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 an invoice from an external service provider or supplier. Managing an incoming invoice 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 an invoice that the company issues to a customer for a service provided. Managing an outgoing invoice 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 entrepreneurs to manage their time better, as processes run consistently, thereby avoiding errors. This leaves more time for actual business activities. Bookkeeping also requires documents to be submitted on time and without errors.
With regard to legal retention requirements, structured invoice management is not just important, it is mandatory. Incoming and outgoing invoices must be archived for 10 years in a way that protects them from loss, tampering, and damage.
Structured invoice management also helps the company maintain control over its liquidity by providing an overview of incoming and outgoing invoices and converting receivables into cash flow 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 are often incorrect, sent far too late, or there is a lack of a consistent and clear dunning process. To set up optimal invoice management in your own company, the following points should be strictly observed:
Invoice management should be kept in mind throughout the entire customer relationship. A credit check of the customer before providing services reduces the risk of payment default and should therefore be an integral part of the project workflow.
After the service has been provided and accepted, it is time for invoicing. You should aim to invoice as soon as possible to optimize your own liquidity. Ideally, the invoice should be sent to the customer the day after the service is provided. For this to run smoothly, all necessary invoice information, such as timesheets and material consumption, must be forwarded to the accounting department immediately.
In addition to the speed of invoicing, the completeness and accuracy of the information on the invoice are crucial for the timing of payment. Only complete and correct invoices are paid; all others are usually returned to the accounting department with a request for correction—and that costs time. The invoice should also be structured as clearly as possible: for example, it is recommended to state a specific due date rather than a time frame. This gives the customer clarity on when the invoice must be paid.
However, if a customer is late with payment despite all this, the dunning process should be initiated consistently.
Managing outstanding invoices is often a difficult issue for companies. Employees are caught up in the daily grind, and unpaid invoices frequently go unnoticed. For smaller, regional businesses, personal relationships with customers can create an additional barrier to accounts receivable management. Professional invoice management therefore involves tracking outstanding items, initiating dunning procedures when necessary, and setting personal feelings aside.
The right approach to open items is essential for a company's liquidity, not just on the accounts payable side, but also for accounts receivable. Outgoing payments directly impact a company's cash flow and should therefore be managed optimally. On the accounts receivable side, it is naturally important to realize outstanding payments as promptly as possible to boost your own liquidity.
Tidely supports your invoice management
Tidely helps you keep track of your invoice management. You can see at a glance which items are still open, when you can expect incoming payments, and when outgoing payments are due. By simply shifting open items, you can see the impact on your liquidity and plan accordingly. Does it make sense to agree on shorter payment terms with a customer or negotiate longer terms with a supplier?
To ensure you see the most important open items at a glance, Tidely clearly summarizes the top 5 largest outstanding items for each month. Optimize your invoice and liquidity management with Tidely and see for yourself!
