Gross Billings Vs. Gross Receipts
Original post by Jason Gillikin of Demand Media
Gross billings and gross receipts are two sides of the same coin regarding a company's monthly revenue figures. Many companies use cost-based accounting strategies that require them to book billed business as it happens. Both gross billings and gross receipts help demonstrate a company's cash flow, and illustrate the problem of slow-pay customers.
Gross billings reflect the total dollar amount invoiced to customers, even if the money hasn't been collected yet. The total does not include adjustments made to an invoice after the fact, like applying a prompt-payment discount or agreeing to forgive part of the outstanding balance. For example, if a lawyer bills a client for 10 hours of labor in a month at a rate of $150 per hour, then the gross billing for that month is $1,500. It remains $1,500 even if the lawyer agrees to settle the bill for only $1,200.
Gross receipts reflects the dollar amount received from all customers in a given time period. This money can include point-of-service cash collections, as well as payments on outstanding invoices.
When taken together for any given month, the billables and receivables show how much work was earned in that month, and how much money was taken in that was earned in prior months but not yet paid. Don't expect these measures to match, or even to be close in a given month, depending on the size and frequency of the company's invoicing strategy.
There is always a lag between billing a client and receiving the client's payment. Many invoices, in fact are net 30, which means the full amount is payable within 30 days. Although significant invoices may be billed one month and received the next, to get a sense of whether a company is losing money from unpaid invoices, a long-term outlook is critical. When the variance between billings and receipts is averaged out month by month for six months, you will get a more accurate picture that isn't complicated by billing outliers. To get an even more complete picture, look at various net adjustments to identify discrepancies between billables and receivables.
- IRS: Gross Receipts Defined
- Findlaw; How Financial Statements Inform Marketing Tactics; Christine Filip; March 2008
About the Author
Jason Gillikin is a business communication consultant from Grand Rapids, Mich. He is a certified professional in health-care quality, also holding a B.A. in political science and professional ethics. Gillikin has worked as a hospital statistician, biomedical ethicist and newspaper editor, and has been published in the Western Herald, Chron.com and several other online publications.
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