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Entrepreneurs often struggle with managing their invoicing process. In this article, we help you to understand the fundamentals of invoicing, and share five tips on how your company can enhance this process.
What is an Invoice?
An invoice is a document that lists the products that your business provides to a customer, and establishes that the customer must pay your company for these products. It generally contains the following pieces of information:
- The names and contact details of the buyer and seller
- A description of the products provided to the buyer
- The unit and total cost of the products
- The date and terms of payment
- An invoice number
The Benefits of Invoicing Management
Invoice management involves processing and managing invoices from suppliers. The steps include the following: receiving the invoice;, extracting the information and checking its accuracy;, approving payment for the invoice;, and storing it for future reference.
Invoice management ensures that your company directors can account for and track the company’s cash flow.
Invoice management also helps you understand how well your company is converting credit sales into cash. It also allows your company to stay on top of the invoicing so that vendors are paid on time. Now let us look at how to improve your company’s invoicing process.
Tip 1: Automate Your Invoicing Process
Automation is one of the best ways to improve your company’s invoicing process and make it more effective. Invoicing software saves time, makes it easier for you to track the financials of your company’s invoices, reduces the probability of making errors, and results in more timely payments.
Tip 2: Accept Online Payments
We strongly urge every business to embrace the 21st century and accept online payment modes such as wire transfer, electronic fund transfer (EFT), PayPal, in order to improve the invoicing process.
Online payments are more reliable, secure, and efficient for both parties because there’ is so much more that can go wrong with cash and check payments. The check can get lost in the mail, on the paper notes could be soiled, among other possible issues. Running a business is hard enough, so spare yourself the hassle, and embrace online payments.
Tip 3: Offer Subscription Pricing
With subscription pricing, your company offers a menu of specific services to clients for a fixed fee. The best and most efficient subscription models offer multiple tiers so that your customers can choose exactly how much service or attention they need.
A key benefit of subscription pricing is that clients are automatically billed (generally monthly), which helps your company maintain a more balanced cash flow throughout the year.
Tip 4: Offer Discounts for Early Payments
Offering your clients discounts for early payment of an invoice increases the likelihood that they pay their bill and helps you convert credit into cash quicker. The discount amount and time frame should be agreed upon by both parties before the transaction takes place.
Tip 5: Respect Your Clients
Unfortunately, your clients might sometimes be unable to pay their bill. When that happens, always communicate openly and empathetically with them, because they could be going through a medical emergency or a tragic event in their personal life. Remember, we are all but only human.
What’s the Difference between Invoice Management for Accounts Payable and Accounts Receivable?
When your company sells a product and agrees to receive the cash later, it is a credit sale. Accounts receivable refers the dollar amount of credit sales that your company makes in a given period.
Invoice management for accounts receivables includes giving customers the correct invoice data on or before the sale, ensuring that they agree to the terms of the invoice, and tracking invoices to make sure that they pay up timely.
Accounts payable refers to the money that your company owes vendors for products that it has received but not paid for yet. Invoicing management for accounts payable generally involves completing purchase orders, creating a “receiving report” to record the goods received and how much your company owes the vendors, processing supplier invoices, and ensuring that your company pays all of its invoices on time.
Sprout with Us!
Sprout Asia wants you to focus on what you do best, while we take care of the rest. That is why we offer budget-friendly accounting services, so that our experts can keep tabs on your invoices and manage your finances with ease, so you never miss out on a payment.
Feel free to reach out to us with any questions you may have about our services, and we will respond to you within 24 hours.