What Is an E-invoice?
An e-invoice is an electronic invoice and is a part of the electronic billing process. Electronic billing is a convenience for your clients. It makes it easier for them to pay their bills. It also helps your company save money on stamps.
Why E-invoices Work
In the past, we have provided you with tips to help your company create a smooth and successful billing and collections process. Today we are here to add a new tip to that list. The use of the e-invoice!
It’s been proven that when companies use e-invoices, as opposed to a traditional paper invoice, the turnaround time for payment is greatly decreased. Who doesn’t want to get paid faster? E-invoices are the quick, convenient, and accurate alternative to the traditional paper invoice. E-InvoicingBasics, a UK based site, provides an at-a-glance chart displaying some of the major benefits associated with switching from traditional paper invoices to e-invoices.
What Happens During the Lifespan of a Traditional Paper Invoice?
- The invoice is generated – either by hand, electronically, or by using your company’s billing software;
- It is then sent to the accounting department for processing;
- Once approved by the accounting department, the invoice is printed, folded, placed in an envelope, addressed, stamped, and set aside to go out with the mail;
- Depending on the time of day that the invoice is completed, it may go out the same day it is prepared, the following day, or even the following week (if it is prepared on a Friday afternoon or a federal holiday);
- It must then be mailed out through the postal system. This process can take anywhere from 3 – 14 business days;
- Once it has arrived at your client’s location, it is processed in some way. Individuals may not open it the same day they get it. Businesses may only process invoices at a specific time of the month;
- After the invoice is processed, the client will then send out the required payment (again using the postal system and possibly experiencing the same delays);
- Once you have received the payment, it must be processed on your end. This may include physically depositing the check or money order in to your company’s bank account;
- The payment must then be cleared through both your bank and the bank of the client. This can take another 3 – 10 business days;
- If there is an issue with the payment, the process whole process must begin again;
- Finally, the client’s account can be updated to show that the payment was received, approved, and processed.
A tradition invoice and payment system can take up to a month.
What Would Happen If You Switch to E-Invoices?
- You would receive payments sooner. Clients just receive the invoice via email and pay through a website;
- Your records would be instantly updated when a payment is received (using most major e-invoicing systems. There are some that may still require a manual reconciliation. Please consult your e-invoicing provider for more information);
- All invoices, billing documents, and payments are able to be stored electronically in an easy to access, secure database. All the information you need will all be just a mouse click away;
- You would save money on the fees associated with printing and mailing a paper invoice;
- Workload will be decreased, allowing affected employees to focus on other aspects of their jobs;
- There would be no concern of invoices or payments being lost in the mail;
- The convenience of using an e-invoice has been proven to increase the likelihood of the client paying on time and in full;
- You are helping the environment by using less paper, thus lowering your company’s carbon footprint.
How Does an E-Invoice Work?
Overall, it will depend on the host you choose for e-invoicing. Here are some general guidelines on how e-invoices work. Your company will electronically generate an invoice. The e-invoice will then be sent electronically to the client. Some programs will generate the e-invoice directly after services are ordered. Other programs will send out the e-invoices at a specified time in the month.
Once received, the client is able to pay instantly through a secure payment processing portal. This is generally done using a debit card, credit card, or some allow the use of checking account information to directly debit the amount out of the client’s bank account. Your records will be updated to show that payment has been received and processed. Your client will receive an automatically generated message informing them of the status of their payment.
How Can Clients A.R.M. Manage Your E-Invoicing Needs?
Clients ARM provides a free, no-obligation process review of your billing and payment system. We can help you determine your exact needs and help you determine if your current accounting software offers an e-invoicing solution. We also provide support to your clients for any billing questions they may have. If a client falls behind on a payment, Clients ARM can help your company by sending out friendly reminders. Since we also provide first and third party collections, we can help you with all of your accounts receivable, billing, and collections needs at a fraction of the cost of hiring a traditional employee.