10 Invoices Facts Everyone Should Know
The invoices are an important document for any business. The invoices are sent to buyers after the order is completed with the intent to get the payment. The seller issues it to buyers. It is important to maintain the cash flow of the business.
Each invoice consists of the details about purchasing. The details on the goods or services, quantities, price, date of delivery, delivery method, and payment methods are mentioned on the invoices. The invoices confirm the trade between the buyers and sellers.
The invoices are not just a simple document but also the legal proof of selling and buying the products or services. The invoices are also equally important to the buyer, freelancers, contractor, sole proprietors, etc.
The ignorance in maintaining the invoices can cause many problems to your business operation. The transaction’s inaccurate details can cause a problem in auditing that can lead your business to a fraud case, and even you have to close down.
However, sellers, buyers, business owners, freelancers all deal with the invoices but there are some facts that everyone must know about the invoicing.
Important Invoices Facts Everyone Should Know
1. Invoice are Legal Documents
The most important fact about the invoices that everyone must know is that the invoices are legal documents. Yes, its true invoices are not just a simple financial document but are the legal documents that confirm the purchase of the goods or services.
Even though sending an invoice means requesting the payment, the invoices carry the legal authorities as both buyer and seller agree with the terms and conditions mentioned on it.
If both buyers and sellers have an agreement on the features of the transaction, then the signature or official stamp on the invoices makes it a legal document.
The accurate quantity, types, and price of the items must be included on the invoices. The professional-looking invoices are trusted by the buyers and encourage faster payment.
2. Purchase Orders Are Not Invoices
During a business transaction, most people get confused about purchase orders and invoices. It is one of the confusing aspects of the accounting process. It is one of the common confusion about both documents, but they have actually different functions and roles in the transaction.
Purchase Order(PO) is issued by the buyers and send to the seller. The purchase order is the first document that is used for purchasing. The buyer sent the PO before purchasing. It is used to confirm the order as it consists of goods and services types, quantities, price, terms, and conditions, etc.
An invoice is a document issued by the vendors and sent to the buyers. The invoice basically requests the payment after the order is fulfilled. It is the last document used in the process of purchasing.
Therefore, the purchase order is used to order the goods or services, whereas an invoice is used as a request for payment after the goods and services are delivered.
3. Types of Invoices
Most of the small business and freelancers uses the standard invoice. But there are other types of invoices that are used in the business.
There are other types of invoices in businesses that can be created for the different requirements of clients. Different invoices can be used according to your business type, billing method, payment methods, etc.
Some of the invoices for your clients are:
- Standard Invoice
- Credit Invoice
- Debit Invoice
- Mixed Invoice
- Commercial Invoice
- Timesheet Invoice
- Expense Report
- Pro Forma Invoice
- Interim Invoice
- Final Invoice
- Past Due Invoice
- Recurring Invoice
You can create any type of these invoices for your clients. For example, if you have a global business and have to ship the product to international borders, you must create the pro forma invoice and commercial invoice.
The e-invoice can be applied if your business organization is compatible with electronic mail. The e-invoice is also quite famous the small business and freelancers. These types of invoices are quicker and easier to create and send than the standard invoice. This type of invoice helps to get faster payment.
Similarly, there are other types of invoices which have its own feature and importance. So you have to use the invoices that match the nature and requirements of your business.
4. Different Regions Have Different Invoice Regulations
The different regions have different invoice-related rules and regulations. The rules for the invoices can be different in each state, country, town, etc.
In most countries invoicing is quite straightforward. For example, in some parts of the US, the invoicing regulations are quite simpler as the invoices only include tax, conditional on a different state.
If you are invoicing within the same country or state, it can be simple, and the standard invoice would be enough. But, if you are dealing with international customers, then a lot of the things must be considered, and different rules and regulations must be followed.
In the country like Australia and Canada, if your invoice reaches a certain threshold, then the invoices need to add on GST (goods and services tax). In the UK, if your business makes more than £83,000 in any 12-month period, then a VAT invoice is needed.
5. Used for Marketing
Many people think invoices just the payment medium for the business organization. The simple and plain look of the invoice can deceive anyone as a simple document, but invoices are more than that.
The marketing team usually has a tough time getting the attention of current and potential customers. They start marketing campaigns like publishing an advertisement, sending emails to their subscribers, sending useful articles and content to open the emails, and the number of possible customers would increase. They are always working on increasing the opening rates.
In the case of opening rates, an invoice has the highest opening rate compared to other materials sent to the customers. The best feature about invoices is that their opening rate is nearly 100%, as your customers are required to pay invoices.
The invoice document has a lot of space to attach our marketing materials like the discount offers, festive offers, feedback requests, referrals, testimonials, etc. The logo and the slogan of the company can also be the best source for marketing.
6. E-invoicing is Increasing
As modern and digital technology is taking over the business world. It is no surprise that the invoicing process also shifts to digitalization. Electronic invoices replace paper invoices.
Electronic Invoicing refers to the process of sending invoices in electronic format. The e-invoicing method is simpler and easier than the paper-based process. The automation and systematic process of invoicing make the business operation more efficient.
Digital invoicing sends the invoices to a customer online rather than via mail. It is sent via email or a secure portal. Generally, businesses that use e-invoicing also offer their clients to pay through online methods. The e-invoices also include the same information as the paper invoices.
7. Instant Invoice Delivery = Faster Payment
The invoice must be sent to get the payment. The customers need the invoice to start the process of the payment.
If you send the invoices faster then, you will get paid quicker. So, you need professional-looking invoices as soon as the product is delivered. Simultaneously, the customers are more likely to pay faster for the order they just received.
Therefore using the invoicing software can be helpful to your business and increase the efficiency of the business. The invoicing software creates and sends the invoices in a few minutes. It also automates the invoicing process for every transaction. Most of this software also tracks down each invoice.
8. Online Invoice Payment Increases Efficiency
Now a day’s most people are comfortable with online payment. For the business organization accepting online payments is a fast, easy and secure method. The fast payment maintains the cash flow of the business operation.
It’s easier and simpler to integrate online payments into the accounting process. You must take advantage of the online payments in the business transaction. The online payment tools can increase your business’s efficiency as they manage cash flow with immediate payments, eliminate paper-based processes, and increase customer relationships and improve lifetime value. Online payment increases the flow of payment, and it is a secure and trackable method.
Thus, you must include the online payment in your billing process. You can offer various discounts on the bills for online payment and encourage them for online payment.
9. Polite email Reminders get Paid Faster
The late payment can hamper your business and may lead to a loss. So you should pursue your late-paying customers to pay the invoices.
Actually, everyone is busy with their work, so it’s common to forget about the due payments. So, you shouldn’t become strict with your customers for late payments; instead of that, you can send some emails as a reminder. It shows your polite behavior and also reminds them to make payment.
It is also the fact that friendly and polite language used in invoices can help get paid faster. This type of polite behavior shows professionalism in work. You can build up a good relationship with the customers and have a long-term relationship.
You can learn more tips to get paid faster and maximize your profit in business.
10. Online Invoicing Software is Better
In the past few years, the invoice is changed from handwritten invoices to electronic invoices, online invoices, and now into mobile invoices.
Paper invoices have become the oldest method of invoicing, where a lot of paper is wasted.
The huge transition of all the business into the computerization system brings the electronic invoices, which is quite cheaper and easier for the business.
Then with the introduction of the internet, the invoicing method becomes advanced and secure. Online invoices are introduced where invoices are sent online, and the payments are online payments implemented.
However, invoicing software has changed everyone’s life. It is the most advanced and new method of invoicing. The invoicing process has become automated with secure and instant invoice delivery is possible. It also allows storing all the records of the transaction on the cloud and can be accessed anytime from anywhere.
Functions of Invoices
An invoice has the main purpose of getting the payment from the buyers. It also serves as a legal document as they contain all the details of a purchase. It shows the price, purchase details, names of buyers and sellers, and the payment conditions.
The functions of invoices are as follow:
The invoices also provide the feature of maintaining the records of the transaction. You can keep the legal record of the sale. All the records like buyer, seller, price, quantity, invoice number, etc., are recorded and can be accessed anytime in the future.
The invoice can help to keep track of your transaction. Each business transaction is recorded in the invoice. It is a helpful tool for account management. The seller and the buyer can keep track of their payments in a business transaction.
After both concerned parties agree with the price of the product, the invoices are sent. So the invoices are the legal evidence of an agreement between buyer and seller. It can be used as a legal document if anything happens in the future.
Easy Tax Filing
The invoices record the actual sales of the goods and services. It provides the actual value of the company’s sales and shows the exact income and profit. Well, that report is helpful in paying the taxes. The record of invoices also helps in tax auditing.
If you analyze the invoices, you can clearly collect all the information about the customer’s behavior, buying patterns, sales period, trends, popular products, etc. You can develop the best marketing and business strategy with this relevant information.
Modern Invoicing Software
Every business organization knows about and also uses invoicing software. But modern invoicing software is quite a different one. The invention of digitalization and online business are becoming partners that can help the business owner.
Likewise, the modern invoicing software carries the SaaS functionalities that support the business organization to automate, speed up, and manage the invoicing process and get faster payment.
What you can do with Invoice Software:
Create Customized Invoices
The invoice software helps to get you the customized invoice for each client. You can choose the look and feel of your invoices. You can also make an invoice as a marketing tool by maintaining your brand identity on the invoices.
Automate your Workflows
You don’t need to worry about creating new invoices and sending them to the clients. Let your software take care of all the invoices by automating the tasks of invoicing. The software also sends payment reminders if the payment is delayed.
Make Payments Easy and Secure
Most people prefer the secure online payment method rather than the traditional way of payment. Thus invoicing software allows your clients to pay through the online method. This type of payment is actually a secured one.
Improve Customer Relations
Good customer relations is the main method of marketing strategy. You must maintain the customer relationship to maintain the flow of the sales. Most of the invoicing software includes CRM support and a client portal for customers. The clients can directly contact the vendors through this system. Another benefit of the software is that it allows us to track their transactions and make an online payment.
Advantages of using Invoice Software
The accounting and billing process can be simplified with the help of invoice software. It also brings a systematization and automation process in the invoicing process.
- Reduce the cost of hiring the staffs in the invoicing and accounting department
- Save time on follow up of late payments
- Ensures faster payment and improve cash flow
- Minimizes the fraud case and improve security
- Improve customer relations
There are a lot of important things about the invoices that many people are not familiar with. It is beneficial to know about the invoicing facts so that you can improve your efficiency in business operation.
However, your negligence in the invoicing and accounting sector can severely affect your business organization’s cash flow. The above-mentioned 10 invoices facts can improve your business accounting with less cost, less time, and minimal effort.
Therefore for business success, you must cope up with the modernized market. You can sincerely invest your capital in the invoicing and billing software and see your business operation changes.