1. Great for Record-Keeping
Invoices give you a clearly documented record of the entire transaction. When it comes time for tax season, this is an invaluable tool for your accounting department. More than that, it is a helpful document to produce if a dispute ever comes up between you and a customer about what work was done, what prices were charged, etc. Invoices are useful for record-keeping on all levels.
When you're doing a friend a favor, you don't need to document your transactions. Nor do you print out a receipt when your 13-year-old does babysitting for your neighbor. But once you start to deal with transactions on a business level, invoices quickly become relevant.
You could send your client a quick email letting them know how much they owe you. But a neat and clearly spelled out print up of services rendered is a much more professional way of handling the entire transaction. If you want to give over a more professional image, even if you are a smaller business being run out of your basement, a professionally-designed invoice is a good way to do this.
And what's more, if you do the same type of project frequently, an invoice can help you obtain a clear picture of how much that or similar types of projects will cost you. This way, you can give your clients a realistic estimate quickly, making your business look even more professional. This is also a good way for businesses to stay on budget.
3. Timely Payments
Giving someone your final project tally over the phone is a great way to never see your money. They forget, you forget. It’s simply inefficient. Sending someone an invoice, on the other hand, is a professional way to ensure that they actually pay you for the services rendered. If you have a payment schedule or pay by date on the invoice, it’s even more efficient.
If you are a busy entrepreneur, this is even more relevant. Often, after you’ve finished one job, you’ll quickly move on to the next one. And when you’re busy with another client, you hardly have time to think about the previous ones. An invoice is a clear, concrete, and dated document that states payment is due. So, you don’t have to keep tabs on it. What’s more, most invoicing software will send out automatic reminders to clients that haven’t paid an invoice in a timely fashion.
4. Tax Purposes
As we have already mentioned, invoices are good for keeping track of your incoming and outgoing expenses. When it comes time to start dealing with taxes, you’ll be very glad that you have this kind of record on hand for your accounting department. And if you do your taxes on your own, then you’ll be that much more relieved for this added layer of organization.
What’s more, professional invoice software has detailed expense tracking features. So, the software will do all of this heavy lifting for you directly in the app. And by the way, the IRS actually suggests that even small businesses maintain a record of all business transactions to help with tax filing, compliance, and ensuring that the right amounts are being paid.
5. Sales and Marketing
If done properly, invoices can help a business boost sales. By analyzing their invoices, businesses can see which customers to target, which products to restock, and which seasons were their busiest. You can cross-reference prices for materials or for overall projects to see where costs can be cut, as well.
6. Legal Purposes
Finally, invoices are extremely important to businesses for legal purposes. Doing someone a favor is nice when it's between friends and family. But business is business. And when it comes to rendering business services, you don't want to rely on a verbal agreement. Invoices ensure that you get credit for the work you've done (it's clearly documented within the invoice and on your software), and it also documents the payments that are due to you from the client.
This way, if there is ever a client that tries to dispute their debt to you, you can easily back up your claims without having to scramble for receipts or get ripped off because of a verbal contract.
Finding the Best Invoicing Software for Your Business
Now that you understand the importance of invoicing for your business, it’s time to choose a service. There are hundreds of options out there, so do your homework and test drive a few if you can. Here are a few of the best invoicing software options that are available for SMBs and medium-sized business in 2020.
- Automated invoices
- Invoice-to-payment feature
- Time and expense tracking built-in
- Few customization options
- Lite Plan only lets you bill up to five clients
FreshBooks is a popular choice for small businesses everywhere because it’s got a clean user interface, plenty of functionality, and is super easy to learn and use. To begin with, you can set up invoices that get sent out automatically, a great feature if you have recurring payments or similar jobs that require the same invoice constantly. FreshBooks also has helpful reminder emails, status updates, and payment tracking, so you know exactly what’s going on with your invoices.
FreshBooks lets you convert an estimate or proposal into a real invoice with the click of a button. So, clients can have their paperwork faster. And the software integrates with almost 100 apps, so you can link up your other business apps seamlessly. FreshBooks includes things like time tracking, expenses management, and projects, as well.
- Accept phone, debit, credit, and PayPal payments
- Over 25 currencies accepted
- Account reconciliation built-in
- No free trial
- Long contracts
Sage is accounting software with decades of experience under its belt. It's meant for small and medium-sized businesses and offers an easy desktop experience complete with payment processing included. You can also use the Sage software for 60 days, risk-free. If you don't like it, you can have your money back. With a few clicks, you can have an invoice created and sent out. Sage also lets you track the invoice and check up on payments made directly from the invoice itself.
In addition to fast and easy invoicing, Sage offers a slew of other features. You can manage your finances with a few clicks, optimize sales with insightful tools like serialized inventory and tracking, and keep your business fully compliant with this useful software.
- Real-time tracking
- Custom estimates (converted)
- Automatic payment reminders
- Percentage-based fees can get expensive
- No multi-currency option
Square is probably the most popular payment processing software. It’s smart, it’s small, and it’s oh so easy to use, which is why merchants love it. But Square is also a convenient tool to have if you want easy invoicing power. Invoices can be generated online and with the click of a button. Square has customization features to tweak your invoice design, as well.
Create and send custom estimates, track your invoices in real-time, and enjoy powerful reporting with Square. What's more, you can set up convenient automation like recurring payments for frequent projects or return customers. Square also has a great mobile app available for both Androids and iOS devices.