Invoice management is a critical facet of every growing MSP. Without proper invoice management, it can be tough to tell how well your company is performing and what amount of your revenue can be considered net profit. However, perfecting your invoice management strategy can prove challenging.

Many companies turn to invoice management software to help handle many details involved in making invoices and ensuring they’re paid on time.

If you want to get the most out of these, you’ll need to know how the process works without them. Then you can optimize your entire billing process with a carefully implemented system going forward.

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3 Critical Steps to Manage Invoices

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1. Creating Invoices

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There are numerous ways to create an invoice from scratch, but the traditional approach - starting with a template and filling it in - still works well. Important details that are normally in a professional invoice include:

• The name of your company as well as that of your client
• The total amount of money expected to be paid, broken down into deliverables, completed payments, etc.
• Payment terms that both parties have agreed to abide by
• Tax information, including value-added tax, etc.
• The current date as well as those of all payments made or expected

To create an invoice for tax reporting purposes, you can also follow the traditional template method. However, it’s important to note that a tax invoice requires specific details to be valid, including the following:

• A unique invoice number
• The date of issue
• The name, address, and contact details of your business
• Your tax identification number
• Prices per item or unit sold
• All payment details
• The term "tax invoice" included

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2. Sending Invoices

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Invoices can be sent to customers in various ways, including by mail, in person, and by email. Emailing invoices is common and can work well for many different companies regardless of their customers' locations. If you decide to deliver your invoices via email, it may help to include them as attachments rather than paste them into the body of your message. You can also put the invoice number and your company name in the subject line to make it easier for your customer to keep track of them.

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3. Tracking Invoices

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Tracking your company's invoices usually means keeping tabs on who has paid for what. It also includes

• How much each client has paid at a given time
• When they are expected to pay again
• What portion of each payment is designated for tax, etc.

Leveraging the power of accounts receivable metrics earlier can help companies smoothly handle unexpected financial emergencies such as tax audits, mergers, and bankruptcies. You could go the old-school route and stuff everything into a single spreadsheet with details of who owes you what and when you expect the payment, but this becomes complicated as your company grows. More advanced metrics that are automatically captured can give you much more helpful insight into how your invoicing efforts are panning out.

Among the many metrics worth paying attention to are the individual invoice payment terms such as payable on receipt conditions and specific payment periods. The number of invoices your company has issued in a given period and the "days sales outstanding" or "DSO" can help you track if your issued invoices are getting paid on time, as well as which kinds of invoices work best for your customers.

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Improving the Invoice Management Process

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Scaling your Invoice Management Process

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As your business grows, so will the number of invoices you’re tasked with dispatching and keeping track of it. There are many factors you’ll need to account for to ensure your invoicing process continues to work out:

• Timing: Pay attention to the days of each payment period on which you have customers set to pay you, as these will collectively form the basis of your future cash flow. Note, if all of your customers are expected to pay on the same day, you could come up short halfway through the month for business expenses, etc.
• Terms and conditions: You should ensure that all of your invoicing terms are spelled out for customers at the start of your professional relationship with them. This means explaining how charges accrue and are billed in your user agreement or initial service contract.

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Leveraging automation for invoice processing

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Data entry is one of the main bottlenecks most companies run into when refining their invoicing processes. Cutting out this step and other mundane and repetitive work involved in invoicing can help your team get back to your company's actual business. It can also help you keep clerical errors and costly mistakes to a minimum.

This is where automation works best, but not all invoicing automation tools are made equal. It’s essential to understand how a proper invoice management system can affect your company's success.

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Optimizing Your Billing Process

Don't miss out on the opportunity to streamline your billing processes and protect your revenue with Zomentum! Sign up for our free demo today to see how our platform can help your IT service provider or MSP business. Our team will guide you through the features and benefits of our automated billing service, and answer any questions you may have. Experience firsthand how Zomentum can optimize your billing operations and take your business to the next level.