoices and statements is important for effective financial management. In this blog post, we’ll break down the differences between invoices and statements, and their purposes and help you make informed decisions about which to use in specific situations. By the end of this article, you’ll have the knowledge you need to confidently handle your billing and keep your financial records in order as a freelancer. Let’s get started!
Table of contents:
What is an Invoice?
An invoice is a request for payment that you, as the freelancer, send to your client for the products or services you have provided. It acts as a detailed bill, including important information such as the invoice number, date, billing address, a breakdown of the items or services rendered, quantities, rates, payment terms, and contact information for both parties. An invoice is a professional way of letting your client know how much they owe you for your work.
To streamline sending invoices, you can leverage tools like CheckYa, which offers a range of features and benefits. CheckYa allows you to send unlimited invoices and even allows you to send automated reminders when the payment is due. It also offers multiple payment methods such as ACH, credit card, debit card, Apple Pay, Google Pay, and PayPal, giving clients flexibility in their payment options. Additionally, freelancers can save on transaction fees by utilizing CheckYa’s fee-splitting feature. Moreover, with CheckYa’s dashboard, you can manage all paid, unpaid, and overdue invoices in one place, ensuring a clear overview of your financials.
What Does an Invoice Contain?
An invoice contains the following information:
- Invoice Number: A unique identifier typically assigned sequentially to an invoice to differentiate it from others.
- Date of Invoice: The date the invoice is sent to the client.
- Billing Address: The address of the company or individual who is requesting payment.
- Description of Services/Products: An itemized account of the products or services provided to the client, including specific details such as quantity and rate.
- Total Amount Due: The sum of all charges related to the products or services provided.
- Payment Terms: Information specifying how and when the client should pay. This includes payment methods, due date, and any applicable late fees.
- Contact Information: The freelancer and client’s contact information in case of further questions or clarification.
Here’s an example invoice that you can create via CheckYa.
When to Use an Invoice?
Invoices are typically used for one-time or recurring transactions when immediate payment is expected. You will commonly use invoices for sales of products or services, one-time freelance projects, or time-based billing. Sending an invoice ensures that you have a clear transaction record, establishes the terms of payment, and helps you and your client maintain accurate financial records.
What is a Statement?
On the other hand, a statement is a summary of all your financial activity with a particular client over a specific period, such as a month or a quarter. It provides an overview of the transactions, payments, credits, and balances associated with that client. Instead of itemizing each individual charge, a statement presents a snapshot of the client’s overall account activity.
What Does a Statement Contain?
Some information in a statement includes the following:
- Account Information: The account number that identifies the client’s account.
- Statement Date: The date the statement is generated and sent to the client.
- Beginning Balance: The balance carried over from the previous statement period.
- Account Activity: A summary of all transactions between the freelancer and client during the statement period. This may include payments, credits, and new charges.
- Ending Balance: The resulting balance of all account activity that occurred during the statement period.
- Contact Information: The contact information of the freelancer and client in case of any further questions or clarification.
When to Use a Statement?
As a freelancer, you may use statements for ongoing relationships with clients, such as those based on recurring services or retainer agreements. Statements are not meant for individual payments, but rather to periodically update your clients about their account status. They serve as reminders and help clients track their payment history, outstanding balances, and any adjustments made to their accounts.
Invoice Vs Statement: Key Differences
|Purpose||Request payment for your freelance services or work on a specific project.||Summarize your freelance income, expenses, and outstanding client balances.|
|Content||Detailed breakdown of a single freelance project, including service details, fees, due date, and payment terms.||Summary of multiple freelance projects, payments, expenses, and your total financial standing.|
|Frequency||Issued for each project or freelance gig, whenever you complete a job.||Typically sent regularly, like monthly or quarterly, to provide an overview of your freelance earnings and financial transactions.|
|Action Required:||Requires immediate attention from your client for payment on a specific project.||Doesn’t ask for immediate payment but helps you keep track of your income and expenses, and prompts you to review your financial status.|
|Payment Terms||Includes specific payment terms for the individual project, such as due date, late payment fees, and discounts.||Generally doesn’t specify payment terms for individual projects but may mention the payment due date for the total outstanding amount.|
|Format||Customized and detailed for each freelance project, focusing on the services provided and fees charged.||Generally follows a standard format to give an overview of your freelance financial activity.|
|Use Cases||Used to request payment for your freelance work and to provide a clear breakdown of each project’s costs.||Used for organizing your freelance income, and expenses, and keeping track of your financial status.|
|Follow-Up||May require follow-up with clients for payment reminders or late fees if the payment isn’t received on time.||Typically does not involve immediate follow-up, but can be used as a reference for unpaid invoices and client balances.|
In conclusion, invoices and statements are both important financial documents for freelancers. An invoice is used to request payment for specific products or services, while a statement provides a summary of all financial activity over a period of time. Invoices are for one-time or recurring transactions, whereas statements are useful for ongoing client relationships. By using these documents correctly, freelancers can ensure prompt payment, track their finances, and maintain good client relationships. It is important to maintain accurate records and consult with professionals when needed.