A Detailed Guide to Online Invoice Payment Processing
Invoicing is one of the most critical moving parts of any venture’s cash flow system. Businesses depend on invoice processing to track transactions and demand client payments. However, most enterprises still operate outdated manual invoicing procedures that derail payments and often result in missed transactions.
The best invoice processing systems are fully automated, offering faster payment tracking, revenue recovery, and streamlined transaction recording.
This guide covers all that you need to know about invoice payment processing.
What is Invoice Payment Processing?
Invoice processing is the set of procedures involved in handling a payment invoice, from receipt to settlement of funds. The invoice, in this case, features itemized goods and their accompanying costs. Additional charges, such as shipping fees, taxes, and stamp duty are also included, where applicable, to determine the invoice’s full value.
The various phases that define invoice payment processing are handled by a designated accounting department. They include invoice receipt, verification, invoice approval, and invoice settlement. With online invoicing, all the phases are automated. From sending the invoice to receiving online payments, everything is handled at the touch of a button.
In most cases, for invoice processing to be completed, the invoices must be featured in a standardized format. Such formats may include e-invoice, PDF, or EDI.
The Benefits of Invoice Payment Processing
Regardless of your business size, invoicing is essential to maintaining a seamless cash flow trajectory. Here are the key benefits that come with invoicing.
This is the primary advantage of invoicing. The process enhances timely payments, allowing your business to cover its prevailing expenses and costs on time. In some cases, automated invoicing gets you paid in a matter of minutes.
Invoices are a crucial element of your accounting records. They are necessary for the preparation, verification, and validation of your financial statements. Additionally, businesses can rely on invoice records as evidence for outstanding bills and possible financial disputes with clients.
Having systemized invoicing records goes a long way in easing the process of filing taxes. Documentation of all online payments settled in your business accounts makes it easy to verify how much you owe the taxman.
Enhanced Brand Clarity
An invoice is a highlight of what you are billing a client for. It clarifies the value attached to your brand and products, especially in scenarios where customers are limited to product knowledge.
How Invoicing Works?
Here is a step-by-step guide to how invoicing works.
Step 1: Invoicing Software
Invoicing runs on a system with capabilities to receive, send, and modify invoices. The system is also integrated with a payment gateway for processing payments Today, accounts payable automation software are becoming popular in facilitating invoice processing. You will need to liaise with payment gateway providers to determine the standard features necessary for a holistic invoicing experience.
Step 2: Invoice Requirements
Once you have invoicing software and payment gateway in place, you want to ensure your business remains compliant with the country’s invoicing requirements. For instance, you may be legally required to adhere to specified invoice prefixes or numerical sequencing for all your invoices.
Step 3: Invoice Draft
An invoice draft should have basic information about a client, such as a name, address, payment terms, date, purchase order details, and product credentials.
Step 4: General Ledger Code
With a draft in the system, assign a general ledger code to your invoice for the capture and extraction of payment details.
Step 5: Invoice Authorization
Submit the invoice to the authorized approvers to validate the draft.
Step 6: Payment Processing
Send your invoices and wait for the payment. Integrate your payment gateway with multiple payment methods to accept wide-ranging payment formats.
How to Pick the Right Invoice Payment Processor
For cost-effective and efficient e-invoicing solutions, you will need to procure services from the best invoice payment processor.
Here is how to choose your processor.
Consider the Features Required
Every processor brings you a package of varying features. Understanding the capabilities you are interested in makes it easy for you to narrow down to specific providers.
If you have scaling plans, then your processor should offer equal upscaling potential.
Cost and Budget
Procuring invoicing software is informed by your budget. Go for the processor with the best price tag for equally high-quality services.
If you are looking for a processor best suited to a specialized sector, you might want to analyze the industry-specific features on offer. There is an invoice processor for your specified business needs. For instance, if you are in the food industry, you may require a billing solution that processes online payments for extended services, such as room service.
Flexibility and Customisation
A flexible and customizable payment processor makes it easy for you to tailor-make solutions based on your business needs.
Invoicing is the backbone of your cash flow framework, wrapping up the crucial procurement cycle. You can streamline your payment processes and cut down on costs by adopting automated invoices. With minimal effort and less time, you can bill your clients and receive your payments at a click of a button.