Whether you’re organizing finances for yourself or your business, one of the first steps is documenting your transactions. Registering expenses, income, purchased inventory, client contracts, or any other type of financial contract can contribute toward financial success.
Keeping a record of your purchases and sales will help to maintain control over your finances, and eliminate any confusion when filing taxes. There are several different ways to document daily transactions. In particular, bills and invoices can help you keep track of the way your money moves.
What Is a Bill?
In general, a bill refers to the amount of money that a customer owes a business, in exchange for goods or services. After a customer receives goods or services from a company, they can expect a bill that outlines each product, and its associated cost.
Businesses have an obligation to provide a clear explanation of product pricing. Whether your company sells an item or an experience, your honesty allows them to make informed purchases.
After customers purchase products, your company will identify the associated pricing through a bill. This is expected of nearly every business, no matter the industry or type.
In some cases, businesses might bill a customer for a product and wait an extended period for payment. For example, a medical company might bill a client for medical billing services.
Often, medical or healthcare companies will wait months before receiving payment from customers. Since these companies need cash flow to pay employees and continue operations, they will often take advantage of medical billing factoring which sells their accounts receivable for an advance on customer payments.
Types of Receipts
Similar to bills, receipts will outline expected payments from customers in exchange for products or services. Depending on the purchases you make, or the products or services you sell, you might use more than one type of receipt.
There are many different types of receipts, including the following options:
- Bank statements — A printed, or digital record of a bank account balance, typically issued after your deposit or withdraw funds.
- Commercial receipts — Any document that outlines a transaction between a buyer and seller.
- Salary records — Offer letters, benefits packages, or other documentation that identifies an employee’s total salary.
- Tax returns — A form capturing your income, and the amount of that income taxable by the government.
You might use these or other receipts types when traveling, filing taxes, purchasing or selling products, or examining financial activity at your bank.
What Is an Invoice?
Unlike a bill, which only offers proof of a transaction, invoices are written expectations for payment. When businesses issue an invoice to a customer, they send a physical or digital document including services rendered, associated costs, and options for payment.
Invoices also differ from bills by outlining different payment terms. Typically, invoices serve as an official notice to a customer that payment is due. Often, both buyers and sellers save copies of invoices as future proof that a transaction took place, and payment followed.
After a customer fulfills an invoice through payment, businesses often follow up with the customer to confirm they have received payment.
Healthcare companies particularly depend on invoices to make payment expectations clear and outline appropriate payment windows for customers. For example, after a medical company sells supplies to customers, it will send along an invoice soon after the transaction is agreed upon.
The invoice will outline the specific terms of the transaction. These terms should include product names, pricing details, and payment options for the customer.
Medical companies commonly trust healthcare factoring or medical accounts receivables factoring to eliminate the waiting period between transaction and payment. Instead of waiting months to receive a customer’s payments, factoring can deliver funds with virtually no wait time by borrowing against a customer’s incoming payment.
Types of Invoices
There are many different types of invoices that customers may receive after a purchase from a company, including:
- Standard invoice — A printed or digital invoice sent to a customer after a business has delivered the expected goods or services.
- Debit invoice — An invoice that outlines debts that require payment between buyers and sellers.
- Expense reports — An invoice detailing expenses eligible for reimbursement from a company, including those spent on travel or transportation, meals, advertising, and office needs.
- Timesheet invoice — An invoice that outlines payment expectations based on hours spent working on a customer’s behalf.
- Final invoice — An invoice sent after a project is completed, or after a vendor completes the final stages of an ongoing project.
No matter the type of invoice sent or received, the invoice itself will include a few pivotal pieces of data. In addition to a total list of services and per-service pricing, invoices should include information that makes it easy for a customer to pay a vendor. Businesses should also include contact information on an invoice, in case customers have any follow-up questions.
The Billing Process
Though similar, invoices and bills each have individual roles in the billing process. Bills are often offered to customers immediately following a purchase. Invoices are subsequently sent to customers when payment is collected.
For example, a medical supplies company might sell equipment to a customer. As a record of the transaction, the medical supplies business provides the customer with a bill. The bill will outline the specific equipment provided to the customer, along with the amount of money the customer will owe as a result of the transaction.
After the customer receives their medical supplies, the medical supplies company will then send an invoice. Unlike a bill, an invoice will typically include an itemized list of products received, alongside per-item pricing. The invoice will also identify payment methods — either through an online payment portal or a mail-in check option — that the customer can use to satisfy the balance.
Though medical supplies providers are eventually repaid, they sometimes face invoice issues. One of these issues is a large amount of time between the sale of medical equipment and a customer’s repayment. Medical supplies businesses wait days, sometimes weeks, before customers issue payment through an invoice.
To drastically reduce wait times for payment, many medical supplies companies use factoring to receive money faster. Factoring helps to improve cash flow by offering medical supplies companies access to advance cash. Medical transcription companies can also use factoring to accelerate cash flow and offer companies access to funds within 24 hours.