Tips for professional invoice management
Within a start-up, craft business, or other small to medium-sized enterprises, invoicing often falls directly on the service provider. Many business owners only appoint an employee to handle invoicing and accounting exclusively once the company reaches a certain size. However, proper invoice management should not be a matter of company size, but rather a matter of course.
What does invoice management actually mean?
In simple terms, invoice management includes all steps from invoicing to payment receipt or payment made. A distinction is made in invoice management between incoming and outgoing invoices.
For incoming invoices, the company receives an invoice from an external service provider or supplier. The management of an incoming invoice includes:
- Recording of the invoice
- Checking the completeness and accuracy of the details
- Internal allocation of the invoice
- Timely payment of the invoice
- Legally compliant archiving of the invoice
The outgoing invoice is an invoice that the company issues to a customer for a service provided. The management of an outgoing invoice includes:
- Accurate and timely invoicing
- Sending the invoice
- Monitoring incoming payments
- Managing receivables in the event of late payment
- Legally compliant archiving of the invoice
Why is good invoice management so important?
Organised invoice management allows business owners to have better time management, as processes run uniformly, thus avoiding errors. This leaves more time for actual business activities. The accounting department also requires the documents to be provided in a timely and error-free manner.
With regard to the legal retention obligation, structured invoice management is not only important but also absolutely necessary. Incoming and outgoing invoices must be archived in such a way for 10 years that they are protected against loss, manipulation, and damage.
A structured invoice management system helps the company to maintain control over its liquidity 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
That a company needs a well-thought-out and reliable invoice management system should no longer be in question. However, in reality, it often proves to be more challenging than expected.
Issued invoices are error-free, but are often issued far too late, or there is no consistent and clear dunning process. To optimise invoice management within your company, the following points must be observed:
Invoice management should be kept in mind throughout the entire customer contact process. Conducting a credit check on the customer even before providing the service reduces the risk of payment defaults and should be an integral part of the project process.
After the service has been delivered and accepted, it finally comes down to invoicing. A prompt invoicing process should be pursued to optimise 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 billing information, such as timesheets and material consumption, must be promptly submitted to the accounting department.
In addition to the speed of invoicing, the completeness and accuracy of the details on the invoice are crucial for determining when the invoice will be paid. Complete and correct invoices are paid, while others are usually sent back to accounting with a request for correction—this costs time. Therefore, the invoice should be as clearly structured as possible: for example, it is advisable to specify a concrete date for the payment deadline instead of just stating a period. This gives the customer clarity on when the invoice must be settled.
However, if there is still a payment delay from a customer, the dunning process should be consistently initiated.
Dealing with outstanding outgoing invoices is often a difficult issue within companies. Employees are caught up in the daily operations, and outstanding invoices often remain unresolved. In smaller, regionally operating companies, the personal relationship with the customer can add to this, further increasing the threshold for receivables management. Part of professional invoice management is therefore to track outstanding items when necessary with dunning procedures and to set aside the personal aspect.
Proper handling of outstanding items is essential for a company's liquidity, not just on the outgoing side but also on the incoming side. Payment inflows directly affect a company's liquidity and should therefore be optimally managed. On the incoming side, it is, of course, important to realise outstanding receivables as quickly as possible in order to increase your own liquidity.
Tidely supports invoice management
Tidely helps you maintain an overview of your invoice management. You can instantly see which items are still outstanding and when you can expect deposits or when payments are due. By simply shifting the outstanding items, you can see how this will impact your liquidity and plan accordingly. Does it perhaps make sense to negotiate a shorter payment term with the customer or a longer one with the supplier?
To ensure you can see the most important outstanding items at a glance, Tidely summarises the top 5, i.e., the largest outstanding items, clearly for each month. Optimise your invoice and liquidity management with Tidely and see for yourself!
