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Invoice Management Tips for Your Small Business
Invoice management is the process of handling and organizing your business invoices from start to finish. It includes data entry, invoice approvals, processing and recording of payments. This is something that every business needs to do efficiently and well.
Small businesses often operate with limited resources, but that's all the more reason to handle your financial transactions with clients and suppliers systematically. Invoice management is vital for maintaining healthy cash flow, fostering strong vendor relationships and ensuring timely payments.
Sloppy invoice management with customers could mean that you don't get paid for your efforts in a timely fashion—or at all. It also could cause you to lose customers. Weak invoice management with suppliers could mean paying too much or getting hit with a late fee.
If you mismanage both sides of the ledger, you might fail to collect money for work you've done or inventory you've shipped while you pile up accounts payable that you owe to suppliers. Too much of that and it becomes hard to tell how close to the edge your business is running.
Why is invoice management important?
Let's start by reviewing some of the ways invoice management can help your small business stay healthy and prosper.
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Timely payments. A good invoice management system increases the likelihood of making and receiving payments on time. And a switch from paper invoices to invoice automation means you’re much more likely to get paid faster
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Reduced human error and fraud. Manual data entry and traditional invoice management are prone to human errors and fraud. Automated invoice management software reduces the chances of mistakes and helps identify potentially fraudulent activities, meaning fewer headaches and potential fraud cost savings
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Cost savings and productivity. Invoice automation significantly accelerates invoice processes. Automated accounting systems can approve invoices faster, process payments efficiently, and handle discrepancies promptly. This translates into cost savings and increased employee productivity
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Early payment discounts. Efficient invoice management helps you spot opportunities for early payment discounts, which can lead to significant savings
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Elimination of duplicate payments. Double heading and processing errors can lead to duplicate payments. A robust invoice management system can prevent duplicate payments and simplify the resolution of discrepancies
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Streamlined auditing and reporting. A well-organized invoice management system helps you generate the regular audits and reports that are essential for maintaining accurate company records and complying with financial regulations
Tips for managing your business invoices
To maximize the benefits of invoice management tools, here are some best practices for small businesses to follow:
Determine the right invoice type
Before you send invoices to clients, it's essential to determine the appropriate invoice type based on the nature of your business and the services rendered.
Different businesses may have specific invoicing requirements. For instance, if you offer subscription-based services, recurring invoices may be more suitable. Understanding the right invoice type ensures clarity and transparency in your billing process and will help you collect payment without issue.
Automate processes
Repetitive processes can be time-consuming. Investing in an invoice management system or automation software can revamp your invoicing process. Automation can handle tasks such as data entry, invoice approvals, and payment processing, greatly reducing the chances of human error and accelerating your invoicing process, start to finish. This saves valuable time and resources, allowing you to focus on other important aspects of your business.
Create custom templates
Designing custom invoice templates is an excellent way to maintain consistency and professionalism in your billing process. You should include details such as:
- Invoice number
- Your business name
- Contact information
- A clear description of services or goods provided
- Due date for payment
Custom templates help establish your brand identity and improve the clarity of your invoices for clients.
Factors to consider when sending invoices
When you set up your invoice management process, consider these practices for maintaining smooth interactions with clients:
Sending to the right contact/person
When you’re ready to send an invoice, make sure that you’re sending it to the appropriate contact. Then, before you hit send, double-check that you have the correct information for the necessary recipient and that you have entered it correctly. Taking an extra moment to check these details will help to avoid unnecessary delays and make it more likely that your invoices will be handled promptly and not lost.
Clear statement of due date and payment instructions
Clearly state the due date for the payment and provide precise instructions on how to make the payment. This reduces confusion for your clients and helps them process payments promptly. Consider adding a line or box at the top of the invoice with the due date prominently displayed in bold type so that it’s hard to miss.
Determine a payment schedule that avoids holidays and weekends
Establish a regular payment schedule that aligns with your business needs and cash flow but will also make sense to your customers and clients. Avoid sending invoices on holidays or weekends to prevent delays in processing payments.
Regular audits and reports
Regular audits and reports are crucial in invoice management for small businesses because they help to achieve financial transparency, accuracy and compliance. By conducting regular audits, businesses can track their financial transactions, identify discrepancies or errors in the invoices and rectify them promptly.
These audits also help you maintain accurate company records, which are essential for tax reporting and proving compliance with regulations. Regular reports provide:
- Valuable insights into your cash flow
- An overview of outstanding payments
- A picture of financial performance
An automated invoice management system makes it easy to generate detailed reports.
TD Online Accounting for Small Business
At TD Bank, we understand the importance of an efficient accounting system for small businesses. That's why we offer an online accounting service designed specifically for small businesses like yours.
TD Online Accounting for Small Business provides an easy-to-use platform that helps you manage your invoices, track payments and maintain financial records seamlessly. With automated invoice management software, you can reduce manual data entry, minimize errors and accelerate the invoice approval process.
By choosing TD Online Accounting for Small Business, you can benefit from improved business competency and faster invoice approvals. This efficient process means you will generally collect payments faster: about 95% of all invoices are paid within 5 days1. Additionally, you can track payments within the platform using TD Small Business Online Banking.