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Dealing with invoices might be among your least favourite tasks, but when you’re a small business owner, it’s one of the most important. Good invoice management encourages regular cash flow, eases accounting woes and saves you time. So you’ll want to make sure you have a simple strategy for generating, sending and keeping track of them.
Find out how to get a handle on invoices so that you can get back to work.
What is invoice management?
Invoice management refers to all the systems and processes involved in sending and receiving invoices. As a vendor, it includes the way you create, send and track customer invoices. When you’re the one making a purchase from a supplier, invoice management entails receiving and reviewing invoices, as well as approving and paying them.
Why is invoice management important for small businesses?
Picture this: It’s tax season and your accountant asks you for all invoices sent to a specific customer. You thought you had them saved on your computer, but made a typo in one of the name files. You spend an hour locating the missing invoice.
Here’s another scenario: You forget to pay a supplier because you’ve been extra busy opening a second location for your business. Now there are late fees, and you feel awkward about the situation.
Or maybe you realize months after delivering a service and invoicing a customer that you haven’t been paid for it — and your cash flow is currently negative.
These are the types of challenges proper invoice management helps you mitigate. It reduces the risk of errors, protects your cash flow, helps you maintain positive relationships with suppliers and keeps records organized for tax purposes, such as collecting and remitting the GST/HST, filing yearly income tax reports and being prepared if you ever get audited by the Canada Revenue Agency (CRA).
Invoice management tips
Since invoice management includes several different tasks, it’s important to choose the right processes and tools for your unique business needs. Here are invoice management tips to help you save time and streamline operations.
Choose the right type of invoice for the job
There’s no one-size-fits-all invoice template — different payment plans work for different projects. So before you begin the work, talk to your client or customer about a payment schedule that works best for both of you and make sure you agree upon one plan. Here are some options to consider:
- Interim invoices: Instead of paying you in one lump sum, your client or customer can pay you in a series of recurring smaller payments, such as monthly installments or as you complete various sections of a project. If you opt for interim invoices, you should also send a final invoice at the end of the project detailing the work that’s been completed and what you’ve been paid.
- Recurring invoices: For ongoing projects for the same client, it may make sense to send recurring invoices at regular, agreed-upon intervals (for instance, weekly or monthly). Getting on a schedule makes sending invoices part of your workflow and, with any luck, your clients will also get in the habit of paying you on time.
- Final invoices: At the conclusion of a project, send a final invoice to outline the work that you have completed alongside any interim invoices that have already been sent. Detail whether those interim invoices have been paid and list the final amount that is outstanding (if applicable). Even if the job has been paid in full, send a final invoice to wrap business up between you and your client.
Use automated invoice management
Whether you need to send recurring invoices on a monthly basis or just want to create one-off invoices, there’s no need to spend hours on manual work. Automated invoice management can help you run the following tasks on autopilot:
- Create and send invoices: Automated invoice management reduces the time it takes to create and send an invoice. You can pick a template, customize it with your logo and save it for future use. You can save your customer’s information too. That way, invoicing just requires a couple of clicks.
- Schedule recurring invoices: Why email your customer every time you need to bill them if you can simply let that process happen behind the scenes? Pre-scheduling recurring invoices saves time and also increases the likelihood you’ll get paid on time.
- Flag overdue payments: It can be hard to stay on top of the status of different invoices if you’re juggling multiple customers and payment schedules. With automated invoice management systems, you can get notified when a payment is overdue and send a payment reminder message to your customer.
- Send payment reminders: You can also send automatic payment reminders before a payment is late to avoid delays, such as a friendly note seven days before a payment is due. This type of system could be difficult to keep up with manually, but it’s possible with automated invoice management tools.
- Apply GST/HST tax rates: There are different GST/HST rates based on the place of supply. For example, if you sell taxable goods to customers in other provinces, you would apply the GST/HST rate of their province, not yours. Invoicing software like Square Invoices can help you automatically apply the correct tax rates on your invoices, saving you time and preventing mistakes. Learn more about GST/HST rates and place-of-supply rules.
- Send receipts: Sending a receipt after an invoice has been paid is an important best practice, as your customers might need receipts for accounting purposes. It also helps you maintain organized records. But sending receipts manually is tedious and receipts can fall through the cracks that way. Automated invoice management takes care of that process for you.
- Bookkeeping and reconciliation: Tools like Square Invoices integrate with your accounting software to support bookkeeping and reconciliation efforts. Payments get matched with invoices for you or your accountant to review.
- Reporting: With manual invoice management, it’s harder to forecast what your cash flow is going to look like. Automated invoice management platforms give you access to data and valuable insights. For example, you might realize that the next six months are going to be healthier than average in terms of cash flow, and decide to finance a business investment during that timeframe.
Manage invoices online
A quick way to reduce headaches and streamline your invoicing process is to eliminate paper from the equation. Paper invoices have a way of piling up (for both you and your clients) — they’re a headache to manage, and it’s easy to lose track of their status.
Enter modern invoicing software, which eliminates the need for paper and supports various aspects of invoice management, from invoice creation to record-keeping and analytics. You can send invoices online, add convenient online payment links to your invoices and automate several tasks and processes.
If you’re wondering how to choose the right invoice management solution, there are a few factors to consider.
- Ease-of-use and mobile-friendliness: Invoicing software should feel intuitive and easy to use, both for yourself and your customers. Mobile access is key if you manage your business on the go.
- Flexibility: Do customers have multiple ways to pay? Can you easily add discounts or accept tips? How will funds reach your bank account once a customer pays? Look for flexible payment options and fast payouts.
- Personalization: You should be able to personalize invoices to fit your needs, whether you’re an IT consultant who charges clients monthly retainers or a graphic designer who bills hourly.
- Integrations: Look for invoicing software that integrates with your point-of-sale (POS) and accounting software, which can help you streamline data reporting and operations.
- Canadian context: Your invoicing platform should align with Canadian tax compliance requirements and make it easy to collect the GST/HST. You should also be able to choose your language and region and serve customers in both English and French as required.
- Scalability: Your freelance business might turn into a full-service agency one day, and you want your invoice management software to grow with you, whether you need to create multiple user accounts or support a large number of client profiles and projects.
Square Invoices checks all those boxes. You can send customized, professional invoices and check the status of every client from your computer or mobile device. You can also send invoices from your device using our invoice app and your customer won’t be charged a fee to pay.
Square Invoice software allows customers multiple, secure ways to pay, whether it’s by credit card, Apple Pay, Google Pay or Afterpay online. You can apply discounts and GST/HST with a few clicks. And you get access to your funds as soon as the next day.
“Setting up invoices is really easy when I do private parties and weddings; it cuts out extra paperwork that needs to be done. They are just so easy to customize at the drop of a hat. You can change menu items, change the price, add HST, add discounts—all that kind of stuff,” said Sylvia Zietek, owner of Pierogi Queen in London, Ontario.
Square makes it easy to automate invoicing tasks like sending payment reminders or scheduling recurring invoices. Plus, Square Invoices seamlessly syncs with accounting tools to help you stay organized. “Having my sales, invoices and expenses integrated and automated takes some of the pressure off me by reducing the amount of paperwork and organizing I have to do,” said Diona Joyce, owner of Tita Flips in Toronto, Ontario.
Ready to get started? Follow these simple steps:
- Sign up for your free Square account.
- Go to Invoices in your online Square Dashboard or log into the Invoices app.
- Click on Create Invoice.
- Choose and customize your template.
- Set payment options and due dates.
- Enter your customer contact information or select an existing customer from your Customer Directory.
- Add the invoice details, GST/HST and any applicable discounts.
- Save your invoice as a draft, schedule it or send it right away.
Common invoicing mistakes
Even if you use online invoices, send your invoice right away and agree on a payment schedule, there are some other common barriers to getting paid on time. Here are some issues that could slow down your payment:
- You sent the invoice to the wrong person: The project manager or primary contact might not be the person who deals with accounting, so before you deal with lengthy back-and-forth communications (further delaying your payment), find out where exactly you should send the invoice. Square’s invoicing software makes it easy to make edits to past invoices. Editing, cancelling and resending existing invoices can be done right from your Square Dashboard or in the app on your mobile device.
- You weren’t clear about terms: If you think the invoice should be paid within a month, and the client thinks that it doesn’t have to be paid until the completion of the project, you’re in trouble. To avoid an uncomfortable and frustrating situation, make sure your client agrees to your terms (in writing) before you begin work. You might also consider setting a shorter payment window or initiating automatic invoices to ensure timely payment. You can also use the “custom text” feature in Square Invoices to clearly state your payment, cancellation and refund policies.
- You sent the invoice on an inconvenient day: If you send an invoice over the weekend, it might end up sitting unopened in someone’s inbox when Monday rolls around. Stick to business days, when accounting departments are open, to increase the chances of getting paid faster. Determine a payment schedule that results in the speediest payment from your clients.
Managing sent invoices in your Invoices App
Sometimes mistakes happen, or you need to edit an invoice you’ve already sent. Luckily, Square invoicing software makes it easy to manage edits to past invoices. Editing, cancelling and resending existing invoices can be done right from your mobile device with the invoicing app.
Resend or edit, invoices
- Navigate to Invoices in your Square Dashboard.
- Select your desired invoice.
- Click Edit to update the invoice details or click Resend. Be sure to preview your invoice before you send it to your client.
Cancel
- To cancel, select an invoice and click More > Cancel > Confirm Cancellation.
- To cancel a recurring invoice, select and click View Series > End Series > Confirm.
- If an invoice has already been paid, you can’t cancel or delete it from your payment history. However, you can issue a refund within 60 days of the payment date to balance your books.
Invoice management tips FAQs
How can I manage invoices for a small business?
To manage invoices as a small business, look for an easy-to-use online invoicing tool that can help you streamline processes and scale with you as you grow. Square Invoices is free, and built with the needs of small business owners in mind.
What is the best way to organize invoices?
A modern, all-in-one invoicing solution can help you organize invoices without manual work and easily look up invoices by date or by customer. It gives you an overview of all invoices and their status to make it easy to spot issues like overdue payments.
What is an invoice management system?
An invoice management system automates and centralizes all invoicing-related tasks and processes, such as creating and tracking invoices, accepting payments and syncing data with accounting software to support bookkeeping. Want to set up automatic payment reminders the day before a payment is due, or set up a recurring invoice for a customer who pays you on a monthly schedule? That’s also part of invoice management.
