As an entrepreneur, record keeping is a primary and essential part of your business. It is important to keep records of payments received for the products you make available for sale (either physical or digital) and the services you render. However, record-keeping is not limited to documenting payments alone.
Sales metrics, particularly the money cost of goods sold and volume of the goods in stock, amongst other things are also meant to be documented. This post, therefore, seeks to give insight into the art of invoicing as well as the relationship it has with receiving payments. So, let’s get started. Shall we?
The art of invoicing
Invoicing, a term gotten from the base word – invoice, is the human action of keeping a list of merch or products (as goods or services) and the prices that they are sold at to be issued to the buyer. It is also best described as updating the invoice, a primary source document used by businesses to request payment for goods. As said, an invoice is a primary document.
This means that it requires little or no technical knowledge before it can be prepared for issuance. On this premise, sales representatives and marketers for small-to-medium scale enterprises may not experience any heck filling up an invoice for their customers. More interestingly, sole proprietors who single-handedly take on all business activities also need no complex or technical training to master the art of invoicing. Before we delve into the art of invoicing proper, it is important that we identify the contents of an invoice.
Some of these items are as follows:
- Name of the business.
- Name of the buyer.
- Goods auctioned and their descriptions – size, quantity, and weight (expressed in g or kg).
- Prices of goods.
- Discounts allowed on goods.
- Amount payable after discount.
- Seller’s signature (this may not be included in digital or email invoices)
P.S.: You may customize your invoice as you deem fit but these basic information should be contained therein.
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The relationship between payment and invoicing
Primarily, there is a coordinate relationship between payment and invoicing. This is because the invoice is used to request payments. This means that the former precedes the latter. The document is sent out before cash is received because it contains information like the units of the products purchased, their prices, and other vitals as highlighted above.
Meanwhile, as there are different modes of payment, there are also variations in the art of invoicing. Basically, the popular modes of payment include cash payment, bank payment options (transfers, mobile banking, debit card, cheques, etc.), payment by tokens or vouchers, and the most recent alternative digital currency payment option. On the other hand, the available options for invoicing are:
1. Paper invoicing.
This is the basic system of invoicing. It is done by a manual filling of a paper-type invoice. As the issuer, either as the proprietor, a cashier, or a business representative, you get to fill the document with the information of the buyer with a ball pen. It is that simple.
This system of invoicing is cheaper as all you need to do is to get a customized invoice pack from the press, featuring your business name and other necessary information about it. It is the best option for SMEs and similar businesses that run on low working capital. One advantage of paper invoicing is that it is always within your reach and you can get to issue it at any time of the day.
Other advantages include less technicality and ease of identification during sales log. On the flip side, the disadvantage of a paper invoice is that there is the possibility of errors in calculation. Other possible disadvantages include its contribution to less-compact office space and the extra cost of sanitation.
2. Digital invoicing.
As the world is steadily growing into a digital economy, there have been several attempts to create platforms where free invoice templates can be gotten online. However, several others come with paid subscriptions. The ideal digital invoice is accessible on-site and can be printed via a portable printer.
An advantage of digital invoicing is the accuracy of sums and payment details. For businesses that have an E-commerce store, your products can be enlisted on the online software such that you do not have to worry about the pricing and accuracy of sums since it’s automated.
Other advantages include portability and uniqueness. The disadvantage of digital invoicing is the cost of funding the network connectivity. Other disadvantages include technicality and the cost of printing papers and electric bills.
3. E-mail invoicing
This is a form of digital invoicing. It is unique and widely used because of its super-fast automation. As the name implies, it is a form of invoicing delivered by mail. There are platforms, free and paid alike, that offer e-mail invoicing services.
This is a better option for medium and large-scale enterprises as most of their business practices, from sales records to stock records amongst other things, are usually digitized. The advantage of e-mail invoicing is cost management. This is possible since the entrepreneur does not necessarily have to worry about running printed copies of the invoices.
On the contrary, the disadvantage of leveraging e-mail invoicing is that some clients may experience some heck accessing their mails at every step of the way.
Why you should not practice bad invoicing as a business owner?
Bad invoicing translates to bad business. Consequently, there are some reasons why you should not practice bad invoicing as an entrepreneur. They include but are not limited to the following:
- Invoicing helps you to track payments.
- Invoicing helps you to measure sales volume.
- Sequentially, invoicing is relevant for balancing accounts.
- Invoicing eases the affair of stock-taking.
- Lastly, the valuation of invoices over a selected period can also aid the measurement of business growth and success.
