Everything a micro business needs to know about receiving and sending invoices
To help sole traders and micro business owners get a grip on their finances from day one, Lauren Wise at accounting software provider?Pandleexplains everything you need to know about receiving and sending invoices.
Invoices the bane of many a small business or startup. Invoices coming in demand your attention when frankly youd rather be concentrating elsewhere. Meanwhile, invoices going out can leave you pulling your hair out in a maze of confusion over formatting, record keeping, and “getting it right”.
This is tough because invoices, and managing them, are a fact of life for all businesses. You have to get to grips with them because even though they arent profit-earning in and of themselves, they are integral to the bottom line.
First of all, just because you’ve received an invoice doesnt mean you should blindly go ahead and pay it. No, were not advocating defaulting on payments. What we are underlining is that invoices are prone to human error. Not everyone uses snazzy automated bookkeeping software like Pandle to stay on top of their invoices after all.
So first of all, you shouldnt rush through a payment simply because of all those other demands on your time. You need to take the time to check the invoice against your expectations and receipts, and effectively to verify the purchase. Now’s the time to speak up if it doesnt match your expectations not after you’ve made the payment.
In order to do this stage properly, we suggest you keep on top of your invoices. Little and often, at a regular time, is much easier to handle. It means it’s a quick job rather than a looming time-sucker.
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Next you need to make sure you record all of the information within the invoice. you’re going to need this for many reasons to help you quantify a nice healthy profit and to keep HMRC from chomping at your heels. You need to be able to provide a complete record of each and every payment made through your business, so get recording.
You then need to be able to match up your records with an audit trail the way of checking that the records are correct.
Many small businesses turn to their trusty friend the spreadsheet at this stage. However, you’re introducing some extra steps to an already convoluted process if you do that. Instead and simple yet effective cloud-based bookkeeping software can do the hard work for you.
Make the payment
Only once you’ve completed the above steps should you then make the payment. However, remember to loop back to step two and update your records, unless that nifty software is doing it for you.
don’t forget to look at the individual invoice for payment terms as these can vary. As a small business or startup you don’t want to be stung for late payment fees or interest, so do make sure you pay on time.
Fundamentally, your invoices need to be professional and accurate. They need to contain certain information, and they will generally all follow the same format.