What is Invoicing Software? Analysis of Features, Types, Benefits and Pricing

Invoicing software is often lumped with billing functionality as they have the same end result – to facilitate payment to you as product or service provider. An invoice is a list of the products and services you send to a customer or client which contain the costs they owe to your business. Basically, an invoice is a bill which may come in all forms and sizes – handwritten, produced on a word processor, or created by software. Whatever its form, it follows a certain template and is the primary tool businesses use to ask clients for payment.

Billing and invoicing software are thus integral features of an accounting and finance software package, although there are vendors that offer dedicated invoicing software solutions. However they are packaged, invoicing systems can range from the simplest and most basic to the more advanced systems with sophisticated features. Invoicing software offers many benefits to users but is primarily used to automate routine tasks, eliminate manual data entry, and ensure that accounting figures are accurate.

The right and correct accounting procedures and processes are of paramount importance and this is often where billing and invoicing software are utilized to reduce or eliminate errors and keep accounting figures precise. Hence, it goes without saying that businesses need to invest and adopt in a quality billing and invoice software system if they want to have a sound accounting and financial operations. Fortunately, the market is filled with software that can handle and automate just about everything related to invoicing – from bookkeeping and general ledger, to accounts receivable and accounts payable, and other tasks. Aside from these, invoicing software carry useful features such as invoice creation, reminders, financial calendars, hours tracking, reporting options, database and records management, and many others.

In this article, we will answer the question – what is invoicing software – and go through its features, advantages and benefits, the leading products currently available, pricing structures, and how the software works, among others. Our special focus is on online or cloud based platforms that offer powerful and convenient functionalities, though many also come with on-premise, machine installed versions. As always, our guide articles are here to provide you all the relevant and useful information you’ll need so that when the time comes to acquire the software for your business, you’ll be in the position to make an intelligent decision.

Here’s what you will learn from this article:

  1. What does invoicing software do?
  2. Benefits of invoicing software
  3. Features of invoicing software
  4. Why use invoicing software
  5. Invoicing software pricing
  6. Examples of invoicing software
  7. Invoicing software issues
  8. Invoicing software trends

Credits: ABBYY

The State of E-Invoicing

The total volume of e-invoices worldwide reached 30 billion in 2016, and the annual growth rate of e-invoicing is expected to be 10% to 20%. But, according to a 2016 US Federal Reserve Study, only 8.4% of bills and invoices were exchanged electronically on a global scale. In the US alone, the figure is only around 24%. The same study estimates that using e-invoicing can save businesses from $4 to $8 per invoice.

It was observed that utilizing e-invoicing tends to push the adoption of other efficient technologies and systems such as global payment networks. These in turn lead to the introduction of fully automated invoice and payment processing, also known as straight-through processing.

In a 2016 global survey by Ardent Partners, it was found out that best-in-class enterprises achieved straight-through processing for nearly 60 percent of invoices which resulted in 81% lower cost of invoice processing, and 77% faster processing time. Likewise, the survey revealed that improving invoice receiving and processing is the top priority for more than half of the respondents.

Credits: Pay Stream Advisors

What Does Invoicing Software Do?

It’s typical for small businesses not to have a dedicated finance department to handle accounts payable. Hence, the task of billing and invoicing is handled by you or a couple of other people. With invoicing software, you are able to automate, speed up and manage the process so that you get paid on time. Invoicing software let’s you do the following:

  1. Create and customize invoices. Today’s online invoicing platforms are relatively easy to use than desktop software, and are increasingly becoming the preferred choice for many. Not being tied down to an on-premise system allows you to easily access information from anywhere to create invoices and personalize them to carry your brand.
  2. Facilitate billing and payment. Online platforms do not require additional set up and can provide you the capability to conveniently process payment. With invoicing software you can create an online portal for customers to directly make payments and for you to immediately process them. It also allows you to accept foreign currency payments as billing and invoicing software has features to handle multiple currencies.
  3. Generate reports. You can produce a variety of reports with invoicing software which can assist you to track your finances and monitor which invoices are currently outstanding. You can automate reports generation, export them as PDF files, and share or receive them by email.
  4. Provide you customer support. Most invoicing software is easy to set up and use and can provide you with useful insights on your financial operations. On top of that is being able to get customer support offered by software vendors which could be in the form of email, live chat or phone support aside from providing knowledge centers, manuals, tutorials and resources to guide you on the use and potentials of the software.

How does invoicing software work exactly? Knowing what is invoicing software means understanding how it works. At its simplest, invoicing software is designed for automation and accuracy. If your business sends out invoices regularly, it would help a lot to have a system that can take care of repetitive tasks while making sure that everything is organized and accurate. There are many types of invoices depending on the industry or business they are used (retail, construction, services, etc.) and could be in any form (receipt, timesheet, credit memos, statements, recurring invoice, progress invoice). Regardless of how they appear, they have similar key elements and a singular purpose – to get payment.

Online invoicing applications are pretty straightforward and usually automate all the basic steps involved like the ones below:

  1. Build the invoice. You build an invoice from scratch and populate the line items with customer name, quantity, amount, discounts, sales tax and others. You may opt to use templates built into the software and simply fill in the fields. Most applications offer customizing options where you can modify invoice elements or include your logo and other corporate symbols.
  2. Send the invoice. Next step is sending it to the client being billed. You can create new clients or import client’s name from a database and simply click send. You have options to transform estimates approved by clients into invoices and send them also. Or you can notify them to get the invoice from an online portal. Sending recurring invoices to long-term clients can likewise be automated.
  3. Receive payment. Managing and processing payment is also an easy task as you have options to integrate with PayPal or other online payment platform, or process credit card payments. Invoicing software usually has features to handle multiple language, multiple currency, and tax adjustments. There is also functionality to track offline payments.
  4. Get reports. You can have reports generated and data analyzed to get relevant insights from your billing and invoicing operations such as number of outstanding invoices, average time for a payment cycle, how many clients pay on time, and how many of them pay late. You can quickly get important information through the software that also manages all your records, transactions and database.

FreshBooks offers great invoicing and time tracking features

What Are the Benefits of Invoicing Software?

Aside from efficiently managing all invoice-related tasks, the best invoicing software should be able to extend the following benefits:

  1. Minimize late payments – The right software solution can help streamline your billing and invoicing process and allow you to get and receive payments on time. By keeping your data and scheduling organized, you can have your collection on the dot and boost your profitability.
  2. Minimize missed payments – By accurately monitoring and tracking your billing commitments, you ensure that you do not miss collecting any payments which will redound to a positive bottom line.
  3. Maintain a professional image – A good billing and invoicing solution can help boost your company reputation. Most software offer support for customized logos and other design improvements to payment documents and invoices. You can put forward an organized and prompt approach to exude a professional image with your clients.

What Are the Advantages of Invoicing Software? Invoicing software helps to streamline your accounting and financial processes by automating important tasks. By doing so, you get to:

  • Cut costs by reducing staff in the invoicing and billing department.
  • Save time that is spent on following up and going after late payers.
  • Increase cash flow with faster payment of invoices.
  • Minimize fraud and improve security.
  • Enhance customer relations with shorter times in fixing and resolving errors.
  • Productively manage teams and projects.
  • Generally get things organized.

Xero is a great solution for small and medium companies

What Are the Features of Invoicing Software?

The best billing software usually carry the following features:

  1. New invoice creation. Allows the creation of clean and professional invoices that can be customized to match your brand. The system should allow for extracting and integrating information from projects, timesheets, and customer records.
  2. Customer records creation. A feature that enables you to summarize customers’ personal and purchase information and attach relevant files in a single, centralized database equipped with search filters for easy access to customer records.
  3. Credit card processing. The invoicing suite should enable you to save time and facilitate billing by processing credit cards promptly and allow recurring billing and secure customer management. Some systems even enable auto-billing of credit cards so clients won’t miss a due payment.
  4. Predefined templates. How your bills and invoices look is equally important as their accuracy, which is why a system should provide for professional and predefined communication templates. This will not only save you time but also let you personalize your accounting and allow you to carry your brand.
  5. Multiple currency setting. This feature enables you to connect your billing and invoicing system seamlessly with the rest of your software architecture, similar to your basic financial operations. Multiple currency setting can be useful for issuing receipts, accepting payment and managing taxes, and it is of vital importance for businesses with global operations.
  6. Receive/send information. The function allows you to send quotes to your customers quickly since there is a centralized database where all their information is stored and readily made available.
  7. Invoice, payment, and tax report. A good online invoicing system should eliminate the need for you to use external systems for tax reporting and allow you to perform it within the same system, without losing hours to summarize information.

Why Use Invoicing Software?

All the aforementioned features, benefits and advantages should be enough reasons for you to adopt invoicing software solutions. But just to drive home the point of what is invoicing software, we go over what it can do for your business with these additional reasons that favor its use.

  1. Online invoice builder. This is a far cry from what you’re used to creating invoice from a word processor. A proper invoice document must have an invoice number with a different number on each invoice you send; details of product or service provided; date invoice was sent and date when the product was delivered or service rendered; name and contact information of seller or service provider; name and contact info of buyer; costs breakdown; total amount due; payment details; and payment due date. Imagine inputting all that information manually compared to a system that does everything for you except for the variable elements.
  2. Create invoices anywhere. In relation to the above, companies can create invoices from any location with internet connectivity since online platforms are powered by cloud technology and are web-based. Likewise, with some providers offering mobile apps, you get to create invoices even on the go, something you cannot do with on-premise software.
  3. Integration. Online invoicing platforms can integrate with your full accounting system for all your financial requirements and can be linked to your payroll, inventory, banking and reporting modules using one basic source. Some invoicing solutions can even connect directly to ecommerce platforms and shopping carts as well as to external client databases and time sheets.

How Much Does Invoicing Software Cost?

Invoicing software can be acquired either as a standalone application or as part of a full-packaged accounting and finance software. There is a misconception here as regards to the former. Invoicing software cannot really stand alone on its own, since to be able to exactly perform its function it must one way or the other use some accounting processes. Hence, most invoicing tools are bundled along with other features in a complete accounting software solution.

Prices can vary widely – from free apps for small businesses with a couple of dozen customers or fewer, to apps with double figure pricing per month depending on number of users and business customers. Most are offered through flexible pricing plans with Basic and Starter to Pro and Enterprise offerings. Whatever you requirements, there should be a pricing plan to match your business. It is best that you go over the price offerings of vendors and compare and study them carefully. Cost is always a major factor in any software acquisition and a free one may not really have the features you need while a more expensive all-in-one accounting package may fall short of your expectations.

What Are Examples of Invoicing Software?

  1. FreshBooks – An award-winning finance and accounting software and one of the best cloud solutions for small business owners. It is recipient of FinancesOnline’s Best Accounting Software Award for 2016 as well as the Supreme Software Award for 2016, and has the highest customer satisfaction rates of all similar apps in this category. Included in its full array of accounting and finance tools is invoice management and online payment collection within the same system. It works with Google Checkout, PayPal, and credit card payments, and integrates with a long list of business systems and applications that can streamline billing, invoicing and payment processes, allowing for financial control in a single system.
  2. Xero – One of the market’s favorite financial collaboration apps listed high on our list of leaders in the accounting category. It won our Expert’s Choice Award for 2017. This system is designed to meet the requirements of small businesses regardless of their industry, and is often qualified by accountants as the ‘handiest asset for managing financial activities’. It is a friendly and usable platform that can create and send invoices automatically and even categorize invoices as drafted, awaiting approval, awaiting payment, or delayed.
  3. Tipalti – A highly regarded payment automation and management software that won our 2016 Supreme Software Award as well as the 2016 Experts’ Choice Award. It is a cloud-based platform with powerful and secure payment features that automate the entire mass global payment processing operation, from onboarding to tax compliance. The app can tackle problems such as late payments, administrative overload, noncompliance, and can streamline the way you make payments to customers, partners, vendors, and affiliates across an impressive base of 190 countries.
  4. Zoho Invoice – A robust finance and accounting system that won our Expert’s Choice and Great User Experience Awards for 2017. It is ideal for small to medium businesses and sole proprietors looking to create and manage personalized invoices. Among other prominent users, Zoho Invoices is applied by creative designers, writers, and photographers looking to launch their online startup and to commercialize their freelance activities. It is designed to manage and monitor invoices, and share them with customers all from the same platform. You can use it to follow any transaction, and customize invoices using a large array of premade templates and imported elements specific for your business.
  5. Quickbooks – A very popular accounting software solution that won our Best Accounting Software Award for 2016. It offers a vast array of insights and organizational capabilities that can help companies keep accounting data organized, including their overdue items, payable bills, accounting notes, contacts’ data, and standard accounting operations. Payment is completely transformed for users with a Pay Now link to connect their invoice to credit cards or bank transfer accounts.
  6. Wave – A free and well-integrated business platform that combines accounting, invoicing, and receipt scanning into one compact package ideal for small businesses and self-employed professionals such as entrepreneurs, freelancers, and consultants. With Wave, accounting and invoicing processes are simplified, enabling users to get rid of distractions that come with monitoring expenses, chasing payments, and managing employees and taxes. The system helps users quickly create and send out professional looking invoicing, estimates, and receipts.

What Are Potential Issues With Invoicing Software?

No single global standard. Invoicing software operates on a diverse and complex e-invoicing environment which at the moment doesn’t have generally accepted standards. While there is a variety of standards used in different geographies, the global landscape is further messed up by different local variations in taxation as well as e-invoicing compliance requirements. Some vendors and solution providers though that operate globally are able to navigate invoicing complexities. But that’s more of an exception than the rule.

Fail-safe system. No online system is built to be an impenetrable fortress despite having all the necessary security protocols and safety mechanisms. If anything is online, it can be breached by the most determined hacker. You may have to talk it over with the online vendor to ensure the integrity of your online database and information, or get the services of third-party security providers to double check and go through existing safety measures.

Government-led adoption. With the realization of more savings and efficient processes, countries in regional areas such as Scandinavia and South America, and specific nations like Brazil and Mexico are spearheading e-invoicing adoption. Catching up are North American and European nations and countries like Canada, Australia, New Zealand, South Africa and the rest of South America. The governments in these countries are pushing for the compliance with e-invoicing requirements. The US Office of Management and Budget has declared that all government agencies should move to e-invoicing by end of 2018, while the European Union has mandated that Public Administrators have to accept e-invoices by November 2018.

Driver of real-time economy. Since invoicing software allows for faster and more accurate data between purchaser and supplier, businesses and governments are being driven towards a “real-time economy.” This will allow the purchaser to quickly validate data, and the supplier to immediately respond using invoices that can be modified and sent again in a span of 24 hours. This system will drastically reduce late payments and penalties.

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