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 difficult.
Many companies turn to invoice management software to help handle the many details involved in making invoices and ensuring they’re paid on time. We discussed 9 popular billing tools for MSPs on our blog before.
However, 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.
How to manage invoices
There are numerous ways to go about creating 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 that is 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 that can be used for tax reporting purposes, you can follow the traditional template method as well. 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
Invoices can be sent to customers in a variety of ways, including by mail, in person, and by email. Emailing invoices is fairly common and can work well for many different kinds of 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.
Tracking your company's invoices usually means keeping tabs on who has paid for what. However, you should also consider the importance of tracking how much individual clients have paid at a given time, when they may be expected to pay again, and what portion of each payment is designated for tax, etc.
Leveraging the power of accounts receivable metrics as soon as you can helps companies handle unexpected financial emergencies such as tax audits, mergers, and bankruptcies smoothly. You could go the old-school route and stuff everything into a single spreadsheet, detailing exactly who owes you what and when you can expect it, but this can become complicated as your company grows. More advanced metrics that are automatically captured can give you much more useful insight into how your invoicing efforts are panning out.
Among the many metrics worth paying attention to are individual invoice payment terms such as payable on receipt conditions and specific payment periods. The number of these your company has issued in a given period and the "days sales outstanding" or "DSO" can help you tell if your issued invoices are getting paid on time as well as which kinds of invoices work best for your customers.
Improving the invoice management process
Scaling your invoice management process
As your business grows, so will the number of invoices you’re tasked with dispatching and keeping up with. 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. If all of your customers are expected to pay on the same day, then you could come up short halfway through the month for business expenses, etc.
- Terms and conditions: You should make sure 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.
Data entry is one of the main bottlenecks companies run into when they attempt to refine their invoicing processes. Cutting out this step as well as other mundane and repetitive work involved in invoicing can help your team get back to the actual business your company is known for. It can also help you to keep clerical errors and costly mistakes to a minimum.
This is where automation works best, but not all invoicing automation tools are made equal. At Goolash, we know how important an invoice management system can be to your company's success.
Give Goolash a go
Goolash gives your team access to an entirely automated billing service that is tailored to fit IT service providers and MSPs perfectly. Whether you need to connect reseller accounts with other third-party services or simply keep up with unbilled licenses that have slipped through the cracks, Goolash is the best choice you can make. Learn more about our services today!