What is the Difference Between an Invoice and a Packing Slip?

There are some easy ways to spot the differences and to keep track of which document is important in which situation.

Among the many documents important in a procurement context, there are two that are often confused; the packing slip and the invoice. It’s understandable why this is, since the two are usually encountered in similar situations, for example during the shipment of goods from a seller to a buyer.

If you’re a receiver of a shipment of goods, you may receive either one or both of these documents, and they both require different actions to be performed. Conversely, if you’re a seller, you need to send each of these to the right person, and through the correct method.

First, the packing slip. This is a document that’s exclusively used in the context of the shipping of goods, and will accompany the shipment, either inside the box or parcel, or in a clear pouch attached to the outside of it. The packing slip will state the items inside the box, giving their quantity, the date of shipment and other details such as weight or dimensions.

On the other hand, an invoice is a commercial document, listing the goods or services provided by a seller to a buyer and laying out the cost of each item, as you would see in a bill. Another important feature of an invoice is the statement of payment terms; either it will ask for payment within a stated timeframe, or it will say that the bill has already been paid, in which case it is a record of the transaction. The invoice will also clearly state the names and addresses of the trading partners involved.

Some other ways to differentiate between the two and to keep track of when to use each are:

Purpose

A packing slip is intended to identify the contents of a package to the person receiving it who is then able to check off the items they were expecting to receive against this list. If something is wrong, they can then immediately contact the seller. In addition, the packing slip can inform government agents (during transport through customs, for example, if there is a package slip in a clear sleeve attached to the package) of the shipment’s contents, weight and commercial value. This can ensure smooth clearance of government checks and procedures.

In contrast, an invoice is a non-negotiable, mandatory payment instrument; this means that it is a demand for accounts to be settled, within the payment terms written on it. The goods to be paid for are listed in itemized form on it, with per item cost, and a clear statement of how much money is owing to the seller.

Who is it sent to?

Another important difference between the two is the person to whom each document is sent. A packing slip is typically sent to the person who will be using the items, or who is responsible for receiving the items and checking that they are correct and match what was ordered. On the other hand, an invoice is usually sent to the person responsible for payment, and quite often these people are not the same, especially in large organisations.

As an example, if an IT systems manager orders a box of printer ink, the package will be addressed to her and she is the one who will receive it and check the contents against the packing slip. However, the invoice will then go out to the procurement manager, the payments manager, or the accounts payable team within the company.

Who is it sent by?

In the same way, the people sending the two documents might be different as well! In our earlier example, the packing slip included in the carton of printer ink might be printed and included by a warehouse employee at the time of fulfilling the order, while the invoice might be sent later by an employee responsible for billing clients, in the accounts section of the company.

Importance

Packing slips are of somewhat limited importance; after the goods are received and checked, they are not essential any longer. However, originals of invoices must be kept by both buyer and seller for records and tax purposes.

Prices

Another way the two documents are different is that the packing slip will usually not state the price of each item, or the Value Added Tax (in a European context). The invoice, however, will include a detailed price breakdown of all items being billed for, as well as VAT or other forms of government taxes applied.

Services

Another useful and quick way to see the differences between a packing slip as opposed to an invoice, is to ask the question “Which one would a company that provided only services use?” It should be clear by now that such a company would not need to provide a packing slip, as there are no physical goods to ship or receive; but the company would indeed provide an invoice to bill for the work performed, perhaps itemised by hourly rate and stating the number of hours worked.

Action required

Now that we know the purpose of these two documents, it’s important to also discuss how to deal with each. In the case of a packing slip, one should have it at hand while unpacking the shipment of goods, in order to cross-check the quantity and condition of each received item. For an invoice, the buyer should first make sure the order has been fulfilled, in the sense that the goods or services have been delivered. Subsequently, the invoice should be paid and the original invoice kept carefully in the both trading partners’ records, for legal and tax purposes. For both buyer and seller, a clear and separate record should always be kept of invoices that have been paid and not paid, with payment due dates noted down on a calendar-based payments software. This will make sure no invoice goes unpaid within the payment terms. Upon payment, the buyer may also need to send a notification of payment, called a remittance advice, to the seller to tell them that the invoice has been paid.

A basic tenet of procurement is that one should always carefully check trading documents such as a packing slip or an invoice upon receipt so that they can be dealt with and filed correctly, and any concerns can be raised in time. Therefore, it’s important to know what kind of document you are dealing with. Sometimes the different names used for each document can throw you off. For example, a packing slip is sometimes called a waybill, a shipping list, manifest, or packaging slip; while an invoice can be called a bill, a tab, or a sales or purchase invoice. However, the essential differences between the two should be clear by now. And of course, when in doubt, or in more complex situations, it is always important to keep lines of communication open between the buyer and the seller and clear up any doubts about trading documents as soon as possible.