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What Is an Invoice?

An invoice is one of the most basic business documents. However, you may have questions if you’re new to running a business. You may also have questions about its details. Or, wondering if there’s anything to do with them besides filing them away and later forgotten.

What is an invoice? What’s it used for? How are they made? These questions, and more, get answered in this article — so keep reading!

What Is an Invoice?

An invoice is a document detailing one of two things:

  • A sold product
  • A rendered service

An invoice transfers from the provider to the purchaser of the item or service. This document is a semi-binding agreement for payments. The purchaser pays the amount owed by the stated date (and complies with any other terms).

Note: “Semi-binding” with the understanding the purchaser doesn’t ghost the provider.

In a way, an invoice is interchangeable with “bill” and “purchase order”. Their intent is to get the provider paid and offer a paper trail for the transaction.

Types of Invoices

A business may get or send out a dozen+ types of invoices. The type is pretty explanatory since they’re usually named after its intent.

Here are a few types of invoices you may run into when running a business:

  • Standard
  • Commercial
  • Utilities
  • Subscriptions
  • Billings
  • Timesheet

If people say they’ve sent an invoice, then it’s usually a ‘standard invoice’. Though, keep an eye out since it’s good to familiarize yourself with the different types.

Invoice vs Receipt

Let’s take a moment to clear any confusion about invoicing and receipts.

  • Invoice — Created before the payment
  • Receipt — Created after the payment

The confusion likely stems from people filing invoices with their receipts. You could print and note the invoice as ‘Paid in Full’. This could work as a receipt if you’re loose with record-keeping. But it’s better to get a receipt when the transaction completes (for safekeeping).

What Is an Invoice Used For?

Now let’s go a little deeper into invoicing. Particularly: Its use. You can do a lot with an invoice when running a business.

Below, we’ve got three of the most common uses of an invoice.

Payroll

Most businesses have payroll services for handling all things employees. Some businesses (perhaps yours) may not need something as complex.

A freelance business, for example, is a prime candidate for standard invoicing. Another would be if you bring on a lot of contractors or 1099-type employees.

The invoice becomes a bit of everything payroll:

  • Processing
  • Recording
  • Reporting

Send it off, get paid, and file it. There you have a simplified payroll system.

Funding

There are a lot of great ways you can use invoicing as a means to fund your business.

These include options like:

Both options are a form of short-term business funding.

Invoice financing and factoring are great when you’re in a cash flow shortage and/or expanding via growth. Or, if you have an incredible opportunity but need to act fast. These options let you get the capital needed to keep going full speed!

Accountability

At one point we mentioned the invoice as “semi-binding”. There’s nothing stopping someone to bail paying it after receiving one. In some situations, there’s nothing a provider can do about this.

It’s unfortunate and sometimes unavoidable. An invoice does offer a proper form of accountability. It is a great piece of evidence if one needs to escalate payments through legal means.

How to Make an Invoice

Do you need to make an invoice for a delivered product or service? Need to wrap your head around the concept as someone who received one? Let’s go ahead and use this section to make one so it answers both questions.

From Scratch

Making an invoice from scratch is a little involved but they’re actually simple. It’s not like you’re writing a resume — you only need the essentials. Dress it up with graphics if you want. Sometimes simple invoices are best to get your point across.

The main components and invoice details will be…

  • Invoice ID/# — States the invoice’s number or ID for easier tracking
  • Contacts — Business and client contact information
  • Services/Items — An itemized breakdown of products or services
  • Terms — Extra terms someone is expected to comply with
  • Due — The amount due

Dig out some invoices from your files if you need a visual. Or hop on over to Google where you’ll find a ton of examples. You can see that they’re pretty basic which means making them is pretty simple.

Try this with a word document:

  1. Open a new document
  2. Place your contact details in the header
  3. Use column #1 to list products or services
  4. Use column #2 to list the amount due and client contact info
  5. List notes and terms around or in the footer

Try touching up the headings with different formatting if you want. Otherwise, that’s about it for its design. It’s simple but effective at conveying its message.

Using Templates

By far the easiest way to put together an invoice is with a template.

  • Downloadable templates
  • Generators and builders
  • Cloud-based worksheets

Most accounts receivable and accounting software include them. Some payment processing platforms offer templates, too. There’s no reason to pay for a template given the number of free resources out there to make them.

Building a Better Business Starts Here

You’ve made it to the end! You got the answer, and more, to your “what is an invoice?” question. But you probably have other questions about building a successful business, right? We got you covered no matter what else you need for running your business!

Explore the many, great business resources we’ve created. And use our website to find and connect with the best business service and business funding providers.

A Business Owner’s Guide to Employee Benefits Insurance

Did you know that 60% of people report that work employee benefits are a huge factor in deciding whether to accept a job offer? The truth of the matter is your current (and potential) employees want benefits.

They see it as a concrete sign of whether you’ll invest in their well-being and their financial stability or you’ll decide to cut corners. When you’re running a small business, you’re already worried about your budget constraints.

Yet, if you’re aiming for long-term financial prosperity, then offering benefits is a must. Keep on reading for our full breakdown of employee benefits. We’ll look into the benefits that you’ll need to provide as required by law, as well as the most common benefits offered by employers.

What Are Required of Employee Benefits Insurance?

There’s no use in starting a list of employee benefits that you’d like to offer without ensuring the availability of the benefits mandated by federal and state law.

Here are the employee benefits that you must provide.

Social Security Taxes

Your business is obligated to pay social security and Medicare taxes just as your employees do, down to the same percentage rate. Also, company tax payments are considered a business expense. You’ll be required to withhold your employees’ share of tax payments from their gross pay.

If you’re using a reputable payroll service, then you won’t have to worry about manually overseeing the process. Regardless, you’ll need to take a close look at the IRS’ social security and Medicare withholding rates to get an idea of what rates you’ll need to calculate into your budget.

Unemployment Insurance

As it stands, unemployment insurance works by paying a benefit to employees in case they’re laid off. You’ll find that there is a plethora of different unemployment programs offered by the federal government as well as on the state level.

These programs are mainly funded via taxes collected from businesses. To set up your unemployment insurance, you’ll have to check out your state’s requirements.

It’ll show you how much you need to pay for unemployment insurance taxes. Depending on your state, you might not need to pay anything at all. However, if you’re required to do so, you can register with your state’s department of revenue or its workforce agency.

Disability Insurance

Similar to unemployment insurance for its variety according to your state’s regulations, disability insurance might require your business to provide partial wage replacement insurance.

This insurance, also known as short-term disability plans, is meant for eligible employees who suffered from a non-work-related injury or illness.

The Family and Medical Leave Act

Furthermore, you’ll need to keep the Family and Medical Leave Act (FMLA) in mind. In short, it’s a federal act that gives your employees up to twelve weeks of unpaid and “job-protected” leave each year.

This act comes into play when one of the following conditions are met:

  • An employee needs to care for an immediate family member with a serious medical condition
  • The employee is either giving birth or caring for their child or needs time for placement of adoption or foster care
  • An employee needs time to care for a serious health condition of their own

Once any of these conditions are met, your employee can tap into the federal act’s 12 weeks of unpaid leave.

What Are the Most Common Types of Employee Benefits Insurance?

Now that we covered the bare-bones benefits that are required by law, it’s time to look into what are considered to be “standard” benefits.

Considering the hugely positive effects of benefits, especially when it comes to your employee’s sense of well-being, it’s time to explore the most common employee benefits you can on offer.

Medical and Health Employee Benefits Insurance

The behemoth of all employee benefits would be—unsurprisingly—medical insurance. It’s considered to be one of the most expensive benefits, and it’s matched by its sheer importance to your employees.

The way medical insurance usually works is having the employer pay a specific percentage of the charged premium per employee. Then, the remaining cost is paid by the employee via their paycheck.

As an added incentive and benefit, some employers decide to pay the entire health insurance premium per employee. This translates into free health insurance for the employee.

Furthermore, there is a multitude of insurance providers and coverage options available to employers. Some of the factors that can influence your selection would be your business location, regional and state considerations, as well as the number of full-time employees.

Flexible Spending Accounts (FSA)

An additional perk that employees tend to expect is the ability to contribute pre-tax dollars every pay period to a Flexible Spending Account. The way an FSA works is by giving access to the employee’s pre-tax money via a credit or debit card. The account holder usually issues this type of card.

Moreover, there are four different types of Flexible Spending Accounts that you can offer to your employees.

1. Medical Expense Account

The money deposited into this account can be used to cover the costs of medical expenses that aren’t already covered by the employee’s health insurance.

For instance, prescription costs, copayments for office visits, or even procedures don’t tend to be covered under health insurance plans. It’s quite versatile as well, as it can be used for almost any healthcare expense under the sun, including vision and dental costs.

2. Dependent Care

A dependent care account can take up to $5,000 per family in pre-tax contributions each year.

Traditionally, these funds will be used to pay for family expenses related to the care of young children. Examples would be paying for daycare or elementary school expenses.

3. Health Premiums

This type of account comes into play only when an employer decides not to offer health insurance.

A health premium FSA allows your employees to contribute pre-tax dollars that can be later applied towards health insurance premiums. In a way, these premiums will be paid fully by the employees.

 4. Adoption Assistance

The overarching costs of the adoption process can be quite astronomical. Therefore, this FSA account allows employees to make use of their pre-tax money for adoption purposes.

Retirement Savings Plan and Employee Benefits Insurance

Similar to the popularity of medical and health insurance plans, employers offering retirement savings plans give them a competitive edge, especially when recruiting new employees.

If you’re a small business, it’s a misconception to think that you won’t be able to offer a decent retirement savings plan to your employees. One of the most common plans would be the 401(k).

Essentially, a 401(k) allows your employees to contribute a chunk of their pre-tax pay into an investment account. The investment account tends to be managed by a third-party investment company, like Merrill Lynch or Vanguard. Also, 401(k)s come with their own constraints.

For instance, your employees won’t be eligible to withdraw their money until they reach a specific age. In cases where employees take money out of their 401(k) early, they might have to contend with income taxes and even penalties.

Besides, you’ll find that many employers offer “matching” retirement savings plans to their employees. In summary, whatever amount the employees contribute out of their annual salary, their employer will “match” either all or a part of that investment amount.

Paid Leave

In the case of paid leave, the scope of this benefit tends to vary widely depending on the employer. Yet, most employers will offer paid leave benefits in one form or another, like vacation time, personal days, and national holidays.

Generally, employers will allow their employees to accrue vacation time and sick days. Then, they can decide when they’d like to cash them in.

Tuition Reimbursement

Nothing shows how much an employer cares about their employees’ personal development more than tuition reimbursement incentives. Increased focus and productivity are some of the great benefits of providing tuition reimbursement.

It also boosts your employees’ overarching happiness and work satisfaction. Additionally, you’ll find that some employers choose to place restrictions on tuition reimbursements.

For example, only reimbursing tuition for coursework that’s directly related to the employee’s job. Other employers are much more open with their eligibility and requirements.

Transportation and Parking Benefits

Your business might be located in a major city with a good public transport system. Or you might not be able to provide access to complementary employee parking. This is when transportation and parking benefits come in.

You can institute a reimbursement program. Or you can team up with your city’s public transport office for employee discounts and passes.

Untangling Employee Benefits Insurance

There is no reason for employee benefits to be as complex as they seem to be, especially for small businesses. By mixing mandatory benefits with other perks, your business will actively invest in its employees. Also, it’ll secure its long-term health and growth.

Thankfully, now you know which ones to pick and what your options are for employee benefits. However, when it comes to employee benefits and business insurance, we’ve barely covered the tip of the iceberg.

Make sure to check out our blog for additional business tips and advice. Or, if you’re ready to discuss your business funding options, contact us today.

What is Request for Proposal (RFP)? A Definitive Guide

Need certain business services, but don’t know where to turn? In many cases, all you have to do is ask! A Request for Proposal, or RFP, is an official request to acquire products or services that your company requires for a specific project.

Interested in getting the best value for your organization? Want access to skilled, short-term talent that’s beyond your core workplace capabilities? In both cases, an RFP can provide immense benefit.

Today, we’re sharing how the RFP process works. Read on to learn how to create one and how it can help propel your company to new heights.

What is an RFP?

In short, an RFP is a document that a business, non-profit, or government agency creates and submits for a project.

Within the RFP, they’ll list specific details about the project, along with the steps that require assistance from outside sources to complete. Then, they’ll request bids from suppliers who are capable of providing that support.

If a company can provide the requested products or services, they’ll submit what’s known as an RFP response. As individual bids come in, the agency that created the RFP will evaluate them against their scoring criteria to determine the most qualified partner for the job.

Why Should You Complete One?

Do you need to complete and submit an RFP for every business requirement? No.

Yet, what happens if there’s a project you want to pursue, but you don’t have the resources on hand to complete it fully? For instance, you might be looking for a skilled developer who can help you perform a countless number of web services, but you lack an in-house IT expert who can take on the project for you.

Rather than losing out on the opportunity, you can issue an RFP to fill in the gaps and fulfill any unmet needs.

That said, can’t you just reach out to individual suppliers on your own? Why go through the RFP process?

The simple answer is that it gives the project structure. When you organize and detail your needs into an RFP, you’re better able to gauge each supplier’s level of understanding around your project. You also create a benchmark against which you can measure your project success further down the road.

In addition, there are many entities, including government agencies and non-profit organizations, that are required to use RFPs to give legitimacy and transparency to their projects. An RFP reveals that a company is taking project goals and the supplier selection seriously.

Understanding the RFP Process

While your organization might vary these procedures a little, most business leaders follow the same basic process when creating and issuing an RFP. Let’s take a look at the process to follow.

Establishing Scoring Criteria

It might seem backward to start from the end, but you need to establish how you’ll ultimately select the winning bid. In other words, which factors are the most important and valuable to this project?

Is it a supplier’s pricing estimate? Or are you more concerned with the unique skill set they can offer or their past performances and references? Working with your team, define these criteria before you publicly release your RFP for bids.

This helps you weed through the proposals that miss the mark right out of the gate. This way, you can quicken the selection process, easily rank qualified suppliers, and begin work sooner.

Formatting the RFP

Within the body of the RFP, you’ll identify your needs for the project. While each RFP will read differently, a few of the most common categories to write about include:

  • The history and background of your organization
  • A detailed project description
  • The background of the project and the results you expect
  • The resources you need to complete the project (materials, tools, software, labor)
  • The project budgets
  • The anticipated project timeline
  • Defined project milestones and deliverable due dates

In addition, you can also include supplemental information in your RFP.  If you have specific questions for suppliers to answer or extra details you want them to provide, list them there.

The RFP should also clearly state the deadline for proposal submissions, as well as specific steps to follow when it’s time to submit. Some startup companies will require suppliers to mail their bids in, while others (such as government agencies) will use online systems.

Sharing Your RFP

Once you’ve taken the time to complete your RFP, it’s time to get the word out! There are several outlets and platforms you can use to do so.

First, you can post the link to the RFP on your website. You can also share it on your social media pages or distribute it to trade news outlets. Once a supplier decides to bid on your project, they’ll review the requirements and provide an official proposal response in the format you’ve requested.

This response will outline the approach they propose to take to meet your needs. In most cases, suppliers will provide both a written technical proposal and an accompanying pricing proposal that includes products, labor, and travel incurred.

Selecting a Winning Bid

When the RFP deadline has passed, it’s time to review the submissions against your previously defined evaluation criteria.

Once you select a winning supplier, you can still continue negotiations in many cases. Go through each line item and review the associated price. Then, negotiate to lower the bid even further. Many companies will issue a final call to their top few suppliers, asking them to submit a Best and Final Offer (BAFO) proposal at their lowest cost.

Navigating the RFP Process with Ease

While an RFP can benefit your organization in many ways, it can be overwhelming at first, especially to the uninitiated.

Knowing when to use one and how to structure it can set your business up for easier purchases and greater networking opportunities. In the future, if a growth opportunity arises that’s outside of your direct wheelhouse, you’ll know how to solicit the resources you need to move forward.

The RFP process is only one important business aspect you’ll encounter as your organization gets off the ground. If you need additional support with other common business services, we’re here to help.

Review our full selection of business service options today and let’s take this next step together.

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