Tips for professional invoice management
In start-ups, craft businesses, and other small to medium-sized enterprises, invoicing often falls directly on the person providing the service. Many entrepreneurs only appoint an employee to handle invoicing and bookkeeping once the company reaches a certain size. However, proper invoice management should not be a question of company size, but a matter of course.
What does invoice management actually mean?
In simple terms, invoice management covers all steps from issuing an invoice to incoming and outgoing payments. A distinction is made between incoming invoices and outgoing invoices.
With an incoming invoice, the company receives a bill from an external service provider or supplier. The management of incoming invoices includes:
- Recording the invoice
- Checking the information for completeness and accuracy
- Internal allocation of the invoice
- Timely payment of the invoice
- Legally compliant archiving of the invoice
An outgoing invoice is a bill that the company issues to a customer for a service provided. The management of outgoing invoices includes:
- Correct and timely invoicing
- Sending the invoice
- Monitoring incoming payments
- Receivables management in case of late payment
- Legally compliant archiving of the invoice
Why is good invoice management so important?
Organized invoice management enables business owners to manage their time more effectively, as standardized processes help prevent errors. This leaves more time for core business activities. Accounting departments also rely on receiving documents promptly and error-free.
Regarding statutory retention requirements, structured invoice management is not only important, but mandatory. Both incoming and outgoing invoices must be archived for 10 years in a way that protects them against loss, manipulation, and damage.
Structured invoice management also helps companies maintain control over their cash flow by providing an overview of incoming and outgoing invoices and converting receivables into liquidity as quickly as possible.
Professional invoice management from a liquidity perspective
It should be clear by now that a company needs well-thought-out and reliable invoice management. Nevertheless, in reality, it often proves more difficult than expected.
Issued invoices contain errors, are sent far too late, or lack a consistent and clear dunning process. To optimize invoice management in your own business, you should pay close attention to the following points:
Invoice management should be kept in mind throughout the entire customer relationship. Performing a customer credit check before delivering services reduces the risk of payment default and should therefore be an integral part of the project workflow.
After the service is completed and accepted, it is finally time for invoicing. Here, you should aim to issue invoices as promptly as possible to optimize your liquidity. Ideally, the invoice is sent to the customer the day after the service is rendered. For this to run smoothly, all necessary billing information, such as timesheets and material usage, must always be forwarded to accounting right away.
Alongside speedy invoicing, the completeness and accuracy of the information on the invoice is crucial for when payment is received. Only complete and accurate invoices get paid; all others are usually sent back to accounting with a request for correction—and that costs time. The invoice should also be structured as clearly as possible: for example, it is advisable to specify a concrete due date rather than a general payment window. This gives the customer clarity on exactly when the invoice must be settled.
However, if a customer falls into late payment despite all precautions, the dunning process should be initiated consistently.
Dealing with outstanding outgoing invoices is often a difficult topic within companies. Employees get caught up in day-to-day business, and unpaid invoices frequently go unnoticed. For smaller, regional businesses, personal relationships with customers can make the prospect of receivables management feel even more uncomfortable. Part of professional invoice management, therefore, is tracking open items, initiating reminder procedures when necessary, and keeping personal feelings out of the equation.
The proper handling of open items is essential for a company's liquidity, on both the incoming and outgoing sides. Outgoing payments directly impact a company's cash flow and should therefore be optimized. On the receivables side, it is naturally vital to collect open items as quickly as possible to boost your own liquidity.
Tidely supports your invoice management
Tidely helps you stay on top of your invoice management. At a glance, you can see which items are still outstanding, when you can expect incoming payments, and when outgoing payments are due. By simply moving open items around, you can see how changes affect your cash flow and plan accordingly. Might it make sense to agree on shorter payment terms with a customer and negotiate longer payment terms with a supplier?
To ensure you can see the most important open items at a glance, Tidely conveniently summarizes the top 5 largest open items for each month. Optimize your invoice and liquidity management with Tidely and see the results for yourself!
