Invoice Management Guide for Beginners and Pros Alike
For many businesses, invoice management is a necessary evil. After all, if you don’t invoice clients and customers, you don’t get paid—and you probably like to get paid.
That said, there are still steps you can take to ensure that invoicing clients doesn’t take up any more time or effort out of your day than it has to. That’s why the guide below is dedicated to helping you spend less time and energy on invoice management—from creating and sending invoices to following up on overdue payments.
The way we see it, there are 3 groups of people when it comes to invoicing:
- Beginners, who need to understand the basics and best practices around invoicing
- Intermediates, who are looking for better and faster ways to streamline the invoicing process
- People who just want to offload the whole process
We’ve broken the tips and best practices below down for each group.
Jump ahead to the section that suits your need:
- Get started invoicing clients and customers
- Improve an existing invoice process
- Offload invoice management to someone else
The Typical Invoice Management Process
Whether you’re sending or receiving invoices, it’s important to understand what happens between the time an invoice gets created and when it gets paid. In a nutshell, here’s what that process typically looks like:
- The invoice is sent by the supplier/contractor and received by the relevant department inside the business (usually accounts payable, accounting, or finance).
- The team extracts key information from the invoice (like payment details, the total amount, and the services/products they’re being charged for).
- Then, they go through a process of validating and verifying the invoice information, including getting approval from relevant other teams who may have contracted the product or service.
- Finally, the AP team approves the invoice and payment is released.
- And lastly, the invoice is archived in case it needs to be referenced later on.
The Costs of Manual Invoice Processing
As you can see there are a lot of time and financial costs associated with processing invoices—especially when that process is done manually. From creating and printing invoices to time spent on data entry and chasing down approvals, those invoice processing costs can quickly add up.
If you’re wondering what that means for your budget, research firm Sterling Commerce estimated that manual processing costs fall around $30 per invoice for accounts payable and $4 per invoice for accounts receivable (AR).
However, when invoice processing is automated, that per-invoice cost drops to $3.50 for AP and $2.25 for AR. That’s (spoiler alert) why we’ll recommend invoice automation later on in this guide.
Glossary of Key Invoicing Terms to Know
Whenever you see “net” followed by a number, it’s referring to the payment terms. It means the net amount of the invoice is due within that number of days. So if a client tells you they pay on a Net30 schedule, it means they’ll pay the full balance of the invoice within 30 days of receiving it. Net0, on the other hand, typically means the invoice is due the same day it’s received.
“On receipt” is another type of payment term that means the same thing as Net0. If an invoice is due on receipt, that means it should be paid the same day it’s received.
The “Bill to” portion of an invoice identifies the company or person you’re sending the invoice to—usually your client or customer. In the Bill to section, you should include:
- The company name
- The company’s main address
- The name of either your primary contact at the company or the person who will approve payment
- The same person’s email address and/or phone number
Paperless invoicing simply means that you’re sending invoices digitally and not sending out physical hard copies of the invoice.
Billing vs. invoicing
While you can find some variation between the terms “billing” and “invoicing” depending on who you talk to, most people typically use both terms interchangeably—referring to sending clients or customers a description of the products or services used and the charges incurred.
Recurring invoices are simply invoices that are sent out regularly for the same amount. If you’re a freelancer working on a monthly retainer, for example, you may send out a recurring invoice for the retainer rate each month.
Instead of listing one total cost, an invoice that’s itemized breaks down each product or service and its individual price. For example, an itemized invoice might look something like this, with each service listed as a line item:
- Service A: $100
- Service B: $42
- Service C: $185
On an itemized invoice, each service or product is listed on its own separate line. Each of these is referred to as a “line item.”
Some clients or customers may require a purchase order from their own accounting or financing department that helps them identify your charges. If requested and provided by the client, including the purchase order (PO) number on your invoice can help streamline and expedite approval and payment.
Accounts payable (AP)
Accounts payable can refer to a few different things. For one, it’s the name of a type of account in a business’ general ledger. The AP account records the money a business is liable to pay in the short-term (like supplier or contractor invoices). AP can also refer to the department within a company that deals with making payments like those.
Accounts receivable (AR)
Similar to AP, accounts receivable (or AR) is a type of account in a business’ general ledger—this one records the money a business is owed (like an outstanding invoice awaiting payment).
An audit trail refers to the written records that accompany a given accounting transaction. Audit trails are most often used to verify the accuracy of payments and accounting entries, and any relevant invoices are considered a part of the audit trail.
Optical character recognition (OCR)
Optical character recognition comes into play when we talk about automating invoice management. Put simply, OCR is a type of technology that’s able to recognize and pull text out of images (like a scanned or photographed invoice, for example).
Enterprise resource planning (ERP)
Large enterprise companies need a solution to tie together the various software and tools each of their departments use. That’s the idea behind enterprise resource planning (or ERP) software. Enterprise solutions like SAP and Microsoft are great examples—both offer a myriad of solutions for different departments that tie back together into one overarching software.
Why Invoicing Matters
Simply put, invoicing matters for businesses because it’s how you get paid. When you send out an invoice, you’re essentially saying to a client, “Hey, you owe me money.” Doing so with care and thought can help ensure positive and ongoing client relationships and prompt payment—both vital for businesses of every size and age.
There are a lot of different ways you can design, build, and send invoices, but we’ll keep it simple for now. Regardless of anything else, your invoices should include the follow pieces of information:
- Your name
- Your business name (if different from your name), address, and phone number
- Bill to information for the client or customer
- The invoice number and date
- Currency (if needed)
- Itemized services/products with a clear description and price per line item
- Any applicable taxes or fees
- Total cost
- Payment due date
- Payment methods and any other information needed to pay (wire transfer information, for example)
- Purchase order (PO) number (if requested and shared by client)
If any of these sound brand new to you, jump back up to our list of key invoicing terms you may need to know.
The Benefits of Timely and Organized Invoicing
Many of the benefits of invoicing are pretty cut-and-dry. If you invoice clients, you have a much better chance of getting paid. But there are also some added benefits to ensuring your invoicing process is as timely and organized as it can be.
- When your invoices are organized and paid promptly, your financial books and records can also be more organized, accurate, and up-to-date.
- When clients are invoiced promptly and given all the information they need to get approvals and pay, you can get paid even more quickly.
- When you send complete and professional invoices, your business looks more professional and clients are more likely to trust that you have your stuff together.
Invoicing Tips and Best Practices for Newbies
Now that you have a better sense of what invoicing entails, let’s talk about some of the tips and best practices you can follow to ensure your invoicing process is streamlined and payments are prompt and accurate.
Tip #1: Block off time regularly to manage invoices
There are 2 main ways to approach invoice timing. You can either invoice in real-time, upon completion of a service (or delivery of a product), or invoice regularly on a schedule—usually around the same time each month.
Whichever schedule works best for you and your clients, keep to it. Block time on your calendar to send regular invoices. If you invoice upon completion or delivery, do it immediately so you don’t forget.
Delegated VAs can help you spend less time managing your invoicing process.
See how it works >>
Tip #2: Set very clear expectations with clients
When you send out invoices, the last thing you want is for your client to be surprised—by any part of the invoice. That’s why it’s vital that you set very clear expectations from the very outset of any business relationship.
Specify (and get your clients to agree in writing to):
- Your invoicing schedule
- Payment terms (i.e. Net30 or due on receipt)
- Rates and prices
- Payment methods (i.e. Wire transfer or credit card)
- Who pays any associated payment costs (like credit card processing fees)
Tip #3: Have a plan for overdue invoices
Over- and past-due invoices are an unfortunate fact of life in most businesses. What’s important is that you have a plan in place for how to deal with nonpayment. This can include:
- A series of follow-up communications (in case your invoice just slipped through the cracks) as well as when and how often you’ll send them
- Agreed upon late fees or interest charges and when they kick in
- A plan for long-term nonpayment and any legal action
One of the best ways to deal with past due invoices is to avoid them altogether. By sending out proactive reminders as invoice due dates approach, you can make it easier for clients to pay you on time.
A Delegated VA can handle payment reminders and past due follow-ups for you.
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Tip #4: Automate your invoice management process
As we mentioned above, manual invoice processing costs (both time and financial) can add up—especially for those on the receiving end of plenty of invoices. That’s why we recommend all companies look into how they can automate their invoice management, whether that’s one particularly intensive aspect or the entire process from end-to-end.
Thankfully, companies and individuals alike have a lot of options for automating various aspects of the invoicing process, including invoice software (more on that below) with automation built in and more task-agnostic tools like robotic process automation (RPA).
Tip #5: Keep a pulse on your cash flow
Whether you’re sending or receiving invoices (or both!), it’s vital that you keep a running pulse on your cash flow.
For those sending invoices, you may have payment terms that vary from one client to another—being able to pay yourself, your team, and your own bills means you need to understand:
- When you can expect to be paid
- What you can afford between now and then
- How you’ll manage if invoices aren’t paid (or paid on time)
If you’re on the receiving end of invoices, you need to know when you’ll be able to pay them, whether you should pay invoices as they come in or as they’re due, and which payment methods will work best for your cash flow and liquidity.
Tip #6: Use a professional-looking invoice
As a small business or independent contractor, conveying a sense of professionalism and credibility is key—especially when you’re asking someone to send payment and share sensitive payment details (like their credit card or bank account number). Using a professional and well-designed invoice is one of the simplest ways to do that.
Tip #7: Include key payment information
Don’t forget to include on your invoice any and all information clients will need in order to pay you. That might include the payment methods you accept, a link to your credit card payment processor, or your own bank account details for a wire transfer.
Tip #8: Explain any discrepancies in your information
If your business name is something other than your own personal name, it’s important that your clients know that before they see an unfamiliar business name on an invoice. The same goes if your credit card processor displays your business name, too.
Explain these things upfront so clients are never surprised or confused.
Tip #9: Connect your invoicing process with your bookkeeping or accounting
Whether you’re doing bookkeeping by hand, using accounting software, or working with a professional accountant, it’s important that your invoicing processes are synced up with your books. That way, you can keep an accurate and up-to-date track of how much you’ve invoiced clients, how much you’ve been paid, and more.
Tip #10: Always itemize your invoices
Whether you’re charging clients and customers for time (hourly), for work (by project or deliverable), or another way, it’s best to include as much detail about the work done as possible on your invoices.
When you itemize invoices and describe in-depth the work you’re charging them for, you’ll have a quicker and easier path to approval and, ultimately, payment.
18 Resources to Help You Better Organize and Manage Invoicing (Plus Samples)
Okay, enough with the basics of invoicing. Now, let’s get into some more of the everyday and advanced concepts involved with invoice management.
Below, we’ve pulled together 18 different resources—from sample invoice templates to free invoice generators and the best invoicing apps for iOS and Android. Have at ‘em!
Sample Invoice Templates
Accounting software FreshBooks offers some of the best sample invoice templates we’ve seen. You can download fully editable templates from their website including:
7 of the Best Free Invoicing Software Options
Below are 7 of the top free invoicing software options. Bonus: Many of them also provide accounting and bookkeeping features, so you can keep all of your financial information in one place.
Wave offers a robust suite of products that include invoicing, accepting payments, accounting, and more. You can use Wave to build completely custom, templated invoices and send automatic payment reminders to clients. Their invoicing features are 100% free forever, plus you can accept bank payments and credit cards directly through your invoices.
With PayPal, you can create customized invoices by starting with their library of invoice templates. You can aslo schedule one-time and recurring invoices and track payments, reminders, and more. One of the key benefits of invoicing with PayPal is the name recognition and credibility—your clients can feel secure sharing sensitive payment details via PayPal.
With Square’s invoicing features, you can create online invoices, seamlessly turn estimates into invoices, and even send automatic payment reminders to clients as invoice due dates approach. Square also makes it easy to create and send invoices with mobile apps for iOS and Android.
AND.CO is an invoicing and accounting software built for independent contractors and solopreneurs. Their software even creates new invoices automatically based on your contracts and projects—all you have to do is hit “send.” Plus, if you work and charge hourly, your AND.CO invoices can integrate directly with your time tracking.
Zoho Invoice is another tool that makes it easy and quick to create professional-looking invoices. The software helps you get paid faster by making invoice creation a breeze and sending out automatic payment reminders to your clients as due dates approach. Plus, Zoho Invoice works seamlessly with the rest of Zoho’s suite of products.
Stripe’s billing and invoicing features are built specifically for subscription businesses that send out recurring invoices on a regular basis. It’s free to invoice for your first $1 million in recurring revenue.
Harvest is among the simplest free invoicing tools, and it’s built for time tracking and billable hours. The software automatically pulls your billable time and expenses to create invoices while enabling you to create custom invoices manually, too. You can integrate with Stripe or PayPal to accept payments and with Xero and QuickBooks to track payments and revenue.,
Invoicing Software for Midsize and Enterprise Companies
As the complexity of your invoicing and accounting needs grows (and your budget for invoicing software in turn), you may outgrow some of the free invoicing software options. If it’s time to move on up, here are our top 5 recommendations for invoicing for midsize and enterprise companies.
Invoicing Apps for Your Phone
For those on the go, several invoicing tools and software offer mobile apps to create, send, and track invoices directly from your smartphone. Below are our top 3 picks for iOS and Android users.
Best for iOS
Best for Android
Free Online Invoice Generators
If you aren’t interested in getting set up in an invoicing or accounting software, there are several free online invoice generators that allow you to just input information and create simple, one-off invoices.
These can be a good option if you’re looking for a simple, no-nonsense invoicing system and if you already have an accounting or bookkeeping setup that doesn’t offer invoicing features.
There are, however, a few downsides to using these invoice generators. For one, they don’t enable you to customize your invoices very much. You can’t add custom fields, for example, or customize very much of the look and feel of the invoice.
Using a one-off invoice generator also makes it hard to really streamline your invoice process—it’s inherently manual and doesn’t allow for creating recurring or templated invoices. Plus, these online generators typically don’t integrate with common bookkeeping or accounting tools, so you’re on the hook for recording and tracking payments.
That said, simple invoice generators can be a great stop-gap while you search for a more robust solution. The following 3 solutions are our top picks for free online invoice generators.
Outsourcing Invoicing to a Virtual Assistant (VA)
Whether you’re new to invoicing or you’ve been doing it for years, there comes a time when it just makes sense to offload invoice management and let someone else handle it. Luckily, invoicing is one task that’s commonly (and seamlessly) handed off to a virtual assistant (or VA)—and the benefits are plenty.
- Simply put, if you don’t have to handle creating invoices, sending them, or following up on payments, that means you have more time to work on your business.
- If you outsource invoice management, it’s no longer on you to remember to build and send invoices—you can get paid without having to remember to invoice your clients.
- Following up on late payments is never fun. When you outsource invoice management, you can offload the handling of overdue payments to someone else.
- If outsourcing means your invoices are more accurate, timely, and complete, then you automatically look more professional and together to clients and customers.
- Offloading invoice management means that invoice sending, following up on late payments, and other aspects of the process won’t fall through the cracks anymore.
When you work with a Delegated VA, they can handle every part of your invoice process, including:
- Creating and sending professional invoices
- Building out invoice templates
- Scheduling recurring invoices
- Tracking and recording invoice payments
- Sending payment reminders as the due date approaches
- Following up on past due payments
Wait—How does this work?
We know that delegating can seem a little weird to those who haven’t done much of it before. In our experience, most of the concerns people come in with are quickly overtaken by the time and effort savings of outsourcing your invoice management.
If you’re still unsure, here are a few questions we hear a lot:
How does all this work?
Your Delegated VA will be at your beck and call whenever you need them. They can create and send your invoices, build invoice templates to reuse, send payment reminders and follow up on overdue invoices, and track and record payments as they come in.
Will my VA know which information to include on invoices?
To start, your VA will base this judgment on the information you provide to them. As you work together, your VA will come to know your regular clients, product or service types, standard payment terms, and other key details included on invoices.
How do I communicate with my VA?
Your Delegated VA can communicate with you in any way you choose. Whether you prefer to chat via Slack, text message, email, phone, or carrier pigeon, your VA will work and communicate according to your preference.
Invoicing and managing client payments is an important part of your business. Doing it in an organized, professional, and timely manner has a direct impact on how clients see you and how quickly you get paid. And with the tips we’ve shared and your choice of software, it’s 100% manageable to get invoicing right.
That said, invoicing is also a valuable opportunity to outsource some of the more tedious and time-consuming parts of your day. By turning things over to a virtual assistant, you can reap the benefits of a streamlined invoicing process without spending any more time or effort on doing it yourself.