Digital invoices, eInvoices, and eBilling. They all sound the same, don’t they? It’s all a bunch of accounting jargon, right? In general, they are fairly similar. They all involve you collecting money from clients or customers online. However, there are distinctions between each of these terms. Not knowing these differences can cause confusion when communicating with others who might use the terms differently.
To that end, we’ve put together this quick guide to the differences between each term. You’ll also learn when it’s appropriate to use each method to get paid for your hard work.
What are Digital Invoices?
Digital invoice is the most generic of the three terms, making it the most used. Any sort of bill or invoice not sent via snail mail is called a digital invoice by most. However, many uses of “digital invoice” are misleading.
A digital invoice actually has a couple of critical characteristics that differentiate it from other forms of billing:
- You can process it digitally
- Humans can read it
In other words, you don’t have to create a physical copy of the invoice in any way. This saves paper, ink, toner, and so on, and it reduces data entry errors. As for the readability part — some invoices aren’t designed to be understood by humans. Rather, they’re built so that a computer can decipher it and record it automatically. On the other hand, a digital invoice contains whichever human language it’s sent in. It can be a PDF file, Word document, scanned image, or something similar.
That said, PDF files and images are used more often since they can’t be easily edited and fraudulently disputed by clients or customers. But instead of creating a new PDF or image invoice from scratch, software like Quickbooks lets you generate professional invoices fast.
When Should You Use a Digital Invoice?
Digital invoices are perhaps the most accessible type of electronic invoice, hence its use as an all-encompassing way to describe any bill sent electronically. Basically, you can use a digital invoice in nearly any instance where you might typically send a hard copy of an invoice.
What are eInvoices?
eInvoices are electronic invoices that use structured data computers can understand. Humans can’t decipher or use the invoice easily, nor are they meant to. They’ll look like a bunch of random code. Instead, computer software deciphers the code and records the correct information accordingly. There are two popular eInvoice formats: EDI (Electronic Data Interchange) and UBL (Universal Business Language).
EDI is the harder of the two to use. Within it are several standards, and there are different versions of each standard. Businesses sending invoices to each other have to agree on standards and versions, making this inaccessible for most small businesses. UBL is standardized and uses XML format to create and send invoices. Thus, more small and medium-sized businesses use UBL for eInvoicing.
When Should You Use an eInvoice?
eInvoices are more limited in their use since humans can’t read or interpret them. Thus, you can’t use them to bill an individual — only a business with the necessary software.
What is eBilling?
Finally, there’s eBilling, which is actually the broader term that encompasses the previous two. eBilling is essentially the process of using invoices to send and pay bills over the Internet. It includes all systems used to send, pay, and process bills and invoices. Solutions ranging from bookkeeping software like Freshbooks to more merchant-services-oriented products like Square may fall under the eBilling umbrella.
When Should You Use eBilling?
Given that eBilling is a catch-all for online billing and invoicing, you should use it whenever possible in place of a paper bill. The electronic side of things cuts down on data entry errors and saves you money on supplies and accounting staff, while you also save time with automation. Customer satisfaction also improves, as clients and customers can easily pay their bills and gain clarity into items they’re charged for. Plus, you can integrate eBilling software with your other business solutions to streamline operations and free up resources for revenue-generating activities.
Digital Invoices, eInvoices, and eBilling: Similar, But With Key Differences
Once you start taking more control of your accounting and investing in software, there’s plenty to learn — including industry jargon. Of course, much of this jargon sounds the same unless you’re trained in accounting and bookkeeping.
- Digital invoices are any invoices that are readable by humans and sent over the Internet. It’s basically a regular paper invoice but sent electronically.
- eInvoices are almost the same, except for they use language only a computer can understand. They have more limited use cases than digital invoices, and some forms of eInvoices may be out of reach for small businesses.
- eBilling is an all-encompassing term for sending, receiving, and processing online payments.
Hopefully, you now understand the subtle differences between each of these terms. This will help you have clearer interactions with other parties your business interacts with. Fortunately, if you ever forget, you have this quick guide to refer to in case you ever need a refresher.