Statement or invoice? Explaining the differences

No matter what you do to make it easy and convenient for your customers to pay you – emailing invoices and accepting credit cards, offering discounts for early payment, etc. – it seems like there are always stragglers. And that makes it difficult for you to do any accurate planning and projecting — not to mention what it does to your current cash flow.

You can keep sending invoices stamped with “Overdue” in big red letters. And you may have to occasionally take collections efforts against seriously late payments. But before you get to that point, you might try another approach: Send a statement.

The best cloud-based accounting websites provide customizable templates for both kinds of sales forms. But each is generally only used in specific situations.

First notices of payment due

Most small businesses send invoices to customers at least some of the time. They contain purchase details and any sales tax or other charges necessary.

When a customer buys something in person and pays you on the spot, you of course issue them a sales receipt. Invoices are used when you sell goods or services that your customer may or may not have received, but which they haven’t yet paid for. It’s your first point of contact, an accounting of what they’ve purchased and what they owe.

Accounting websites offer tools that help you personalize your invoices, adding logos and modifying their columns and changing field labels, for example. They also let you set up repeating invoices. So if you bill a customer on a recurring basis, you can create a template that can be re-used. Some applications will even issue the invoices automatically (if the amount is always the same) or at least send you a reminder.

Multiple uses

Best-of-breed cloud-based accounting applications automate the process of creating statements. These customizable forms can serve many purposes. If you’re using them to let customers know that they have one or more past-due invoices, they’re more like reports than invoices. You may want a list of only the customers’ unpaid invoices, or you may want an accounting of all transactions from a given period, including payments.

You can send statements to show customers all transactions from a specified period or just those invoices that are delinquent.

Other situations where you might want to send statements include:

• Fees or dues. If you own a fitness club, for example, or your company has a rewards/discount program that requires periodic payment, you might opt for statements.
• Payment disputes. You may occasionally have delinquent customers who claim to be current with their payments. A statement can display all transactions you’ve recorded.
• End-of-year income tax information. Depending on your type of business, some transactions might need to be documented.

Finally, try not to confuse your customers by sending multiple statements too close together. You financial advisor can help you determine the timing for such dispatches.

Need more help with small business bookkeeping?

As a business owner, educating yourself about bookkeeping is a worthwhile endeavor. But enlisting the help of a trained professional can give you access to expertise you could never find time to learn on your own. That’s where Block Advisors comes in. Our team of bookkeeping professionals can give you a clear picture of your business financials with expert recommendations for optimizing cash flow and keeping your business on track.

Block Advisors also offers year-round small business services that help you manage other tasks on your small business to-do list. Our business formation, taxes, payroll, and beneficial owner reporting services help relieve the stress of common administrative tasks so you can get back to business.

This article is for informational purposes only. The content may not constitute the most up-to-date information and should not be construed as legal advice. 

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