Paying bills and collecting sales income are two critical functions in business. Accounting software does a lot more than simply record the transactions in a spreadsheet.
Collect Your Sales Income Faster
The way a business sends out invoices is changing rapidly. The usual method is to create an invoice in your desktop accounting software and either print it out for posting or attach it as a PDF to an email.
Some online accounting programs have already moved to online invoices (others are following suit). An online invoice is also sent by email, with the option to attach a PDF. However, the email also contains a link to view the invoice online.
When a customer clicks on that link the browser displays the invoice with a Pay Now button. Customers can click on the button and pay the invoice immediately with a debit or credit card or PayPal.
Either the online accounting program includes a payment gateway to process the transactions or the user must sign up with a third-party gateway.
Let’s look at some of the advantages of online invoicing.
- Faster Payments. This ability to pay immediately has a measurable impact on the average time it takes to collect money from customers.
Businesses get paid twice as fast when they use online invoicing (1) and reduce the average time until an invoice is paid from 48 days to 33 days (2). That compares to an average of 55 days among businesses generally.
- Better Bookkeeping. Online invoicing speeds up the bookkeeping too. Any invoices paid online are marked as paid in the accounting program and the transaction automatically reconciled.
- More Payment Options. As any retailer will tell you, the more payment options you can give a customer the greater the likelihood you will be paid. Online invoicing puts many payment options directly in front of the customer, whether you’re a services business or selling widgets.
- Pay on Mobile. Many business owners check their mobiles after hours or out of the office. Giving them the ability to view and pay an invoice quickly and easily from a smartphone or tablet is terrific. It is not just better cash flow but looks much more professional and modern than a paper invoice.
Pay Your Bills More Easily
Collecting money is crucial to cash flow. Paying your suppliers regularly is essential to staying in business too. Accounting software has been able to do this for a long time. Online accounting software has made some small improvements, with more likely to follow with tighter integration with online banking.
Batch payments, for example, long used to increase the efficiency of paying multiple suppliers, are typically saved into a file that has to be uploaded to an online banking portal.
Online accounting software aims to automate that upload process. Once a user creates the list of batch payments in their online accounting software they can push the list directly to their online banking portal for approval.
Few online accounting programs can do this and only then with a handful of tech-savvy banks. However, it is a priority issue for both banks and software companies and will become increasingly common.
Software companies have brought out a string of new ideas that make it easier to pay suppliers or process sales transactions. Some of the more recent and interesting developments are listed below.
Payments on Mobile Phone
Two accounting software companies have released their own mobile payment apps (MYOB PayDirect in Australia and Intuit QuickBooks GoPayment in the US). These give businesses the ability to take credit card payments on the spot. This is very useful for services businesses such as tradesmen and gardeners or mobile businesses such as market stalls.
The advantage of these mobile apps over standalone mobile payments apps such as PayPal or Square is that they can create invoices on the fly and reconcile payments automatically with the accounting software. The apps record all payment types including checks/cheques and cash so a business can maintain near real-time records of which customers have paid.
Send International Payments
It’s not just importers who need to pay overseas these days. Many companies are using online services provided by suppliers in the US, Asia, Europe and Russia.
The payments process is more complicated when it comes to international providers. In most cases a business will pay through their bank, often using the online banking portal. Banks charge a lot of money for this service compared to bank fees on domestic transactions.
Recent innovations by one online accounting program make paying overseas suppliers much cheaper and easier.
A Saasu user selecting an international bill for payment within Saasu is taken to a third-party foreign exchange. The exchange gives the invoice a competitive rate with a lower transaction fee than the banks and transfers the payment from the user’s bank account.
The invoice is then marked as paid in Saasu and the transaction reconciled automatically.
Track Bills Better
The standard format for bills sent electronically is a PDF. Unfortunately this is not a simple file from which to copy and paste information into your accounting program.Receipt processing apps can scan PDF invoices sent to a business email address and import the information automatically into an online accounting program.
MYOB has built this functionality into its AccountRight and Essentials accounting programs. They use optical character recognition to identify the contact, the business registration number, item details and costs, and tax included.
The software then creates a draft bill with all these details for approval. This helps track upcoming liabilities and plan cash flow.
Masters of the Coin
Registration with a payment gateway service is required to take payments from customers using online invoices. These gateways process debit and credit card transactions instantly although they can sometimes take several days to transfer the money to your bank account.
The most well-known is PayPal which can accept a huge range of currencies and is a trusted supplier. Other services such as Ezidebit, Authorize.net, DPS, POLi and others offer escrow, custom branding, cheaper fees or bigger business networks. Intuit QuickBooks can even accept payments in the virtual currency bitcoin.
The main criteria for evaluating a payment gateway are accepted currencies, the cost of transaction fees and the number of days from payment to withdrawal.
There are a lot of new ideas about how to improve modern accounting. Read on to Chapter 4: How Bank Feeds Work if you want to know more about one of the best – bank feeds.
1. QuickBooks Payments (Intuit)
2. Use Online Accounting, Get Paid 3 Weeks Faster, Xero Says (Digital First)