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Study the Billing Process in an Organization

Submitted in partial fulfilment of the requirements

For the award of the degree of

Master of Business Administration

in

Software Enterprise Management

Under the guidance of

Mr.Amit kumar Gupta

(ERP Consultant)

Centre for Development of Advanced Computing, Noida

Affiliated to

Guru Gobind Singh Indraprastha University

Kashmere Gate, Delhi - 110006

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DECLARATION

I hereby declare that this Project Report entitled “Study the billing process in an

Organization” submitted by me to the GGSIPU Delhi, is a bonafide work undertaken by

me and it is not submitted to any other University or Institution for the award of any

degree diploma / certificate or published any time before.

Name: Saurav Kataria Signature of the Student

Enrolment No : 0151189908

Semester : 04

Date :

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Acknowledgements

Acknowledgement is not only a ritual but also an expression of indebtedness to all those

who have helped me in the preparation process of the project and beyond.

I take great pleasure and deep gratitude ness in expressing my sincere thanks to my

project guide Mr. Amit Kumar Gupta, ERP consultant CDAC Noida whose expertise

have given my efforts a new direction.

I would like to extend my special thanks to Ms. Mary Jacintha, Sr. Lecturer CDAC

Noida, who has been readily available for all helps and guidance.

Next I would like to thank all my team mates for providing me all the supports and

requirements for the smooth completion of my project.

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Objective

• To study the different billing types used in an organization.

• To study the importance of billing in an organization.

Scope

• To study billing document types and invoice types.

• To study automated billing and electronic invoices.

• To study the process of medical billing in health insurance companies..

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Table of Contents

1) Introduction 7

2) Review of Literature 8

3) Order Related and Delivery Related Billing 8

4) Billing Document Types 10

5) Invoice 11

6) Invoice Format 12

7) Different Types of Invoices 13

8) Electronic Invoices 17

9) Billing Cycle 19

10) Automated Billing 21

11) Billing Plans 24

12) Medical Billing Process 25

13) Conclusion 29

14) References 30

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INTRODUCTION

An invoice or bill is a commercial document issued by a seller to the buyer, indicating the

products, quantities, and agreed prices for products or services the seller has provided the

buyer. An invoice indicates the buyer must pay the seller, according to the payment

terms. The buyer has a maximum amount of days to pay these goods and are sometimes

offered a discount if paid before.

In the rental industry, an invoice must include a specific reference to the duration of the

time being billed, so rather than quantity, price and discount the invoicing amount is

based on quantity, price, discount and duration. Generally speaking each line of a rental

invoice will refer to the actual hours, days, weeks, months etc being billed.

From the point of view of a seller, an invoice is a sales invoice. From the point of view of

a buyer, an invoice is a purchase invoice. The document indicates the buyer and seller,

but the term invoice indicates money is owed or owing. In English, the context of the

term invoice is usually used to clarify its meaning, such as "We sent them an invoice"

(they owe us money) or "We received an invoice from them" (we owe them money).

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Review of Literature

The business is able to invoice the customer for materials or services rendered. Generally,

this takes place after the delivery process has been completed, whether this is a delivery

of a physical item or a service. The billing process could be order- or delivery-related,

and may include billing of standard deliveries as well as the creation of debit and credit

memos. The billing process may even include invoicing for financial deposits for large

projects prior to construction and inception of the project.

Order Related and Delivery related billing

In NPIL, the billing process could be Order- related or Delivery-related, and may include

billing of standard deliveries as well as creation of debit memos and credit memos.

Order related billing is done when we proceed directly to the billing from order while

doing only the PGI. E.g. Cash sales

Delivery related billing is the normal sales cycle where we go to delivery from order and

then to the invoice from delivery. E.g. normal sales cycle rush order.

The Cash Sale Process

You will use the cash sale process when the customer places the sales order and picks up

and pays for the goods at the same time—for example, when you walk into a store and

purchase goods. The system automatically proposes the current date in the sales order as

the date for the delivery and billing.

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The Rush Order Process

For the rush order process the customer places the order and collects the items

immediately, or the materials are shipped immediately. However, the customer is

invoiced later.

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Billing Document Types

Invoice,

Pro Forma Invoice, used for printing documents without having to post to the

invoice.

Credit Memo, used for issuing credit for any returns to the customer.

Debit memo, used for issuing debit for getting money not received from customer.

Returns, for generating any return document.

Cancellation invoice, if you want to cancel an invoice and issue a new one.

Cancellation credit memo.

Invoice List, to generate a list from multiple invoices.

Credit memo list, to list all the credit memos to a customer for specific period.

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Invoice

A typical invoice contains

The word invoice

A unique reference number

Date of the invoice

Tax payments if relevant

Name and contact details of the seller

Tax or company registration details of seller

Name and contact details of the buyer

Date that the product was sent or delivered

Purchase order number

Description of the product(s)

Unit price(s) of the product(s) (if relevant)

Total amount charged (optionally with breakdown of taxes, if relevant)

Payment terms (including method of payment, date of payment, and details about

charges late payment)

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Invoice Format

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There are different types of invoices:

Pro forma invoice - In foreign trade, a pro forma invoice is a document that states a

commitment from the seller to provide specified goods to the buyer at specific prices. It is

often used to declare value for customs. It is not a true invoice, because the seller does

not record a pro forma invoice as an accounts receivable and the buyer does not record a

pro forma invoice as an accounts payable. A pro forma invoice is not issued by the seller

until the seller and buyer have agreed to the terms of the order. In few cases, pro forma

invoice is issued for obtaining advance payments from buyer, either for start of

production or for security of the goods produced.

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Credit memo - If the buyer returns the product, the seller usually issues a credit memo for

the same or lower amount than the invoice, and then refunds the money to the buyer, or

the buyer can apply that credit memo to another invoice.

Commercial invoice - a customs declaration form used in international trade that

describes the parties involved in the shipping transaction, the goods being transported,

and the value of the goods. It is the primary document used by customs, and must meet

specific customs requirements, such as the Harmonized System number and the country

of manufacture. It is used to calculate tariffs.

Debit memo - When a company fails to pay or short-pays an invoice, it is common

practice to issue a debit memo for the balance and any late fees owed. In function debit

memos are identical to invoices.

Self-billing invoice - A self billing invoice is when the buyer issues the invoice to himself

(e.g. according to the consumption levels he is taking out of a vendor-managed inventory

stock).

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Evaluated receipt settlement (ERS) - ERS is a process of paying for goods and services

from a packing slip rather than from a separate invoice document. The payee uses data in

the packing slip to apply the payments. "In an ERS transaction, the supplier ships goods

based upon an Advance Shipping Notice (ASN), and the purchaser, upon receipt,

confirms the existence of a corresponding purchase order or contract, verifies the identity

and quantity of the goods, and then pays the supplier."

Timesheet - Invoices for hourly services such as by lawyers and consultants often pull

data from a timesheet. A Timesheet invoice may also be generated by Operated

equipment rental companies where the invoice will be a combination of timesheet based

charges and equipment rental charges.

Invoicing - The term invoicing is also used to refer to the act of delivering baggage to a

flight company in an airport before taking a flight.

Statement - A periodic customer statement includes opening balance, invoices, payments,

credit memos, debit memos, and ending balance for the customer's account during a

specified period. A monthly statement can be used as a summary invoice to request a

single payment for accrued monthly charges.

Progress billing used to obtain partial payment on extended contracts, particularly in the

construction industry (see Schedule of values)

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Collective Invoicing is also known as monthly invoicing in Japan. Japanese businesses

tend to have many orders with small amounts because of the outsourcing system

(Keiretsu), or of demands for less inventory control (Kanban). To save the administration

work, invoicing is normally processed on monthly basis.

Continuation or Recurring Invoicing is standard within the equipment rental industry,

including tool rental. A recurring invoice is one generated on a cyclical basis during the

lifetime of a rental contract. For example if you rent an excavator from 1 January to 15

April, on a calendar monthly arrears billing cycle, you would expect to receive an invoice

at the end of January, another at the end of February, another at the end of March and a

final Off-rent invoice would be generated at the point when the asset is returned. The

same principle would be adopted if you were invoiced in advance, or if you were

invoiced on a specific day of the month.

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Electronic invoices

Some invoices are no longer paper-based, but rather transmitted electronically over the

Internet. It is still common for electronic remittance or invoicing to be printed in order to

maintain paper records. The Standards for electronic invoicing varies widely from

country to country. Electronic Data Interchange (EDI) standards such as the United

Nation's EDIFACT standard include message encoding guidelines for electronic invoices.

EDIFACT

The United Nations standard for electronic invoices ("INVOIC") includes standard codes

for transmitting header information (common to the entire invoice) and codes for

transmitting details for each of the line items (products or services). The "INVOIC"

standard can also be used to transmit credit and debit memos. The "IFTMCS" standard is

used to transmit freight invoices.

UBL

Use of the XML message format for electronic invoices has begun in recent years. There

are two standards currently being developed. One is the cross industry invoice under

development by the United Nations standards body UNCEFACT and the other is UBL

(Universal Business Language) which is issued by [Oasis]http://www.oasis-open.org.

Implementations of invoices based on UBL are common, most importantly in the public

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sector in Denmark. Further implementations are under way in the Scandinavian countries

as result of the NES (North European Subset) project http://www.nesubl.eu.

Implementations are also underway in , Italy, Spain, Holland and with the European

Commission itself.

The NES work has been transferred to [CEN] http://www.cen.eu, (the standards body of

the European Union) workshop CEN/BII, for public procurement in Europe. The result of

that work is a pre-condition for PEPPOL, pan European pilots for public procurement,

financed by the European commission. There UBL procurement documents will be

implemented in cross border pilots between European countries.

Agreement has been made between UBL and UN/CEFACT for convergence of the two

XML messages standards with the objective of merging the two standards into one before

end of 2009 including the provision of an upgrade path for implementations started in

either standard.

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Billing Cycle

A billing cycle is an interval between bills for products and services. Typically, this

interval lasts for one month, and consumers may be able to adjust the timing of their

billing cycles to meet their economic needs, depending on the company. Billing cycles

are used to calculate things like interest and account standing, and they are an important

part of the financial world.

In the example of services, a company like a cell phone provider might start offering

service on the sixth of the month, and bill on the sixth of each month after that. Each bill

will include a note specifying which billing cycle is covered by the bill, so that

consumers can understand when and why various charges might have been incurred.

Products may be billed in a similar way; a consumer may be given 30 days to pay for

something, for example, and many retailers rely on a credit system with the wholesalers

who send them products.

Many people are also familiar with the concept of the billing cycle in terms of financial

accounts like credit cards. In the case of a credit card, consumers are charged interest on

outstanding transactions from past billing cycles, and they may be charged for failing to

pay on an account in a timely fashion, or paying less than the minimum. People should

keep a close eye on credit card billing cycles, since they can sometimes change without

notice, causing consumers to incur unexpected financial charges.

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In some cases, a company will adjust its billing cycle to meet the needs of clients. If, for

example, someone gets paid on the first of the month, he or she may request a billing

cycle which runs from the 15th through the 15th, to ensure that bills can be paid on time.

The period between billings may also be adjusted to meet the needs of bookkeepers and

other company staff who specialize in financial matters for large companies, to ensure

that financial staff is not swamped with bills at any particular period of the month.

If you are trying to pay down debt and keep your bills organized, you should consider

synchronizing your billing cycles to a day which is convenient for you. This can ensure

that you never miss a bill, because you can pay your bills all at once. It may also help you

keep your finances organized, because you can keep track of the lump sum required to

pay all your bills, rather than paying them sporadically throughout the month as they

arrive.

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Automated Billing

Automated billing is an action in which the invoicing for goods and services occurs

without the need to prepare the invoice by hand. Many billing systems of this type

provide the ability to generate and send electronic copies of the invoices to customers.

The use of this type of billing software makes it possible to manage the invoicing process

with greater efficiency, saving the company both time and money.

There are several features that are common to automated billing software. In most cases,

the software is designed to allow the creation of customer profiles which contain all the

data needed to accurately prepare the invoice. This data will include the customer name,

billing address, billing contact, and an email address if the invoice is to be sent

electronically. In most cases, the automated billing program will collect data from other

sources that have to do with customer usage, or allow for the manual entry of orders once

they are fulfilled. The processes within the billing system then apply the proper rates for

each order and create an invoice.

Depending on how the automated billing system is configured, the invoice may be

printed out, along with a companion envelope, immediately after the invoice generation.

However, it is possible to set up the software so that invoices are automatically printed at

a specific time of day. There are even some examples of software that will prompt

machinery to fold the invoice, insert it into a pre-addressed envelope, and seal the

envelope. When email is used as the delivery medium, the system may expedite the

delivery immediately after generating the invoice, or manage the email process at a

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specific time of day, an approach that allows business owners to survey invoices before

they are sent out.

Electronic billing systems of this type sometimes include the ability to receive and apply

payments to outstanding invoices. For example, email invoices may contain a embedded

link that allows the customer to immediately render payment after receiving and

reviewing the invoice. Rather than requiring an individual to receive the payment and

manually enter it into the Accounts Receivable database, the software recognizes the

payment, applies it to the appropriate invoice number, and deducts that amount from the

balance of the customer account.

Automated billing works very well with situations where a customer has a standing order,

or there is a recurring payment that must be requested on a weekly or monthly basis.

With this application, the system can be configured to automatically generate standing or

recurring invoices to the appropriate customers, thus eliminating the need for one or more

employees to spend hours on this repetitive task. The end result is that personnel can be

utilized for different functions, allowing the workday to be more productive and thus cost

efficient.

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The use of automated billing is common today with companies of all sizes. Business

types ranging from telecommunications to online retail stores benefit from the use of this

types of software. By saving the company time and resources, businesses are able to keep

expenses lower and thus remain more competitive.

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Billing Plans

The SAP system uses two billing plans. One is called milestone billing, which is a final

billing in full at a particular milestone according to items sold or services rendered. An

example of this would be a project milestone, such as the completion of an architect’s

blueprint, for which the service is invoiced. The alternative billing plan is periodic

billing. Periodic billing uses a predefined date proposal, which bills the customer at

periodic intervals. An example of this would be billing for rental of an object.

To define a billing plan type, use the following menu path.

The difference between milestone billing and periodic billing may be described as

follows.

Milestone billing bills an amount distributed between dates until the total value is billed.

Periodic billing, on the other hand, bills a total amount for each date until a predefined

end date is reached.

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Medical Billing Process

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Medical records of patients at a hospital contain demographic details about the patient,

summary of his medical history, summary of diagnoses and regular medical updates on

each physician visit. The patient settles the payment by submission of his medical

insurance details at the hospital front desk. It is implied that the hospital or healthcare

facility receives the final payment only when the insuring agency settles the claim.

The medical billing process flowchart follows a series of clearly defined steps with a

complete focus on accuracy, quality and process audits. The following are the steps

involved in the medical billing process:

Claims Transmission: The hospital forwards the medical claims to medical billing team

via courier or as scanned documents. The medical claim is supported by patient details

such as demographics, super bills, charge sheets, insurance verification data, a copy of

the insurance card and any other information pertaining to the patient. All such

documentation is scanned and uploaded onto secure FTP server for access by expert

medical billing staff.

Retrieval and Checking of Medical Claims by Team: Medical billing staff access the

medical claims and supporting documents from secure FTP servers. All documents are

checked for illegible or missing documents and the hospital billing office is notified

immediately so that they can re-scan and send missing documents.

Medical Coding: An important step in claims processing is to fix the procedure and

diagnoses codes for each patient based on standards such as CPT ('Current Procedural

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Terminology')and ICD-9 (International Classification of Diseases, Ninth Edition). The

'level of service' determines the associated 5-digit 'procedure code' while the 'diagnosis

code' is based on the medical diagnosis made by the doctor.

Charge Creation: The trained Medical Billing professionals will then create appropriate

medical claims based on billing rules pertaining to specific carriers and locations. All

medical claims are created within agreed turnaround times - generally 24 hours. A

thorough audit and checking of the completed medical claims is done at multiple levels.

The medical claims are checked for valid and complete information, correct procedure

and diagnosis codes and veracity of all other relevant information about the patient since

incomplete/incorrect information is one the single most common cause for rejection of

medical claims.

Medical Claims Audit: A thorough audit and checking of the completed medical claims is

done at multiple levels within medical team. The medical claims are checked for valid

and complete information, correct procedure and diagnosis codes and veracity of all other

relevant information about the patient since incomplete/incorrect information is one the

single most common cause for rejection of medical claims.

Medical Claims Transmission: Medical claims created are filed for follow up before they

are sent electronically to the claims transmission department with all relevant information

on each medical claim.

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Claims Submission to Insurance Agencies: The audited, listed and recorded medical

claims are now printed out and dispatched to concerned Insurance Agencies or

governmental departments with any attachments or supporting documents that may be

required for ultimate settlement.

Follow-up and Settlement: This involves the final stages when our expert medical billing

team follows up consistently with the insurers and payment agencies until the final

settlement is disbursed.

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Conclusion

The billing process used in an organization could be order related or delivery

related billing.

The different billing document types used in an organization are invoice, pro

forma invoice, credit memo, debit memo, cancellation invoice, cancellation credit

memo, returns, etc.

Different companies use different billing cycles. A billing cycle is an interval

between bills for products and services.

The use of automated billing software makes it possible to manage the invoicing

process with greater efficiency, saving the company both time and money.

The health insurance companies use 8 step medical billing process to settle the

payment of medical insurance.

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References

• www.wikipedia.org

• http://www.medicalbilling-india.com/medical-billing-process.php

• www.medical-billing-company.com/medical-billing/medical-billing-process

• www.billingpros.com/

• http://linasbeautystuff.files.wordpress.com/2010/01/invoice_printed.gif