5 Ways Traditional Invoicing Holds Back Mid-Market Companies
What you’ll learn
- Drawbacks of traditional invoicing methods – increased cost, time-consuming, longer time to cash, and error-prone
- How e-invoicing overcomes the drawbacks of traditional invoicing systems
Introduction
Invoicing is an integral part of the order-to-cash (O2C) cycle. Invoicing process inefficiencies lead to delayed time to cash cycles. As your business grows, the functional complexities also increase. Overlooking updating your invoicing system, can lead to several challenges as your clientele grows. Invoicing is a key touchpoint between the customer and your company substantially affects customer experience and revenues. Invoicing not only helps you get paid but also impacts your relationship with your customer, which is of the highest value for a business. As your company grows, it requires advanced billing and invoicing systems. Relying on traditional invoicing systems is no longer an option as they cannot keep pace with your business’ growth. Let’s look into the traditional invoicing process, factors holding back mid-market companies in traditional invoicing, and why mid-market companies should switch to e-invoicing.
Source: PYMNTS
Traditional Invoicing vs e-Invoicing
Some of the most important functions of a finance team include generating invoices, sending invoices, collecting payments, and settling disputes. The traditional invoicing process, in comparison to the modern electronic invoicing process, relies heavily on manual intervention, thus slowing down the whole process.
In the traditional process invoices are generally sent in two ways :
Physical Invoicing:
Invoices are created by manually filling up the details. A printed copy of the invoice is then sent to the customer either via fax or postal mails or any other physical means.
Digital Invoicing :
In digital invoicing systems, an electronic pdf copy of the invoice is generated which is then saved locally and then sent to the customer either via emails or uploaded to portals for future references. The digital model of issuing and sending invoices is a faster and better way of sending invoices than the physical means.
5 Drawbacks of Traditional Invoicing Systems
Let’s look into 5 reasons why traditional invoicing is holding back mid-market companies.
1. Time-Consuming
Manually drafting and sending invoices is a time-intensive process. This requires a lot of human involvement, thus slowing down the whole process. Manual invoicing delays receiving payments from customers and impacts the business’ cash flow.
The time for drafting and sending invoices depends upon the following factors:
- The efficiency of employees
- The workload of employees
- The speed of postal services
2. No Tracking and Visibility
In a manual invoicing process, it is difficult to track whether the invoices have reached their destination or not. There is a high chance of invoices getting lost and not being delivered to the right address.
Invoices sent manually are often stored in physical warehouses for future reference. This means that in case of a dispute or for closing an invoice, your employees need to manually search through hundreds of documents to find the right documents. Moreover, paper invoices are prone to wear and tear, making them harder to store for future references. The current status of invoices remains unclear because traditional processes lack transparency.
3. Longer Time to Cash
Traditional billing and the invoicing systems being paper-heavy and manually-driven increase the time to collect payments and close the invoice (time-to-cash). Analysts are often burdened with a lot of invoices to draft which delays the process, thus affecting the subsequent collections and cash application workflows. Furthermore, tracking invoice delivery and ensuring that the customer has received it is also difficult.
Traditional invoicing is prone to errors and often takes up a lot of time settling disputes, thus delaying the resolution process.
Source: PYMNTS
4. Prone to Errors
On average, an employee handles more than a hundred invoices regularly. In such scenarios mistakes are inevitable. Manual invoicing often leads to inconsistent creation, drafting, and sending of invoices which further delays payment processing.
5. Increased OpEx
mid-market companies that use traditional invoicing systems spend a huge chunk of money per invoice delivered. The traditional invoicing system requires :
- Manually printing invoices to be mailed
- Sending it to customers via physical or digital channels
- Storing the invoices in physical warehouses for future references
These requirements increase the operational and handling cost per invoice at both the sender’s and receiver’s end. On top of this, traditional invoicing often takes up a lot of time, effort, and money to solve disputes as employees need to manually search through all the documents for reference.
Why Should You Switch to e-Invoicing?
E-Invoicing stands for electronic invoicing. It is the exchange of invoices between the supplier and the buyer in an integrated electronic format. Traditional invoices, in contrast to e-invoices, are paper-heavy, prone to errors, and require human involvement resulting in an increased cost to the company.
With e-invoicing, you can automate the process of generating invoices and delivering them over e-mails or customer preferred portals. It helps:
- Reduce invoicing costs
- Ensure invoice tracking and delivery
- Reduce the chance of errors
- Enable invoice delivery based on customer preferences
Let’s look into some benefits of e-invoicing :
To know more about e-invoicing and its benefits you can read the following blog on 3 best practices for adopting e-invoicing.
Conclusion
Traditional invoicing systems get outdated as the business expands. Most of the leading mid-market companies are actively looking to automate their billing and invoicing systems. This will not only help them deliver invoices faster but will also help get insights about the company. This in turn helps reduce the risk of bad debt. A company that is growing rapidly must explore the option of automation to be efficient.
Let’s see how RadiusOne helps you ensure timely delivery of invoices, centrally track and manage invoices, and eliminate time-consuming and error-prone processes.
HighRadius RadiusOne AR Suite provides the complete eInvoicing solution designed to automate your invoice delivery and empower customers with a self-service portal to manage, track and pay invoices. It is quick to deploy and ready to integrate with ERPs like Oracle NetSuite, Sage Intacct, Quickbooks, and scales to meet the needs of your order-to-cash process.
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