What is Electronic Invoicing and How Does it Work?
A key part that any business undertakes is sending out invoices. From SaaS services to healthcare, numerous businesses need to send out invoices and bills in order to get paid.
In the past, your invoice process was probably paper-based. It might have involved printing out physical invoices, mailing them off to a client, and waiting for them to confirm, pay, or send proof of payment.
Over the last several years, electronic invoicing (or e-invoicing) has taken the invoice management game to the next level, streamlining workflows and simplifying the entire process. In fact, research shows that the global e-invoicing market was worth $8.74 billion in 2021 and is expected to reach $29.68 billion by 2027.
While there’s a growing trend shifting towards e-invoices, industry data shows that on average, accounts payable departments received over a third of their invoices in paper, despite a paper invoice error costing $53.50 to fix. Clearly, there’s still a way to go.
Want to learn more about all things e-invoicing? In this article, we’ll explain what electronic invoicing is (and isn’t), its benefits, and how you can successfully implement an e-invoicing solution.Request a Quote
E-Invoicing and How it Works
Electronic invoicing goes by a few other names, including e-invoicing and digital invoicing. It’s the process of billing your customer digitally or through the Internet, instead of in-person or by mail.
However, the digitization of paper invoices is not the same thing as e-invoicing. If you take a photo of a paper invoice or use an app to convert it into a PDF invoice, that isn’t e-invoicing. If it wasn’t issued electronically and didn’t include structured data a machine can read or extract, it’s not an e-invoice.
E-invoicing has been around for decades, since the days of XML formats and electronic data interchange (EDI) for document processing and material procurement. Now, digital invoices are often prepared with billing software solutions, allowing customers to access their invoice data via their email or in an online environment. Most invoicing systems also let customers make payments through the portal.
Of course, like paper invoices, you need to include the same information on your e-invoice, including the customer and seller info, goods or services purchased, amount due, payment date, and invoice number.
There are several reasons why you might switch to e-invoicing, including:
Overall convenience and improved productivity. Companies can avoid many hours of manual processing, using templates to quickly generate their invoice to send electronically and securely—wherever they are.
Automated and touchless invoice processing. Larger companies that regularly send recurring invoices can benefit from the automation functionality of e-invoicing, freeing up more time for their accounts payable department.
Early payments. Minimize the risk of late payments with paper invoices and improve your cash flow with quicker, streamlined payments updated in real-time.
Fewer bottlenecks. Manually adjusting errors on paper invoices costs time and money. With invoicing software, you can reduce the risk of human error and instantly make changes, all reflected instantaneously in your invoicing portal—i.e., your single source of truth.
How To Get Started with Electronic Invoice Processing
It can be hard to choose the right invoice software for your business, but it’s important to take into consideration the needs of your department or company. Some general questions you should ask are:
- What kind of functionalities and integrations do you need? How specialized should they be?
- Do you only need invoicing or accounting features, or also additional features such as project management?
- How robust can the e-invoicing solution be, given your budget?
- How scalable is the product? Will it be able to match your growth and needs over the upcoming years?
By taking the time to answer these questions, you’ll be able to choose the perfect invoice service provider for your needs.
How to Implement Electronic Invoicing Successfully
Once you’ve chosen a digital invoice provider, you’re only halfway there. After all, if your clients don’t make the switch with you, you’re back to square one. To make the transition process easy and seamlessly onboard your clients, here are some tips to take into consideration.
Create a comprehensive strategy introducing the switch to e-invoicing. If you’ve decided to go digital, it’s important to bring your clients alongside your thinking. This means you shouldn’t just send one update email and call it a day, but provide multiple opportunities for your customers to understand why you’re making the transition.
If you’re in healthcare and primarily bill individuals, you might consider creating an email, letter, and a short video with FAQs. If you’re in financial services and mostly invoice accounts payable departments, you could organize a webinar where they can speak to a representative about your new ERP system.
Whatever option you go with, make sure your messaging is consistent and straightforward.
Inform your customers well in advance of any changes. Old habits die hard, and expecting your clients to make a switch within a week is not only unrealistic, but also poor customer service. For example, if you’re an accounting firm working with larger corporate clients, they may need to go through lengthy internal approval processes. By giving your clients enough time, you’ll avoid running the risk of them switching to a competitor providing paper invoices.
Focus on the benefits your clients will receive. Don’t only talk about why e-invoicing is a smart choice for your company. Instead, explain what’s in it for your customers.
- How much time will they be able to save?
- Will they need to contact customer service less frequently?
- Will their data be more secure?
By answering these questions, you’ll be able to drive your e-invoicing adoption rates.
Provide incentives to your customers. You’ll probably save on admin costs once you switch to e-invoicing. If so, consider allocating some of that budget for offering discounts. For example, you might offer a small discount on the next three invoices if customers switch to e-invoicing ahead of the final deadline. Alternatively, you could make a donation to a charity of the customer’s choosing on their behalf.
Avoid a “one size fits all” approach. While all your customers should be well-informed on your digital transformation towards e-invoicing, it might make sense to create a dedicated approach for high-value customers. Let’s say you’re a legal firm, and a small handful of clients account for over 70% of your revenue. If so, you could consider offering a 1-on-1 meeting with them to personally walk them through why you’re making the switch. This could be the manager of the accounts payable department or the CEO if it’s a smaller company.
Another option could be offering custom programs, where you accommodate certain requests your clients have, such as training sessions or deadline extensions. By recognizing the importance of your high-value clients, you’ll be more likely to keep them on board.
Adopting digital invoices can streamline your workflow, increase productivity, and save costs—all while providing an improved customer experience. With a little bit of time and effort, you can successfully implement electronic invoicing and keep your customers throughout the transition period.
Stax has an all-in-one payment platform that makes billing and invoicing simpler. We offer scalable e-invoicing solutions for each business, always with transparent pricing.
Contact us today to learn more.