What Is Invoicing?
A typical business transaction involves two parties: a buyer and a seller. The seller provides goods or services to the buyer, and in return, they would like to get paid. Since the buyer owes money to the seller, the seller sends them an invoice that sets out all information to let the buyer know what they owe. For example, the buyer will get an itemized list of all the goods and services they’re paying for, and they know the terms of the transaction. After the buyer sends the money to the seller, the transaction is complete. Bills and Invoices relate to the document sent to the buyer to request the payment for the goods and services the seller has provided.
What does an invoice look like?
An invoice should be readable and straightforward while providing all the details on the services offered and the payment required by the client. An outstanding invoice should include:
- Your business logo
- Your business contact information
- Your client’s contact information
- An invoice ID or invoice number
- Quantity and description
- Payment terms and deadlines
- An itemized list of services rendered
- The amount due
- Due date
Why is Invoicing important?
Invoicing is important to sellers because they want to get paid. It’s essential to send out invoices as early as possible so the sellers will not be waiting around for the cash.
The government is also keen on invoices. Most countries charge some form of sales tax on transactions involving taxable goods and services. An invoice is a record of a transaction that splits out and identifies the sales tax.
Invoices are also necessary from an accounting perspective because they trigger the accounting entries in both buyer and seller books. They are also used to track accounts receivable and accounts payable.
What is Invoice processing?
Invoice processing is a business function that starts when you receive an invoice and ends when payment has been made to record in the general ledger. An invoice processing flowchart is a detailed guide for how an accounts payable team processes vendor invoices.
Why do you need to automate your Invoice Processing Procedure?
1.Save time and reduce errors
First, automated invoicing reduces the processing time because it cuts down on error rates. There will be less room for mistakes with less manual entry. While it eliminates the risk of missing invoices due to human error, automated invoicing enables you to pay all your invoices by the payment date.
In a Manual invoice process, you must pay person-hours for each invoice. With the proper invoice processing software, you could minimize manual work and save labor costs, allowing staff to focus on more business-crucial jobs.
With an automated invoice process, you could maintain an excellent standing with all your suppliers because of fewer errors and on-time payments. This may improve your credit with your customers or business partners in the form of additional funds or better payment terms.
An automated invoice processing supports you in automatically generating reports with the information stored in databases instead of manually collecting invoice data and order receipts. Special reports have the potential to make a vast difference in your business.
There are plenty of ways to automate invoices. If you want to be more organized and track payments and create reports, I recommend using some cloud accounting software. And if you are a Shopify merchant that is using MYOB AccountRight, I recommend you take a look at Shypyard's MYOB AccountRight connector for Shopify.