If you have been growing your business steadily, you might be starting to realize that you need a better system for keeping track of invoices.
According to a 2018 survey, 25% of US-based small businesses still keep track of invoices and finances on paper. Not only does this leave you vulnerable to mistakes at tax time, it could be costing you valuable time and money!
Invoice tracking is not as complicated as it sounds, and with the right tips, tricks and software, you’ll be on top of invoice payments in no time.
Keeping Track of Invoices: What Does That Mean Exactly?
When we say keeping track of invoices (AKA invoice management), we are referring to the system you use to stay on top of incoming and outgoing invoices.
Incoming invoices are usually business expenses like suppliers, contractors and software subscriptions. Outgoing invoices are the billable hours and products you charge clients for.
Having a process for tracking all of your invoices means that you and your team are able to:
- Know who the invoice goes to so that it gets paid on time
- Know how to get expenses approved
- Find archived invoices easily and know where to file them once they are approved
- Keep track of payments coming in (from who, for how much)
This can be done manually through spreadsheets and emailing PDFs back and forward between clients and suppliers. However, the easiest way to keep track of invoices is to use a software that processes them from start to finish.
The Importance of Tracking Invoices for a Business
Research has shown that 80% of companies are overwhelmed by the invoicing process. Energy that could be spent improving customer service and developing products is instead funneled into admin work.
When you fail to systemise your invoice tracking, you can find that you have:
- Late fees to suppliers because you don’t know when expenses are due
- Loss of income when you don’t know which customers to follow up
- Lack of professionalism when it comes time to bill clients
- No data for tracking budgets and hourly retainers
Even if you are a small to medium business, keeping track of invoices is critical for smooth business growth.
Reasons to Prioritize Better Invoice Tracking
Invoice tracking doesn’t just make tax season easier; It also lays a systematic foundation for your accounts that allow your business to continue expanding. Here are just a few reasons why keeping track of invoices is important (even if you aren’t a “big” company yet).
- Helps Save Time
Your accounts department can lose hours of productive work without an invoice tracking system. In fact, a study by Stampli showed that 72% of workplaces experienced slow invoice payment on a regular basis. Inefficient invoice management means missed deadlines, projects falling behind, and a lot of miscommunication between departments. Using an invoice tracking system saves time that you could spend with creative business growth activities.
- Helps Save Money
If you are spending too much time on invoice management, then you are also spending too much money on it by default. Between inefficient staff time, manual data entry, tracking down purchase order numbers and missing payment deadlines- the wasted money adds up quickly.
You could also be losing money on outgoing invoices for hours worked as well. No system for automatically following up late client payments? You lose revenue. No easy process for them to pay directly through the invoice by card? You lose revenue. An invoice tracking software solution can fix most of these problems as soon as it is set up.
- Avoid the Pressure of Overburdening Your Team
Accounting teams (or maybe you just have one person for it!) face the pressure of handling expenses every day. Keeping track of incoming and outgoing payments automatically means that they can do their other important tasks well.
Having an invoice tracking process in place also means that if your accounts payable employee leaves, the next person can easily pick up where they left off.
Tips to Track Invoices
Invoices don’t have to cause headaches. With a few systems in place, these tips for tracking invoices will make accounting almost enjoyable!
- Automate Your Invoices
Although you still need someone to set it up, a lot of your invoicing can be automated to save time. It’s how to make sure invoices get paid.
Some steps that you can automate include:
- Populating client data
- Tallying up each line
- Automatically adding tax
- Sending out reminders when a customer is overdue
- Collecting accounts payable in one place
- Letting clients pay by card directly through the invoice
- Use an Invoicing/Billing Software Solution
Using billing software is the easiest way to automate your invoices and make sure you get paid. For example, MinuteDock tracks your billable hours and creates professional invoices when it is time to send them out to clients. It then reminds clients of overdue payments, and keeps everything in one place so that you can easily go back if needed.
- Delegate or Outsource Your Invoicing Process
Even if you are a small business (even if it’s just you), outsourcing your accounting is one of the best investments you can make for your sanity. To get the most out of outsourcing, make sure you have a system for tracking invoices first!
- Use Your Aging Reports
An aging report is a list of outstanding client invoices and how long they have been left unpaid. If you use an invoice tracking software, an aging report can quickly show you which customers are slow to pay so you can keep on top of them.
Questions to Ask Yourself While Choosing the Best Accounting Software
So you know you should use some sort of accounting software to keep track of invoices. But how do you choose the right one for you? Below are some features to look for in your invoice tracking software.
- Is it Cloud-based?
You should be able to keep track of payments and invoices no matter where you login. A cloud-based accounting software means that you can quickly check incoming and outgoing payments, make approvals and chase invoices even if you’re not in the office. It also means that everything is backed up and saved securely for tax time.
- Is it Multi-user Accessible?
If you are looking to outsource your invoice tracking, multi-user logins are especially important. This means that you can let go of admin tasks and let someone else take care of payments.
- What Features Does it Offer?
When looking at invoice tracking software, start with what your business model needs. Do you work by the hour? Do you have multiple employees or contractors? Do you need to keep track of supplier invoices as well as client invoices?
Some features to look for could be:
- Automatic client payment follow up
- Integration with your existing accounting software
- Tracking hours to make invoicing easy
- One-click reporting
- Access for multiple employees
- Does the Pricing Structure Suit Your Business Needs?
Most accounting software has either a tier-based pricing model or they take a portion of each client payment.
To choose the right pricing structure, you should consider
- How many people need access,
- Do you have enough clients to cover a monthly price point
- Is it more cost effective to pay monthly or to only pay when you are using the service (e.g. the software takes a percentage if you send an invoice, but if you aren’t bringing in money then they won’t charge you).
- How Secure is it?
If you are dealing with client or supplier information, it is critical to have a secure invoicing software. Your chosen platform should clearly state how they protect you and your clients from financial hackers.
- Is it Cost-effective?
For the amount of time and money you save tracking invoices, this kind of software is generally worth the expense. To figure out if it is cost effective for you personally, you should look at all the features included at each price point and if it aligns with your day-to-day business structure. For example, a software that tracks billable hours would be perfect for a freelancer, but wouldn’t suit a business selling physical products.
Take Home Message
Invoice tracking is the best way to make sure you and your team get paid without the overwhelm of chasing clients. MinuteDock is a cloud-based software that lets you easily track and bill hours, follow up on payments, and keep everything in one place. Ready to save time and money on your invoice tracking? Start your free MinuteDock trial today!