Invoicing is an integral part of B2B transactions. It is so essential its absence in business dealings would cause commercial chaos meaning that both invoicing and transactions are necessary to one another. In the business environment today paper invoice and the e-invoice co-exist. Paper invoicing has been around for a while, it is older and much slower than e-invoicing and there’s a real possibility that the former will be completely overshadowed by the latter in a decade if not sooner. For this reason this post will focus on e-invoicing.
So what is E-invoicing?
Similar to standard paper invoicing, e-invoicing is essentially a request for payment for the supply of goods or services to a customer or client. Unlike paper invoicing, it is compiled and sent to a customer or customers almost immediately via the computer. It is a time saving despatch method and therefore fast and efficient. The client doesn’t have to wait for a month or more to receive and invoice and the seller also doesn’t need to wait a month or more before getting paid for goods supplied or work done.
Any Hiccups to E-invoicing?
Proponents for the betterment of business transactions are clamouring for a total change saying that e-invoicing is the way to go and have campaigned for total assimilation of e-invoicing to the existing Account Payable (AP) and Accounts Receivable (AR) processes. Their main argument revolves around the fact that at present, the invoicing format is either presented in paper form or by email. This they argue, with sound reasoning, creates a lot of inefficiency from the AP and AR perspectives simply because these two automated processes cannot handle either paper or email invoices. They argue it is about time all suppliers and buyers upgraded their systems so as to accommodate e-invoicing.
Would SMBs Benefit from E-invoicing?
Amongst other benefits factoring e-invoicing by small businesses into their system will definitely usher in a period of uniformity, speed and efficiency that other invoicing practices like paper and email invoicing dimply don’t have. With e-invoicing, everything will be faster, costs reduced, productivity increased and with these, enhanced cash flow and debt management. For B2B, e-invoicing will boost all levels of transacting activities by making them continuous, easy to process and achieve better results. Among other benefits, e-invoicing has 3 main advantages for the small business:
- Getting Paid Becomes Faster
The practise in the past mainly for small businesses was to wait a month to send an invoice for the payment. This was the accepted practice simply because the client needed that much time to process an invoice. So in fact, the invoice is sent 2 weeks after the end of the month and the payment was also received 2 weeks later. This is drastically different from sending an e-invoice immediately after the job has been completed and receiving the payment almost instantaneously.
- More Cash Collected
Your work is a good as you see and remember it, so when you send an e-invoice immediately you will be billing for the actual value of you work rather than the little bits and pieces you remember of your work because you could not send an invoice as soon as you finished your work. You tend to undervalue your own work, bill for less and therefore receive less. With e-invoicing you get real value for your work.
- Enhance Client Relations
When you have done an excellent job according to the set time line and the client receives an e-invoice almost immediately, the job becomes a catalyst in the payment process that entices the client to make the payment there and then. This would not have been the case if you send the invoice a few weeks or a month later because the great work you did is lost. Invoicing early will definitely make clients more willing and happy to pay you.