Why do you need to prioritize your invoicing? The question that you may be asking after reading the headline of this piece of writing. Well, that’s what we will be discussing in the next few paragraphs.
The most basic definition of Business, as we know is “any commercial activity”. What does this mean? It means that all of us do business, it is not necessary to be in a business to do business. We all do commercial activities irrespective of our occupation. Even if we don’t sell anything, still we buy many things. So everybody is a part of commercial activities, even if as a recipient. Most of the commercial activities are documented. You buy groceries from a merchant in your locality, you buy milk from the milkman who delivers it to your place every day, they all give you an invoice. So it can be assumed that we all know about invoices and invoicing.
For individuals, an invoice may just be a piece of paper that reflects their purchases. They use it for tallying their purchased goods and the amount they paid to record an expense if they do any such practice. For some, it may not even be that important. That’s true about the buyers who buy things without any commercial intent of reselling them or adding some value to them before selling. When it comes to business, invoices become an equally important document for both buyer and the seller.
What Is An Invoice
An invoice is a commercial document, that records a commercial transaction between two parties where one party provides some goods and/or services in exchange for some amount from the other. So there are at least two parties in an invoice. One is the seller and the other one is a buyer. The invoice is drawn by the seller and is drawn upon the buyer. An invoice may not necessarily be paid immediately. It can be deferred for some future date. When it comes to business, most of the invoices are meant for deferred payment.
Importance Of Invoicing For A Business
An invoice is an important commercial document for a business. It is equally important for both buyer and the seller. As discussed earlier, most of the business invoices are drawn against future payments, in that case, it becomes more important for the seller and the buyer
An invoice is important for a business for many reasons. Some major reasons are as follows:
· For Record Keeping
· For Legal Purpose
· For Accounting Purpose
· For Tax Record
· For Inventory Management
· For Borrowing Purpose
· For Management Purpose
For Record Keeping
An invoice acts as legal documentation of the transaction in the event
of a legal dispute. To
be deemed a legitimate legal document, an invoice must have all important
information such as the date, buyer and seller information, descriptions of
goods and services, quantity, amount, signature, and stamps.
For Legal Purpose
An invoice acts as legal documentation of the transaction in the event of a legal dispute. To be deemed a legitimate legal document, an invoice must have all important information such as the date, buyer and seller information, descriptions of goods and services, quantity, amount, signature, and stamps.
For Accounting Purpose
An invoice is also essential for the company’s internal bookkeeping. In most circumstances, it is the initial document in a transaction. Especially with small enterprises that do not keep track of purchase orders and delivery receipts. In certain situations, the invoice is the sole document that will suffice. In a postponed payment scenario, it’s even more critical to correctly capture and save the required invoices.
For Tax Record
In a tax filing, an invoice provides documentation of spending or revenue. It is required to preserve appropriate invoices for sales tax and other levies, as well as refund requests.
For Inventory Management
For inventory management, the invoice is a crucial document. The invoice is a vital document for inventory management in the absence of automated accounting software.
For Borrowing Purpose
Sellers can borrow money against their receivable invoices for a limited period of time (invoice financing/factoring). This aids in the improvement of their cash flow. To obtain invoice finance, correct invoicing is required.
For Management Purpose
In most cases, the time it takes to pay an invoice is rather quick. As a result, it serves as a short-term asset/liability for both the seller and the buyer. It is vital to have a clear understanding of payable and receivable bills to manage cash flow effectively. Management can make informed financial judgments if they follow effective invoicing procedures.
Why You Need To Prioritize Your Invoicing
Now that we have seen that an invoice is important for a business in many ways, invoicing becomes a much more important priority for concern. A business needs to have an effective invoicing system in place to remain:
· Legally Secure
An automated invoice management system is one of the basic needs of any business.
InvoiceMate by MateSol is a next-generation blockchain-based invoice management solution that provides the highest level of trust and efficiency throughout the invoice lifecycle. It allows you to manage your whole invoicing environment. InvoiceMate makes use of blockchain and artificial intelligence to increase trust, transparency, and efficiency.
Please contact us to learn more about the future of invoice management or to try out the application.