Invoicing is an essential part of any business, whether you’re working for yourself or a company; if you want to get paid, you need to know what invoices are. In today’s topic, we will cover everything about Invoice Management, so if you own a business or a freelancer who wants to learn about invoices and how to manage them, this article is for you.
What is an Invoice?
A standard business transaction involves two parties “A Buyer” and “A Seller.” Seller provides products to buyers; in return, the seller wants to get paid for products. The seller sends an invoice to the buyer and sets out all the information about the quantity, description of the product/service, and payment duration.
To answer all the above questions such as the quantity or quality of the product/service and the duration of the payment, the seller sends an invoice which sets out all of the information. So, the buyer knows what they owe and the products or services they are paying for.
In simple terms, an invoice refers to a piece of soft/hard document that is used for listing the purchased products, their quantities, and costs, etc. Invoices are handed over by sellers to customers/buyers; this handing can happen before or after the products/services have been received.
The Importance of an Invoice
An invoice is a commercial document issued by a seller to a buyer. It identifies both the trading parties and details the items, prices, taxes, and discounts. Invoices can help in:
• Providing Proof of Sale
• Maintaining Records
• Analyzing Business Trends
• Tracking Payments and Credits
• Providing Easy Tax Filling
Invoices are an essential part of every business. Whether it’s a small business or a large corporation, everyone needs an invoice to bill their customers and maintain transaction records for revenue, profits, and tax filling.
What are the different types of Invoices?
As a business owner or a freelancer, you need to know the various types of invoices and their uses. Let us help you understand the different types of invoices:
1. Standard Invoice: A standard invoice is a simple document used to bill the sellers when they buy a service from buyers. It will include the seller’s company info, full or partial description of the service, the price, payment methods, and the due date.
2. Commercial Invoice: A commercial invoice is used by suppliers and the consumers that clearly describe the sold goods and the amount payable by the consumer. It is also a type of customs document when used in foreign trade.
3. Recurring Invoice: A recurring invoice is a type of document in which a seller/supplier/producer/merchant automatically charges a customer for goods or services at regular intervals. The charges will continue until the termination of the contract between the two parties, a seller and a buyer.
4. Pending Invoice: A pending invoice is an invoice that has been sent to a client as a preview of the next invoice. In most cases, an awaiting invoice means that the invoice has been sent to the customer and has been paid, but the amount is on hold, for example, Bank Transfer & ACH payments which usually take 3-5 business days.
5. Pro-Forma Invoice: A Pro-forma invoice is an initial proof of sale sent to buyers before a shipment or delivery of products. The invoice will commonly explain the purchased goods and also other essential information, such as the shipping weight and costs.
6. Utility Invoice: A utility invoice is a record that contains information for utility services offered, such as process components, entities, technical data, and software component version.
These are the different types of standard invoices that are used for various invoice management/processing. Now that you’ve got an idea about different invoices, we are heading to our next and primary topic, “Invoice Management.”
Invoice Management: Everything a Business Needs to Know About It
Invoice management helps in handling of invoices from arrival to settlement (payment). It verifies the costs of purchase to pay from numerous suppliers with the payment terms. In simple terms, it starts from the moment an invoice is received until the moment the payment has been made and recorded in the general ledger.
An invoice can be received in formats such as format papers, PDF, online sheets, and e-invoice. With the help of an invoice management system, you can convert all these documents into one format and save it online on the cloud to maintain financial records such as revenues, profits, overdue payments, and filing taxes.
Regardless of the arrival methods such as email, postal mail, fax, or messenger, etc. once the invoice arrives, the accounts payable department must ensure that the document is indeed an invoice, then they need to sort the invoices into various categories.
The invoice processing job is tedious and costs a company tons of time and money. This is where you can utilize and invoicing software and focus on other aspects of your business that could grow your revenue and profits.
Benefits of Invoice Management Software for Business
Are you a business owner or a freelance, and you spend hours creating different invoices for each of your clients every month? It can be chaotic and sometimes create more work to send reminders and chase down your clients for overdue payment.
Reliable invoice management software can make your invoicing process painless and fast with the help of automation. Nowadays, most of the invoice management software comes with cloud storage and has several built-in tools for invoicing at your fingertips.
An invoice management system can help you create an invoice for your customers in seconds. It can also help in making your invoices look professional by adding your logo and images. Good invoicing software not only generates invoices but also stores all your customers' data, such as their next billing dates, overdue payments, and payment status. Here are a few other benefits of invoice management software:
1. Manage invoices professionally
2. Access payment information from anywhere and anytime
3. Systemize payment process
4. Reduce late payments and disputes
5. Track monthly revenue & expenses
6. Automate billing & payments procedure
7. Improve client retention rates
8. Save time, effort, and money
9. Secure billing information
10. Simplify financial analysis
11. Improve cash-flow with automated invoices
12. Manage subscription payments
13. Integrate with legacy software
Invoice management software makes the whole invoicing process simpler and faster. Invoicing software offers numerous advantages for businesses of all sizes and also for freelancers. However, a company should be aware of the essential features an invoice management system must have before choosing.
How to choose Invoice Management Software?
Good invoice management software must have a robust billing system that covers all the needs of a modern invoice generation and invoice billing software. It must handle the core financial operations such as client payments history, client’s billing information, overdue & prepaid payments, preparing details financial reports, calculating taxes (country-specific), and inventory management. Here are a few other things to look for before choosing an invoice management system for their business:
1. Branded invoices
2. Auto recurring invoices
3. Client portal
4. Online invoicing & billing
5. Multi-currency support
6. Auto payment reminders
7. Auto recurring payments from clients
8. Multiple payment options
9. SSL HTTPS encryption security
10. Invoice templates
11. Bank reconciliation
12. Document upload
13. Data entry tool
14. Financial reports
15. Invoice reports
16. Print and share option
17. Send estimates
18. Friendly payment reminders
19. Share project details
20. Multi-user system
These are some of the features that you should look for before integrating invoice processing software into your business or company. There are several other things that you need to look at depending upon your requirements.
Top 3 Invoice Management Software for Businesses
There is no shortage of options if you are searching for an invoicing solution. However, the ‘top 3’ or ‘best’ invoice management software for businesses is a bit subjective because, based on the business type, a company might have different invoicing needs.
Before subscribing to an invoice management system, it is vital to know who uses that software. Is it the accountant, salesperson, business owner, or all of them? Knowing this will help you decide whether to subscribe to single-user or a multi-user invoice management software. Find out the top 3 invoice management software for businesses below:
Freshbooks is hands down one of the best invoicing software available at the moment. It lets you create and send branded invoices in seconds and even lets you receive payments online. Freshbooks can help you get paid up to eleven days faster, and when you want to know where your invoicing process stands, you can head into a dashboard that lets you review the details.
INVOICERA is a secure online invoicing solution for businesses and professionals. INVOICERA is the best option for freelancers such as marketers, lawyers, web developers, social media experts, and consultants. It is also the best option for IT firms, web hosting service providers, and software companies and particularly for any professional or business that needs to send an invoice.
3. ZOHO Invoice
You can create personalized or branded invoices with attractive templates. If you’ve foreign customers, you can send invoices in your customer’s currencies, and ZOHO Invoice also supports ten multilingual languages.
Invoice management software has several features that boost corporate productivity. All the above three software are excellent tools with fascinating potentials such as the preparation of branded invoices, taxes, fees, withholdings, and budget.
Several factors affect the selection of the right invoice management software. Each business will have to choose their service provider based on a careful examination of factors about their specific situation.