Kick your admin issues to the kerb with these six invoicing tips

Most people start their small business to follow a dream or area of opportunity. Very few set out on their own with a passion for all the other admin that comes with it – like paying bills or decoding a balance sheet. But it’s this admin, which is part and parcel of being your own boss, that’s causing huge headaches for Australia’s small businesses, writes Joseph Lyons, Managing Director Australia & Asia, Xero.

One of their biggest admin headaches? Invoicing. We recently commissioned research into behaviours and attitudes towards invoice management. And what we found is that not only is invoicing taking up a large amount of small business owners’ precious time; but issues within the invoice management process are causing bigger problems as late payments hinder cash flow.

The admin issues that come with chasing paper

The average small business spends two days (12.4 hours) on invoice management a month. While you may be thinking that doesn’t sound too bad, that’s almost a full month’s work each year just on creating, sending and chasing invoices. And time is only one component.

According to our findings, almost half (45 per cent) of these small businesses find the entire invoicing process stressful – and it’s easy to see why. They’re spending hours each month creating invoices, chasing late payments and correcting errors. While these tasks are essential to keep a business running, time spent on admin is time away from focusing on business growth or recovery – especially as we navigate out of the pandemic. Now more than ever, it’s vital that small businesses have the space to get operations back up and running, attract customers and ramp up for the busy holiday season.

Working to solve the late payments problem

One of the biggest issues associated with invoicing is late payments. The impact these delayed funds can have for small businesses isn’t new, but it has been amplified by the pandemic. Our latest Xero Small Business Insights data maps the effects of the pandemic on payment times, with the August findings revealing that small businesses had to wait 23.7 days on average to be paid by their customers – the longest wait since September 2020.

This is causing major headaches for small businesses and sole traders across the country, with our research finding that the majority (63 per cent) deal with customers or clients paying late. As a result, nearly one in four delay payments either to themselves (24 per cent) or to their own creditor or suppliers (23 per cent). Neither is ideal and both hurt the broader economy.

A better way to manage invoices and bills

There is, however, a solution to be found – with a new way to send and receive invoices and bills promising to overcome some of the shortcomings of traditional invoicing. E-invoicing allows businesses to exchange invoices directly between accounting systems. Although it is a relatively new concept in Australia, it promises to make life easier for the many small business owners and bookkeepers who spend time managing invoices and bills. Of those we surveyed, 78 per cent could see clear benefits of adopting e-invoicing.

So what are these benefits? There are many. E-invoicing takes hard parts out of the invoicing process.. And since incoming e-invoices automatically arrive in the payer’s accounting software as draft bills waiting to be approved, there’s less manual admin – removing some of the steps that can lead to late payments. This can reduce the time it takes a business to pay their invoices so others, in turn, can be paid faster. A number of federal and state government agencies have already committed to faster payment times with e-invoicing and others are expected to follow. Overall, e-invoicing is more accurate, with fewer errors, and since it goes via the secure Peppol network there’s less risk of foul play or your invoice going missing.

There’s huge potential in this new era of invoicing. But for e-invoicing to work, both the sender and the receiver need to be enabled through their accounting software. This means it’s vital for the network to grow for us to truly see the benefits. Each business that registers means we are one step closer to a streamlined invoicing and billing future that frees up small businesses for more important work.

Six tips to upgrade your invoice and bill management

There are plenty of ways to improve invoice management now and into the future. Not sure where to begin? Here are a few simple fixes for smoother processes:

Register for e-invoicing: It only takes a few moments within your accounting software and means you will be ready to go as the network grows. You can start sending and receiving e-invoices once your customers and suppliers are also on board – reach out to see if they’re ready to use it too.
Make the tools work for you: If you’re not already, using accounting software or other programs will streamline invoicing. This can allow you to set up templates or recurring invoices and manage everything in one place. Plus, you can access e-invoicing.
Consider add-ons: Tools like Hubdoc integrate with your existing software to make billing much easier. It can capture data from incoming bills and import it directly to your software – without having to lift a finger.
Set up auto-reminders: Chasing invoices is a huge time-waster for small businesses. Invoice reminders can automatically follow up for you and can be set up for your preferred time frames.
Add payment capabilities: Payment services like Stripe and GoCardless can be integrated into an invoice and make it easy to get paid promptly online.
Invoice immediately: One in five (21 per cent) small businesses have missed more than one payment because they forgot to send an invoice. Rather than waiting until the end of the month, send it out as soon as a project is done.