Bills

What It Means

In the most basic sense a bill is a printed request for money that is owed for a particular product or service. Bills are used to collect payments in a wide range of business transactions, from monthly telephone charges to automobile repairs. In some cases (for example, a document listing the costs involved with a housepainting job or a statement listing the items in a shipment of office equipment) a bill can also be called an invoice. Upon completing a meal at a restaurant, a person receives a final bill, which is typically referred to as a check or, in informal usage, a tab.

Paying bills is a regular and unavoidable ritual of modern life. There are two basic types of bills. Some bills (for example, the invoice an electrician presents a customer after rewiring his kitchen or the bill an accountant presents a client after preparing her taxes) require a one-time payment and are generally due within a certain number of days after the customer receives the bill. Other goods and services, such as utilities (services—including electricity, water, and natural gas—involved with the day-to-day operation of a home or an office), garbage disposal, and telephone charges, are continually recurring and must be paid on a regular basis, usually every month. These monthly bills are often generally referred to as “the bills,” as in, “We need to pay the bills before we even think about taking a vacation.”

In standard economic terms the person or party who owes money on a bill is known as a debtor, while the party to whom the money is owed is known as a creditor. The money a customer owes toward all his or her bills is sometimes referred to, collectively, as debt. Almost all bills must be paid in full within a certain amount of time, usually a month. One notable exception to this rule involves credit cards (plastic cards used to purchase goods or services in advance of actually paying for them). With credit card bills customers must make a minimum monthly payment, usually consisting of the interest (a percentage of the amount owed that is charged by the credit card company as a fee for using the card) on the balance due, as well as a small portion of the principal (the amount of money owed, not including the interest). In some cases involving one-time bills, a creditor will come to an agreement with a debtor that allows him or her to pay a bill in installments. These arrangements generally apply to large bills, such as for a hospital stay or a major home repair, and require a level of trust between the customer and the person providing the service or item. After paying a bill the customer will often receive a receipt, a document that provides evidence of the bill’s payment.

When a bill goes unpaid for a long period of time, it will usually be sent to a collection agency, a company that attempts to collect payment for the unpaid bill on behalf of the company or individual to which the money is owed. When trying to collect money on an unpaid bill, collection agencies will often use aggressive tactics, such as making repeated phone calls to the debtor’s residence or sending a series of threatening letters. If a collection agency is unable to collect payment for an unpaid bill, it will often report the customer’s name to credit bureaus (companies that evaluate and rank the credit, or financial reputation, of individuals).

When Did It Begin

Some form of bill has likely existed for as long as human beings have engaged in commercial activities. Historians have uncovered evidence of various invoices and bills that were used in the ancient world. The oldest bills were inscribed on clay tablets and were typically used to document the exchange of material goods. Archaeologists have discovered evidence of business transactions in Assyria (an ancient kingdom in Asia in what is now Iraq), in the form of invoices showing lists of material items relating to a sale of goods, along with their equivalent values in silver.

Evidence of the use of bills in ancient civilization also appears in the Code of Hammurabi, a legal code dating to about 1760 bc . The code was created by Hammurabi (c. 1810 bc –1750 bc ), the sixth king of Babylon (an ancient holy city located in Mesopotamia, a region in what would become the modern Middle East), and is widely regarded to be among the oldest existing sets of laws in the world. It contains specific laws regarding transactions between merchants, requiring one merchant to provide an itemized list of goods being sold and the other to provide documentation showing that money has been paid.

More Detailed Information

There are many types of bills, which are roughly divided into two categories: recurring (or monthly) and one-time bills. Typical recurring bills include phone bills, cable-television bills, power bills (generally involving charges for electricity and natural gas, which are used to run appliances in addition to heating and cooling a home), water bills, sewer bills, and so on. Usually these bills arrive in the mail once a month and are due within two to three weeks from the time they are mailed to the customer. While all bills include a deadline for payment, most monthly bills include a grace period (a length of time extending past the deadline, during which a payment can still be made without resulting in penalty charges or cancellation of service). The length of the grace period varies from company to company and is sometimes determined by the customer’s past payments; customers with a record of making late payments or who have poor credit histories are generally given a shorter grace period to pay their bills. In most cases when a customer is unable to pay a bill by the due date, he or she can call the company to try to work out a more flexible payment schedule. Many companies will allow customers to pay bills late, as long as they commit to making the payment by a specific date, agreed upon by both the company and the customer.

Printed bills vary in content and format, depending on the service or product. Still almost all bills contain the same basic information. A customer will find, at the top of most bills, his or her name, address, and account number. The top of the invoice will also typically include the date of the bill and in some cases the payment due date.

In many cases the top of the bill will provide contact information for the company’s customer service department, usually a toll-free phone number and an e-mail address. A customer will usually find, directly below the date, several lines of information relating to the service, along with a breakdown of previous charges, payments received, and current charges and a due date. This section is generally referred to as the account summary. For some services this section is relatively straightforward; for example, a cable-television bill will probably list a single amount due, along with, in most cases, any relevant taxes. Other bills, however, can be more complicated. In some areas certain utilities are billed together. A power bill, for instance, may include a breakdown of specific charges for electricity and natural gas, along with the total amount due. Power bill charges may be further broken down into regulated (rates dictated by the government) and deregulated or market (rates determined by the level of competition between companies providing the same service). In addition to this basic outline of charges, power bills also include a second, more extensive breakdown of customer usage, rates, and charges. This breakdown often appears on the back of the bill and contains detailed information concerning the transmission or delivery of the power, storage of the power, supply of the power, and so on. Because this information is highly technical, most customers simply ignore this portion of the bill.

A payment stub, also known as a return portion, usually makes up the bottom portion of a printed bill. This section repeats the same basic information concerning the account information, the charges due, and the due date; it also includes a place where the customer can write the amount enclosed. This section is generally perforated at the top, so that the customer can remove it from the upper portion of the bill and send it, along with a personal check (a piece of paper that facilitates the transfer of money from the customer’s bank account), in a payment envelope provided by the company. These payment envelopes usually have a small window between the middle and the right side of the front; the name and address of the company appear on the return portion of the bill, positioned to be visible through the envelope window once the stub is in the envelope.

One-time bills, such as an invoice for car repairs or for an order of photocopies, look slightly different than recurring bills. Much of the same basic information (the customer’s account data, the bill date, the due date, and the amount due) is more or less the same. These invoices differ mainly in the way they list the products or services that the customer has received. For example, a bill from a photocopy store might include a column itemizing the products or services provided, along with the individual charges for each. Such a bill might list separate charges for the photocopies, for stapling, and for any other products or services that have been rendered. These amounts will subsequently be tallied as the amount due. The bottom of the invoice might also include several past-due boxes. These boxes provide the past and current charges, along with the number of days the amount has been due. Past-due boxes might appear in the following order: 1–30 days past due, 31–60 days past due, 61–90 days past due, and more than 90 days past due.

Recent Trends

Traditionally people pay their bills by mailing checks to the companies to which they owe money. With the rise of the Internet in the 1990s, however, banks began offering online bill-pay services for their customers, and more and more consumers began to pay their bills electronically. For a small monthly fee customers are now able to use bill-pay services to send money to their creditors. To use bill pay customers create a list of creditors on a personal account page on the bank’s website. Each listing includes a column for the amount of money that the customer wants to pay and a column for the date the customer wants the payment to be sent. Electronic bill pay offers several advantages. For one, money travels more quickly electronically than it does by regular mail, thereby providing customers with additional assurance that their payment will arrive on time. Bill pay also spares consumers the postage costs involved with mailing payments to all their creditors each month, while also cutting down on the number of personal checks they write.