An open invoice is a request for payment that you have sent to your customers, but they still haven’t paid. In other words, they have an outstanding balance. Open invoices are also sometimes called outstanding or unpaid invoices.
Invoices that stay open longer than intended impede cash flow, which can slow growth or cause downstream problems like the inability to pay vendors or worse, payroll! Monitoring open invoices to be sure customers are paying within the allotted time frame is a critical piece of running a growing business.
To learn “What Is an Invoice?” visit this previous article that explores the fundamentals. This post details how to track and close your open invoices and how good accounting software will help you save time and money and set your business up for success.
Track Your Open Invoices
If you are still using a manual or disconnected approach to invoicing, you will need to schedule time frequently to review your invoices, check them against payments received (perhaps in a bank ledger) and then close those that you can. If you’re letting customers slide too often, you may even be unable to pay your suppliers or employees due to insufficient liquidity or cash. To avoid these situations, it is vital to track all of your business invoices.
An invoice tracking system can help you manage the due dates of each invoice and notify you when one is about to expire. This can save your company time and money and reduce the risk of having to actively collect from your customers. This tracking system is often associated with accounting software, which we cover in-depth below.
If you consistently review a dashboard that automatically tracks open invoices and closes them automatically upon payment receipt, you are regularly aware of which accounts remain unpaid. Then you can work with your customers to receive the funds as soon as possible. From here there are several courses of action with which you can proceed.
Three Steps to Help You Close Your Open Invoices
The first step in closing your outstanding invoices is to verify their accuracy. Make sure the numbers on each invoice match what was delivered or services provided, and then go from there with supporting documentation such as shipping receipts. An inaccurate invoice can be a significant obstacle to getting paid.
Second, follow up with customers promptly. You can set up email alerts when an invoice is unpaid beyond a specific timeframe. Or use advanced tracking software to alert you and your customers automatically and sequentially. Also, a polite phone call can often elicit a timely payment as a final resort.
Finally, be willing to negotiate payment terms with customers if necessary. If you have a customer struggling with cash flow, present them with a partial payment method or other forms of payment such as a credit card through ACH. By being more flexible on when and how you get paid, you may be more likely to collect quickly and efficiently.
If closing your open invoices continues to be laborious, consider implementing new promotions. You can offer discounts for upfront payments, payment plans, free months of service, or other incentives. Furthermore, take time in the beginning when you create an invoice to include clear payment instructions, so your customers know exactly what they need to do to pay you.
How to Track Your Invoices Using Accounting Software
Using accounting software like FINSYNC, each invoice created has an “unpaid” status by default until the payment has been accepted. When you log in and view your accounts receivable, you can quickly identify the still open invoices.
An accounting platform can create reminders that are automatic and emailed on an ongoing schedule, daily, weekly, etc., until payment is received. This type of system enables you to be proactive. Sometimes the best way to tackle a problem is to address it right away before it becomes a bigger issue.
In addition, the FINSYNC accounting platform can provide additional features such as the ability to create recurring, duplicate, and specific project-based invoices. Along with many other features to simplify your cash flow management.
Summary
Open invoices can have a negative impact on your business’s cash flow and revenue. Every business owner should have a tracking tool that helps them monitor their business’ financial management and operational health.
You can monitor open invoices by manually entering them into your ledger. However, the best way to close open invoices is with an automated accounting solution like FINSYNC. The good news is that you can reduce your outstanding receivables and improve your bottom line with just a few simple steps.
FINSYNC provides a straightforward way to collect invoice payments directly from a customer’s bank account. You maintain control over all your payments, saving you time and money.