E-Invoicing

Many organizations had trouble securing payments on time, and organizations that didn’t have the support of strong and integrated digital software encountered challenges with tracking payments and adjusting their processes in real-time. As organizations continue to recover from these obstacles, they must prepare for the future by implementing procedures that make doing business more accessible and efficient. One way companies can create a more resilient process is through using e-invoicing.

What is e-invoicing?

To understand the nuances of digital transactions, it is important to understand the fundamental processes. One part of the transaction process is the use of invoicing. An invoice is a document sent to buyers for the cost of purchasing a product or service. This document helps to track accounts and establishes an obligation of the buyer to pay the balance. While an invoice might seem like a bill, the difference lies in the information they contain.

While bills are usually generic and don’t include much information on the transaction or the customer, invoices are much more specific. Since invoices are legal documents used for tax and accounting purposes, they provide detailed information on both involved parties.

Typical information included in invoices are:

  • Buyer and seller names and addresses
  • Date of transaction
  • An itemized description of the products or services purchased
  • Cost of products or services
  • Terms and conditions of payment and the payment due date

When buyers enter into a contract with sellers, they agree upon certain terms and conditions for payment. These invoice payment terms, more commonly known as payment terms, specify the payment deadline in relation to the delivery date of the goods or services. These terms also establish the repercussions of failing to pay within the specified period.

With enhanced technology and businesses modernizing their processes, many companies have been embracing electronic invoicing. Electronic invoicing (e-invoicing) moves the traditional use of invoices from paper to a digital format. As the world becomes more connected, using e-invoicing helps companies to stay on top of their cash flow and collaborate with their buyers regardless of location.

What is the invoice process?

The processing of invoicing begins when a customer states their intent to purchase your goods or services. During the purchasing process, buyers and sellers agree to terms and conditions regarding the cost, deliverance, and payment of the products. Once the decision to purchase has been made, a purchasing order is created. The purchasing order is essential to the process, as it clearly states the expectations of both involved parties. When the terms of purchase are agreed upon, the purchasing order becomes a legally binding contract.

At this stage, the vendor must adhere to the agreed-upon terms of what is purchased, the delivery steps, and the cost of goods. Purchasing orders assist with providing clarity to the transaction and eliminate the possibility of any miscommunications or disputes. Once the vendor has delivered the goods or services, the transaction moves into the invoicing stage.

Invoices are necessary for more than just ensuring you get paid on time. With the consistent changes and rapid speed of business in today’s world, making sure you keep records of transactions will help streamline your business operations. Organizations can refer to previous invoices to find areas that need attention within their supply chain and identify what aspects of their current processes are still functioning well. When it comes to filing taxes, organizations need a strong record of invoices and payments to ensure compliance.

The length of time before payment is due on invoices may vary based on the size of the purchase and the agreed-upon deadline. Usually, invoices are created using Net 30, which means that the buyer is obligated to pay for the order within 30 days of receiving the invoice. There are a variety of timelines for invoice deadlines, with the most commonly used deadlines being 10, 30, 60, or 90 days. While Net 30 is the standard practice, remember that this timeline may not work for all situations or all clients. As you and the buyer negotiate the terms of the agreement, ensure both parties are satisfied with the decided upon deadline.

What are the challenges of traditional invoicing?

In the past year, supply chains have faced disruptions like never before. Cash flow slowed, customers struggled to pay invoices, and businesses struggled to adjust to an increase in remote operations. With more disruption expected in the future, it is imperative that businesses analyze the weak points of their processes and find methods to better adapt in the future; one process that deserves to go — traditional paper invoicing. Traditional invoicing involves a lot of paperwork that can easily get lost in the mix or clutter up the office. When organizations rely on traditional paper methods, they open the door to a range of challenges:

Time-consuming process.

Paper invoices are time-intensive. Research has found that the cycle time for the processing of paper invoices can take up to 22 days. Businesses using paper invoices will discover that a large amount of time is spent handling and entering data. Depending on the organization’s size, there can be thousands of invoices being sent around at any given time. This workload can quickly stack up with every invoice needing to be validated and cross-referenced with purchase orders.

Tracking invoices is difficult.

Let’s face it; paper is easy to lose. Rather than spending their time monitoring invoices and tracking down payments, your accounts payable team will spend their time and effort searching for misplaced invoices. When customers call to inquire about the status of their invoice, it can be challenging for accounts payable staff to track down the specific invoice. Without digital assistance, your AP department will find it difficult to reassure executives and customers on the status of payments.

As organizations highlight the weak spots in their invoicing process, the need for adopting technology into your supply chain becomes apparent. E-invoicing provides the support and tools necessary to transform the efficiency of your system.

Error-prone.

The chance of error is significantly increased when using paper invoices. Since paper invoices need to be shipped or mailed, there is the possibility of invoices being lost or delivered to the wrong location. In addition to the challenges mail poses, there is the possibility for human error when entering and filing previous invoices. Without a consolidated system, confusion can occur through your communication lines. Organizations who use paper invoice systems have seen mistakes such as:

  • The buyer paying the invoice without having been delivered the product
  • Customers paying the same invoice twice
  • Invoices being tied to the wrong purchase order
  • Customers being charged the incorrect amount

E Invoicing solutions are your strategic partner

E-invoicing alleviates the stress of traditional invoicing and automates much of the tedious work associated with securing payments from buyers. When organizations consider moving to an e-invoicing system, they need to ensure that their digital tools can support their staff and processes. E-invoicing assists in the process by:

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What are the advantages of e-invoicing?

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Saving time.

Using technology to record and track invoices saves your AP department a great deal of time. Without having to manually enter data and file invoices by hand, a digital platform and the use of e-invoicing make storing previous payment records easier and allows for historical data that is accessible at any point in time.

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Reducing error.

Since invoices can be sent instantly and directly to the customer when using e-invoices, the possibility of misplacing or losing invoices is greatly reduced. The built-in digital paper trail makes tracking each invoice’s progress efficient and allows for stronger communication between all involved parties. Additionally, the automated system handles the collection and analysis of the data, leading to a much more reliable process.

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The ease of use.

A robust e-invoicing system collaborates with the other tools and technology your organization uses to support your AP and supply chain processes. This allows for total automation, meaning that returning customers do not have to go through manually creating invoices repeatedly. Organizations can more easily sort and keep track of their records, and often, organizations will find that they can receive payments much faster. Offering customers the ability to pay invoices instantly and online may encourage customers to pay you faster.

 

How does Tradeshift make digital shift happen?

Tradeshift knows that shift happens, and your organization needs the comfort and support of strong technology to navigate disruption. Through the use of our customizable software, we are equipped to provide you with the specific support your team needs. In addition to assisting with e-invoicing, our digital network of business professionals enables you to strengthen your relationship with customers, leading to heightened transparency in communication and payment processes.

As the leading supplier of supply chain B2B payments and marketplaces, Tradeshift’s robust software processes millions of payments every day. Our expansive portfolio of clients showcases our commitment to creating an award-winning and user-friendly program.

Ensuring efficiency and compliance.

When businesses operate in a global market, it can be challenging to ensure compliance across countries. This means that organizations using e-invoicing need to ensure that they are complying with dozens of regulations. Tradeshift helps users make sure all the T’s are crossed, and all the I’s are dotted. In addition to staying updated with the latest compliance regulations, our digital software ensures efficiency with all your transactions. Our streamlined and digital system means that your invoices get processed at a faster speed, getting cash in your hands quicker.

 

As a leading supplier of B2B marketplace and network solutions, Tradeshift enables suppliers and buyers to connect more quickly and process payments in record time. For more information regarding our e-invoicing options and how they can transform your traditional processes, reach out to one of our experts. If you’re ready to shift your organization to a digital format, sign up now for your free demo.

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