What’s an electronic invoice?
An invoice is a formal request for payment from a business or supplier after services have been rendered. This document keeps a record of a transaction between buyer and seller and can be a paper receipt or online record. Invoices typically set out payment terms, supply costs, shipping, and other items outlined in the transaction.
Unless you like the taste of envelope glue, there's no reason why your small business should be relying on paper invoices and postage stamps. An electronic invoicing system can streamline the way you do business, making you more agile, productive, and better able to meet the demands of today's global marketplace.
E-invoicing makes good business sense, and today, we'll show you why.
What is an e-invoice?
Historically, sending invoice documents has been a comparatively slow process, as it takes time to send or receive a paper invoice by mail. Plus, manual data entry is notorious for producing errors and creating a remarkably inefficient system.
Electronic invoicing (or "e-invoicing") simplifies this process by relying on an online platform to send and receive invoices. By processing invoices electronically, companies can process invoices with unparalleled speed.
How does e-invoicing work?
Today's electronic invoicing software offers more than just a way of communication. E-invoicing systems integrate into your company's accounting software, which can automate recurring invoices and ensure accuracy and reliability.
E-invoices contain the same invoice data as their paper counterparts, including:
- Date
- Invoice number
- Company name and logo
- Business information of the customer
- Description of goods or services rendered
- Amount due
- Payment methods and terms
E-invoicing companies provide a range of tools to maximize your invoice processing methods. At Invoice2go, a Bill.com company, for example, we offer a free invoice generator, as well as a mobile app to send and receive invoices with the swipe of your thumb.
With the tap of a button, you can create a new invoice unique to your business and have it sent automatically to your customers and clients.
Electronic invoices vs. digital invoices
You may hear the terms "electronic invoice" and "digital invoice" used interchangeably, but they are not synonymous. While they both refer to web-based invoicing methods, digital invoices can refer to a wider variety of formats.
PDF invoices or scans of paper invoices could technically be classified as a type of digital invoice, but that hardly makes them equal to the superior quality of an electronic invoice.
E-invoicing relies on specific invoicing software that can enable businesses to create invoices and collect payments by integrating with their existing financial software.
E-invoicing empowers a company to create automated invoicing processes that streamline their business and provide better management of their payment and procurement processes.
Who needs electronic invoicing software?
Electronic invoicing can provide a much-needed solution for businesses of any size. Small business owners may lack the overheads to hire a full-fledged accounting staff. Having the ability to bill a customer automatically eliminates the downtime associated with paper invoices.
This type of business automation can feel like an extra set of hands for small business owners who already have their plates full.
Advantages of electronic invoicing
E-invoicing can not only revolutionize your invoicing process; it can also breathe new life into you and your business. Electronic invoicing can allow you to do the following:
Get paid faster with an electronic invoice
Every business owner knows the frustration that comes when a customer won't pay their bill. In fact, according to Forbes magazine, large companies make it a habit to pay their bills late, especially when dealing with smaller businesses.
In many cases, it can take up to 30 days to receive payment for your services. Sending an electronic invoice can help you to bill your clients immediately after you finish your work. Electronic invoice platforms enable you to send reminders to your customers so you don't have to chase down unpaid invoices!
Set up automated payments
Some businesses provide regular services to their clients. Rather than creating a new invoice for each service, e-invoicing allows you to set up automated billing so that your client receives an electronic invoice on a recurring basis. Naturally, this can save you the time and the hassle of sending regular invoices. With a steady cash flow, you can ensure that you stay up-to-date with your suppliers.
The frequency of this invoicing cycle is up to you. With modern cloud-based software, you'll receive notifications and reminders so you can keep track of the payment status of each invoice you send.
Increase efficiency
Receiving a check in the mail can take around three weeks. E-invoicing allows you to accept payments in real-time by taking advantage of electronic forms of payment. Online tools can allow you to check the status of each invoice, while cloud and web-based solutions ensure that this data is always in your pocket.
Faster payment processing means your books will always be up-to-date. You'll have the most accurate picture of your company's cash flow.
Increased efficiency also creates more time for you and your employees to stay focused on what matters: growing your core business. Face it, your time is too valuable to spend chasing down customers and following up on outstanding invoices.
Automating these processes can save hours, freeing you from the back room. It can even help you to invest in the revenue-generating activities that are crucial to your small business!
Reduce costs
Printing out PDF documents and sending them through the mail isn't just an inconvenience; it can also eat into your operating costs. Not only do you have to spend money on the paper and postage required to send these documents, but you may have to rely on an employee to manage your invoicing system actively.
Companies can save money by switching to electronic invoice systems, eliminating the need for the paper trail.
Improve accuracy
E-invoicing can reduce errors by automating the invoice process. Relying on electronic solutions can minimize the mistakes caused by faulty data entry and other kinds of human errors.
By integrating e-invoices into your company's financial software, you'll be able to ensure that your books stay up-to-date and accurate as you do business.
Customized communication
You can send an electronic invoice to customers in various formats, including email, text message, and even over social media.
Each e-invoice can be converted to a PDF format for customers who may need it as part of their procurement procedure. E-invoicing can also allow you to send reminders to your clients so that you can ensure prompt, reliable payments.
Access to financial data
An e-invoicing system integrates into your existing accounting software. By processing your invoices electronically, you'll make sure that your accounting data is up-to-date.
More importantly, e-invoicing gives users access to their financial data so that business owners can better monitor their cash flow and stay on top of every aspect of their company.
Best of all, online solutions ensure that users have access to their data from anywhere in the world.
Pay your suppliers on time
Electronic invoices won't just help you receive funds from your clients; they can also help your business budgeting and accounts payable.
By quickly processing payments from your clients, you'll have a better understanding of your overall assets. When you receive a new invoice from a supplier or one of your partners, you'll be able to settle the invoice and stay current with your expenses quickly.
Win more work
An electronic invoice can give your company a competitive edge, enable you to land more contracts, and help to create more partnerships.
With your data stored on the cloud, you'll have access to your information from anywhere in the world, so you can easily take advantage of customer communication tools. You may even find that prospective clients actually prefer the convenience of e-invoicing over other formats, which can be a major selling point when you're trying to land new contracts!
Improve your regulatory compliance
An increasing number of businesses serve as suppliers to other companies around the world. But some regulations govern financial transactions, especially in a global economy.
An electronic invoice can ensure compliance with the regulations surrounding B2B deals, in part because e-invoices provide a clear record of the nature of the service being transacted, while the invoice number can be used to match the financial records for both partners.
These web and cloud-based solutions can also save time, eliminating the need to exhaustively search for the right file.
Look professional
As an entrepreneur, you deserve to be taken seriously. When you create your own invoice, you're able to put your own personal touches on the final product, giving your company an added measure of credibility.
The free online invoice creation software available at Invoice2go even allows you to upload a corporate logo, ensuring that your brand is prominently displayed to have the professional look you deserve.
Save the planet
E-invoicing doesn't just reduce overhead costs; it also minimizes the amount of paper used by invoicing and accounts payable departments.
Going paperless can demonstrate your strong commitment to the environment. The Chicago Tribune estimates that over 450,000 trees are saved per year for every 5% of U.S. households that go paperless.
As more businesses and suppliers convert to electronic systems, we can imagine that number would increase dramatically. Customers may share your passion for the environment, which could offer the added benefit of some free publicity when you choose to go green.
Is an e-invoice a legal document?
Sending an electronic invoice allows you to track the status of that invoice and ensure that it is paid on time. But what happens when you send an invoice to an accounts payable department and never receive your money?
Most of the time, a friendly reminder (or two) is enough to get a customer's attention. Believe it or not, some larger companies are actually structured so that they ignore the first invoice they receive, preferring to prioritize other things before paying their smaller suppliers. They may actually be waiting for a reminder from their supplier before they will pay what they owe.
What can suppliers do if their invoice remains unpaid? Unfortunately, an invoice is not considered to be a legally binding document. But that doesn't mean you can't file a claim against them in small claims court.
Your electronic invoice can at least provide some documentation about your transaction and tip the balance in your favor. Of course, this process can cost you, and unless you can obtain free legal counsel, you may need to consult with an attorney.
E-invoicing and data security
Some people are naturally skeptical of online solutions. Hearing stories of businesses being hacked doesn't engender confidence in keeping your financial data stored in the cloud. The cost of network breaches can be high, and if you're a supplier, you may find that your buyers lose confidence in you after a cyberattack.
Admittedly, there will always be some degree of vulnerability when businesses are structured to rely on electronic tools. Network security is paramount, which is why platforms like Invoice2go protect the identity of their clients, primarily by keeping their information strictly confidential. Our customers even can include Paypal and other digital payment options as part of their invoice protocol.
Invoice2go, providing e-invoice solutions for the modern world
Invoice2go offers exceptional solutions for businesses of any type, allowing entrepreneurs and managers to create and send customized invoices, tracking the status of each invoice using our secure online tools.
With our app, your data will be accessible from your phone or tablet, giving you the information you need to land more contracts and outpace the competition. Curious if Invoice2go could be a good fit for your business?