Using Invoices vs. Receipts for Your Home Business

Monday, 26 Jul 2021

 Running a home-based business in Melbourne is becoming the new trend after the pandemic struck the country. Many aspiring entrepreneurs are looking forward to starting a venture from the safe environment of their home that allows them to cut down on the cost of the office lease.

However, when it comes to accounting, they become a bit confused about using invoices and receipts. This is the reason why they rely on bookkeepers in Melbourne who are able to help them with the accounting work.  

If you too have a home business or are planning to launch one, you must be aware of the difference between the two and how they should be used. So, here is a rundown on using the correct paperwork for your home business.

What Is an Invoice?

An invoice is sent to the customers when they are required to make a payment. It can be a paper slip or an electronic invoice that is sent before the payment is released and after the customer has received a product or service.

The invoice is a record of the transaction and has details including the number of products or services purchased from the business in Melbourne and their costing based on work hours, the material used and labour charges.

Other information on the invoice is the date of issuing the bill and the terms of making the payment, along with the contact details of the seller and the customer. Invoices help in getting receivables into the business to improve its cash flow.

Bookkeepers makes it a point to send out invoices on time to get the payments from the customers. They also make sure to follow up with them so that it does not get delayed.

 What Is a Receipt?

A receipt is proof of disbursement as it confirms that the customer has made the payment for the delivered goods or services received. It can be used by the customers in Melbourne to prove that they have made the payment to the seller.

Your bookkeeping company will make sure that the receipts sent out to the clients and those received by the business are kept safe to claim business deductions during the filing of taxes. A receipt has information like the number of products and services sold and total cost, including taxes and discounts.

Other significant details include the method used to make the payment, the amount of money paid and the date of disbursement, along with the contact details of the buyer and the seller in Melbourne.

The receipt can be utilised by the buyer in case he/she needs to return the product or get it exchanged. It helps the seller to identify the exact payment made by the customer and provide the refund or exchange accordingly.

Important Components of an Invoice

When the seller asks for payment, they need to prepare a thorough invoice with the help of the bookkeeper. It must include the name of the business in Melbourne, its logo, address, name and address of the customer, date, type, and quantity of products sold, discounts, sales tax, the due date for payment, penalties, or late fee in case of a default, and all the methods of making the payment.  

The transaction needs to be updated by the bookkeeper and added to accounts receivable after the money is credited to the company account. Many businesses use the invoicing software makes it easy to generate invoices on time and get reminders for follow-ups.

Important Components of a Receipt

The receipt usually does not have a standard format like the invoice. It can be as simple as a document stating that the customer has made the payment on this date. However, some businesses in Melbourne make it as elaborate as the invoice and put the stamp of paid on it to confirm the acceptance of payment.

Bookkeepers create professional receipts that help in keeping the records up to date. You can also use accounting software to take care of the task of preparing receipts. The receipts should be sent to the customers as soon as they are generated.

What To Do If the Client Does Not Pay?  

The bookkeeper can contact the customers and remind them of the due date without straining their relationship with the business. Sometimes the customer may forget about the deadline and these reminders can help them to act.

If they do not respond to the reminders, the bookkeeper will then send a letter of demand with the help of a lawyer as it involves legal and consumer law liabilities. If nothing works, the business owner can file a complaint with Consumer Affairs Victoria or the Australian Financial Complaints Authority.

Other options for resolving the dispute include contacting the Mediator Standards Board to help with mediation in Melbourne or the Australian Small Business and Family Enterprise Ombudsman.

Resolving the issue harmoniously is better for both parties, and this is the reason why bookkeepers rely on this method to get the payment. Another way out of this problem is the use of a debt collection service and informing the customer about the same.

It may push them to go ahead with the payment. You can also go the legal way and file a complaint with Small Claims Tribunal to get rightfully paid for your services.   

Conclusion

Invoices and receipts are both equally significant documents that need to be prepared by home businesses for completing transactions. They are needed for getting payments from clients and claiming tax deductions.

Without them, it will not be possible to manage the financial records. Thus, bookkeepers in Melbourne emphasise on creating both for every transaction.

 

  

 

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