Automated invoicing: more than just a time saver
When you think about payments, you may actually be surprised to know how long processing a single invoice can take! A study by software review company G2 once estimated that the average invoice turnaround time for small to mid-sized companies is 25 days. Now imagine an organization that processes more than 2,000 invoices every month. The strain on the accounts department would be significant and even worse- it could impede the growth of the business. A better solution has to exist, right?
Paper-based invoicing systems have been the norm for several decades now. However, the tedious approval chains and multi-step processes associated with these usually result in errors in data entry, payment delays, and misplaced or overlooked invoices.
In recent years, there has been a growing increase in the popularity of automated invoicing systems, which help organizations process invoices faster and more accurately, helping to relieve accounts teams of their burden. This article will explain business invoicing and how automating your invoicing process can be beneficial for your organization.
What is a business invoice?
An invoice is a business document that summarizes the list of products and services provided by a company to a client. It also includes the amount that the client owes the business for these products and services. Essentially, an invoice acts as a legal obligation for the client to pay the business.
It is important that the business not only send the client an invoice, but that the client also acknowledges its receipt. For the business, an invoice acts as a notification to the client for a payment that is due. For the client, an invoice can be used as a detailed record of their expenses that helps with bookkeeping.
Elements of a business invoice
Different businesses have different types of invoices, depending on the services they provide. However, some of the most common elements of a business invoice are:
Giving each invoice a unique number or code is helpful for identifying and differentiating between multiple invoices and customers. For example, if you are dealing with one customer on a regular basis, then you can number your invoices chronologically. If you deal with multiple customers, you can add a code for each one to make sure that the invoice goes to the correct client.
It’s essential to be clear about the timeline within which the payment must be made. The due date of the invoice is one of the most important elements you need to put into the document to ensure that the customer is aware of the terms of payment. It is also good to include payment information, so the client knows how they can pay.
Business Logo / Branding
A business logo and branding give your invoice a professional look, lending a sense of authenticity to it, so that your client feels like your business is legitimate. It also prevents your invoices from easily being replicated by fraudsters.
Business Contact Information
Maintaining an open channel of communication with your clients is critical. If your invoice does not contain any contact information, it could mean delayed payments and confusion in case of any queries. Including contact information can help to avoid miscommunication and payment fraud.
Description of Products and Services Rendered
An invoice should not only include a list of the products or services the client has purchased, but also the price and quantity of each one, along with any extra details (for example, hours worked, additional fees, service charges, etc.). This ensures that the client is aware of the services they are paying for.
Total Amount Due
If you plan on charging additional expenses or giving your client any discounts, it should be mentioned in the invoice along with the price of each item. This avoids any surprises when it comes to the total amount due.
Benefits of a good invoice template
Since invoicing is one of the final steps in the customer journey, it is imperative to leave a lasting impression. When sending out an invoice to a client, be sure to format it in a way which makes it easy for them to understand. An easy way to do this is by standardizing your invoice templates to make the job of your accounting department simple!
Some benefits of having a good invoice template are:
1. Clients who receive a neat invoice are more likely to have a good impression of your business
2. It is fast and simple to use an invoice template rather than spending time on entering important details repeatedly for different invoices
3. A neat invoice template helps you keep track of payments easily, including payments that have been made and those that are outstanding
4. Templates provide an identity to your brand and help clients differ invoices from separate vendor.
Creating an invoice template doesn’t have to be difficult. Plenty of software solutions exist that can help you build the perfect invoice template and tweak them when necessary. Contractbook, for example, offers several useful features for creating automated contracts and agreements, that can also be used for invoicing your clients.
Types of invoices
Depending on the payment terms agreed upon with your client, you may need to send certain types of invoices. Some of the common types of business invoices are:
Pro forma invoice
This is an invoice sent to the client for the amount they will have to pay after the project is completed. It does not act as an immediate demand for payment but is more useful for budgeting and bookkeeping.
This type of invoice is used to break up larger payments into smaller milestones and is sent to the client after a certain part of the project is complete.
This is a type of invoice made for recurring client payments such as a membership or fees. They are paid on an ongoing basis.
Past Due invoice
This type of invoice serves as a reminder to the client that their payment is due and that they have to settle the payment as soon as possible.
Why should you automate business invoicing?
Given the complexity and effort required for processing individual payments, automation can be used to make your accounting department’s job easier.
Automated invoicing is the use of software applications to help with payment processing. Software can help to extract invoice data, enter invoice information into the system, process invoices for payment, and much more. This reduces the manual effort of processing invoices.
Automated invoicing is a fast-growing industry. A study by Billentis estimates that in 2019, a whopping 55 billion paperless invoices were exchanged. The same study expects the global e-invoice industry to reach a valuation of EUR 18 billion by 2025. While the numbers speak for themselves, more practically, there are several advantages to automated invoicing. Some of these are:
Online invoicing saves time: Without digitization, payment processing involves multiple steps. The supplier has to generate the invoice, the buyer has to print the invoice, information needs to be entered and reviewed, payments need to be approved, and then the payment needs to be made. A mistake in any of these steps can result in lengthy back and forth between the two parties, leading to delays. By automating the process, some of these steps can be automated, thereby reducing the time spent on invoicing.
Online invoicing is cost effective: Not only does electronic invoicing save you time, but it also saves you money! A study by Sterling Commerce found that businesses could save up to a whopping 90% on their accounts payable, simply by switching to digital payment solutions. Manual invoice processing involves unnecessary expenses like printing, postage, and late fees. What’s more, you are also paying for the man-hours for tasks that can easily be automated. Instead, consider opting for an automated software that does the grunt work for you, freeing up your time for more productive work.
Invoice automation improves efficiency: Given the multiple steps involved in manual invoicing, the chances of error are correspondingly higher. Automation decreases the chances of making costly mistakes that lead to delays in payments and inaccurate accounting. Software also make it easier to keep data up-to-date and keep customer payment information secure.
Automation provides better insights: Having an overview of your accounts at any time becomes that much easier if all your payments are digitally catalogued. An invoicing software can provide rich data at the click of a button, such as total sales over time, cash-flow, and revenue generated from each client. This allows businesses to identify key problem areas where greater efficiency can be achieved, as well as allows them to forecast and budget more effectively.
For anyone who’s ever had to wrestle with Excel sheets and paper bills, it is clear that accounting and manual invoicing is no easy feat. However, thanks to the power of automation, you can now create quick and easy invoice templates that can reduce errors and effort. What’s more, you can enjoy a number of benefits such as happier clients, repeat business, but most importantly, a happier accounts department!