How many times have you sent out an invoice to a customer and lost track of it while waiting for payment? If it’s happened more than once, it might be time to step up your invoice tracking skills.
Invoice tracking is key to sending out payment reminders, adding late fees, and—most importantly—getting paid.
…But first, a brief invoice recap
Invoices are bills you send out to customers after giving them a product or providing them a service. The invoice asks the customer for payment. And, it gives you and the customer a paper trail so everyone knows when payment is due.
An invoice lists key details a customer needs to know to pay their bills, including:
- Customer and seller information
- Purchased goods and/or services
- Total amount due
- Payment terms
- Invoice number
You can send paper invoices to customers. Or, you can try sending digital copies (e.g., email) with e-invoicing.
5 Invoice tracking tips
If you send invoices to customers, you need a tracking system. Why? Using a well-hashed invoice tracking system can help you:
- Monitor paid and unpaid invoices
- Take action when a customer’s payment is overdue
- Ensure you receive your accounts receivable
- Better balance your business’s cash flow
- Make decisions about letting customers make more purchases using credit
To make the process of getting paid smoother, take a look at the following invoice tracking tips.
1. Use a system
First things first: you need a system in place to help you track your invoices. Here are a few ways you can track invoices:
- Invoice tracking software
- Accounting software
Using a spreadsheet means you must manually create an invoice tracker template to track your business’s invoices, which can be time-consuming. However, you don’t have to pay for this method with anything but your time.
Invoice tracking software does exactly what the name suggests: It gives you an automated way to create and track your invoices. However, invoice tracking software typically doesn’t provide detailed reporting like accounting software.
Using accounting software not only gives you the ability to track your invoices, but you also get extensive reports and other much-needed features for business. If you want to automate your invoices and your accounting books, accounting software may be the way to go. Not to mention, there are some providers that let you create and send estimates, convert estimates to invoices, accept credit card payments, and more.
2. Always keep a copy
Whether you’re sending out paper or electronic invoices, always save a copy of the invoice for your records.
If you’re using accounting software or invoice tracking software, the system acts as an automatic paper trail for you. That means you can access copies of your invoices whenever you want.
If you’re not using software, you can keep digital copies of each invoice you send out on your computer (e.g., in a folder). Or, you can keep paper copies stored in a filing cabinet.
3. Use your aging reports
Want to improve your invoice tracker process, identify and avoid cash flow problems, and easily see when all your accounts receivable are due? If so, create an aging of accounts receivable report.
Aging of accounts receivable reports show you the number of days an invoice is past due. Your accounts receivable (AR) is the money owed to you from customers. This report breaks it down even further to categorize overdue invoices in set blocks of time.
An accounts receivable aging report typically uses the following time frames:
- Current (due immediately)
- 1 – 30 days
- 31 – 60 days
- 61 – 90 days
- 91+ days
For example, you may have an invoice that’s 30 days overdue. The next day (31 days overdue), you’d move the customer into the 31 – 60 days time frame. This helps show you which customers have invoices overdue in which category. And, the report breaks down the amounts owed in each interval.
Your AR report may look something like this:
|Customer Name||Total Balance||Current||1 – 30 Days||31 – 60 Days||61 – 90 Days||90+ Days|
Using an aging report is the best way to track your invoices by intervals to see who owes the most amount of money (and when).
Again, using software can streamline the process of managing your accounts receivable aging report. The software automatically moves invoices down the pipeline based on the number of days past due each invoice you’ve entered into the system is.
You can also opt for manually creating an AR report (e.g., invoice tracking spreadsheet) and updating it monthly.
4. Send reminders (+ automate the process!)
Using a system, creating copies, and creating an AR aging report give you the information you need to send reminders. That’s why sending reminders made our top five list of invoice tracking tips.
When tracking invoices, you need to send reminders to customers asking them for payment. These gentle nudges remind customers that their invoices are past due. And, payment reminders can help customers better track their accounts payable.
If you use software, you may not have to worry about sending reminders. You can set up automatic payment reminders for when invoices are past due a certain number of days.
|The ability to send invoice reminders is just one of the features your accounting software should have. What else should your accounting software be able to do? Check out our FREE whitepaper, “10 Things to Consider When Choosing Accounting Software,” to find out.|
5. See what is and isn’t working
Tacking on late fees? What about an early payment discount? Find out what is and isn’t working with your current process to improve invoice tracking.
Pay attention to your current payment tracker system to look for areas that you can improve on. You may find that you need to:
- Better articulate your payment terms
- Immediately invoice clients
- Offer a discount to customers who are willing to pay early
- Give customers an easier way to pay (e.g., accept digital payments)
- Set up a payment process for struggling customers
Ready to take your invoice process to the next level? With Patriot’s Accounting Premium, you can create and track unlimited customers and invoices, accept credit card payments, set up recurring invoices, and send out automatic payment reminders. Take advantage of our free trial today!This is not intended as legal advice; for more information, please click here.