What Is Invoice vs. Voucher?

Understand the distinctions between Invoices and Vouchers, including their definitions, purposes, and applications in business transactions.

In the world of finance and accounting, the terms “invoice” and “voucher” are pivotal yet often misunderstood. While both are essential in managing and documenting transactions, they serve distinct roles.

What is an Invoice?

An invoice is a commercial document issued by a seller to a buyer to request payment for goods or services provided. It typically contains details such as:

• Seller’s and buyer’s information
• Description of goods or services
• Quantity
• Price per unit
• Total amount due
• Payment terms
• Invoice number
• Date of issue

Types of Invoices

• Pro Forma Invoice: A preliminary bill of sale sent to buyers in advance of a shipment or delivery of goods.
• Commercial Invoice: A document required by customs to determine the true value of imported goods, often for the assessment of duties and taxes.
• Credit Invoice: Issued when a buyer returns goods or when a seller provides a discount.
• Debit Invoice: Raised by the seller to increase the amount receivable from the buyer in case of past undercharged invoices.

What is a Voucher?

A voucher is an internal document used within an organization to authorize and record the payment of a liability. It allows for the verification and approval of expenses before payment is made. Generally, a voucher includes:

• Details of the transaction
• Date and amount
• Authorization by relevant personnel
• Payment method
• Supporting documents like invoices or receipts

Types of Vouchers

• Payment Voucher: Prepared for recording payments made by the company.
• Receipt Voucher: Used for recording receipts of cash or check.
• Journal Voucher: Maintained to record adjustments or non-cash transactions.
• Supporting Voucher: Helps in supporting evidence for any financial transaction.

Applicability in Business Transactions

Invoice

Invoices are crucial in sales transactions as they formalize the payment arrangement between buyer and seller. This ensures both parties are clear about the amount due and payment terms, which helps in maintaining a healthy cash flow for businesses.

Voucher

Vouchers are key to internal financial control and auditing processes. They ensure that all payments are accounted for and authorized properly, reducing risks of fraud or errors in financial records.

Special Considerations

• Accuracy: Invoices must be accurate to avoid disputes with customers, which can delay payments and affect business relationships.
• Authorization: Vouchers must be authorized by appropriate personnel to maintain control over the organization’s cash outflows.
• Documentation: Good documentation practices for both invoices and vouchers help in the smooth operation of financial audits.

Examples

Example of an Invoice

ABC Company
123 Market Street
City, ST 12345

Bill To:
XYZ Company
456 Corporate Blvd
City, ST 67890

Invoice #12345
Date: 10/03/2023

Description:         Quantity:   Price:   Total:
---------------------------------------------------
Web Design Services      2          $500      $1000
---------------------------------------------------
Total Amount: $1000
Payment Terms: Net 30

Example of a Voucher

XYZ Company
Voucher No.: 2023-001
Date: 10/03/2023

Description: Payment for web design services
Amount: $1000
Payment Method: Bank Transfer

Authorized By: John Doe
Supporting Documents: Invoice #12345

Related Terms

• Receipt: A proof of payment.
• Bill of Lading: A document issued by a carrier to acknowledge receipt of cargo for shipment.
• Purchase Order: A document created by a buyer to authorize a purchase transaction.

FAQs

What is the main difference between an invoice and a voucher?

The main difference is that an invoice is issued by the seller requesting payment, whereas a voucher is an internal document used by a company to authorize and record payment.

Can an invoice and a voucher be used interchangeably?

No, they serve different purposes. An invoice is an external document, while a voucher is used internally for payment processing and record-keeping.

Who issues a voucher?

Vouchers are prepared and authorized by the company’s internal personnel to approve and document financial transactions.

Summary

Invoices and vouchers are integral components of business finance and accounting. By understanding their distinctions and applications, businesses can ensure accurate transaction recording and effective financial management. While an invoice serves as a request for payment and a legal record of sale between seller and buyer, a voucher acts as an internal document for authorizing and documenting the payment of liabilities.

References

1. AccountingTools. (n.d.). Invoice Definition. Retrieved from accountingtools.com.
2. Investopedia. (n.d.). Voucher Definition. Retrieved from investopedia.com.