10 Best Practices in Invoice Management for Contractors

In the world of business, the invoice management process is a critical cog in the machine. It's the lifeblood that keeps the cash flowing.

Yet, it's often riddled with mistakes and inefficiencies. These can lead to delayed payments, strained relationships, and even financial distress.

In this article, we'll delve into the common mistakes made in the invoice management process. We'll explore how these pitfalls can impact your business and provide actionable tips to avoid them.

From neglecting invoice automation to poor handling of contractor invoices, these mistakes can cost your business time and money. They can also damage your credibility and relationships with clients.

But don't worry, we've got you covered. We'll guide you through each mistake, explaining its impact and offering solutions.

Whether you're a small business owner, a finance manager, or an independent contractor, this guide is for you. It's time to streamline your invoice management process and ensure your business works like a clock.

So, let's dive in and start fixing those common invoice management mistakes. Your business deserves nothing less.

1. Neglecting Invoice Automation

The first common mistake is neglecting invoice automation. Many businesses still rely on manual processes for invoicing. This surely ends up with errors, lost invoices, and payment delays.

Neglecting invoice automation can lead to costly mistakes and inefficiencies. It can also delay payments, impacting your cash flow. So, if you're still relying on manual processes for invoicing, it's time to consider automation. It's an investment that can pay off in the long run.

Best practices:

Invoice automation can significantly reduce these issues. First, it eliminates the need for manual data entry. It also speeds up the invoicing process, leading to faster payments.

Here are some key benefits of invoice automation:

• Reduces human error
• Speeds up the invoicing process
• Improves accuracy in payments
• Enhances efficiency
• Facilitates faster payments

Despite these benefits, many businesses hesitate to automate their invoicing process. They may fear the cost or complexity of implementing new HRIS and payroll software. But in reality, the cost of not automating can be much higher. 

In fact, by automating invoice processing, you remove plenty of tasks that take pretty much time when done manually: collecting invoices, transferring pay rates and tasks to pay to your payroll system, approving, and – the most unpleasant part – reconciliating on mistakes and following up with correct payments. Automation cuts 90% of the hassle.

2. Inconsistent Invoice Tracking

The second common mistake in the process of invoice management is inconsistent invoice tracking. Many businesses lack a systematic approach to tracking invoices. The results are missed payments, late fees, and discrepancies in the planned and final budgets.

Inconsistent invoice tracking has serious consequences for your business. It can lead to cash flow problems and poor budgeting. Let alone a pile of invoices don’t allow you to have a clear overview of all expenses.

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Automated invoice tracking is crucial for maintaining accurate financial records. It helps you keep track of one-time or irregular payments, paid invoices, and payment deadlines. It also provides valuable data for financial forecasting and decision-making.

Here are some key benefits of consistent invoice tracking:

• Helps maintain accurate financial records
• Tracks all due and paid invoices
• Provides data for financial forecasting
• Helps to take better decisions

Despite its importance, many businesses still allow their invoice flow to come and go as it is. They may lack the necessary tools or processes to track invoices effectively. What’s the outcome? Again, financial mismanagement and cash flow issues. So, it's crucial to establish a consistent and effective invoice tracking system. This will help you maintain accurate financial records and take informed business decisions.

3. Overlooking Digital Invoicing Benefits

The third common mistake is overlooking the benefits of digital invoicing. Many businesses still rely on traditional, paper-based invoicing methods. Paperwork in the age of e-signs and AI, seriously?

By overlooking the benefits of digital invoicing, businesses are missing out on a valuable opportunity to streamline their invoicing process, reduce errors, and speed up payment times.

Best practices:

Digital invoicing offers numerous benefits. It can streamline the invoicing process, reduce mistakes, and speed up payment times. Here are some key benefits of digital invoicing:

• Streamlines the invoicing process
• Reduces flaws and inaccuracies
• Accelerates payments
• Enhances data security
• Facilitates easy tracking and management of invoices

So why are businesses hesitant to adopt digital invoicing? They may be concerned about the cost, the learning curve, or the security of digital systems. However, the benefits of digital invoicing far outweigh these concerns. It's crucial to embrace digital invoicing and reap its numerous benefits. 

Juggl has transparent per person billing and no unexpected extra costs. So, if you can easily estimate the costs and benefits of making the switch to digital invoicing. 

4. Failure to Standardize the Invoice Management Process

The fourth common mistake is failing to standardize the invoice management. Without a standardized process, businesses can face inconsistencies, mistakes, and inefficiencies in their invoicing.

It’s probably your internal issue, and how you handle it shouldn’t bother your clients. However, the flawed invoice management process becomes obvious too soon to everyone involved. The result? Damaged credibility, tense relationships with clients, and higher costs on onboarding and offboarding with every next contractor. 

Therefore, it's crucial to establish a standardized invoice management process to ensure consistency, accuracy, and efficiency. It sets clear guidelines for how invoices should be created, sent, tracked, and paid. Here are some key components of a standardized process:

• Clear guidelines for creating and sending invoices
• Defined process for tracking and managing invoices
• Clear procedures for handling unpaid invoices
• Regular audits to ensure compliance and accuracy.

Businesses shouldn’t neglect this aspect of invoice management. If they come across an ad-hoc process in place, they will already know how to handle it, avoiding the typical traps.

5. Poor Handling of Contractor Invoices

The fifth common mistake is poor handling of contractor invoices. Many businesses mishandle contractor invoices. They lose track of invoices, delay payments, or fail to reconcile invoices with work records. It’s unbelievable, but according to statistics, a stunning 55% of B2B sales invoices are overdue.

This poor handling of contractor invoices leads to strained attitudes with contractors and potential legal issues. Therefore, it's crucial to handle contractor invoices properly to ensure smooth operations and maintain good relationships with contractors.

Best practices:

Contractor invoices require special attention. They often include details like hours worked, materials used, and other expenses. Here are some best practices for handling contractor invoices:

• Use project management tools to track contractor work and invoices.
• Ensure all contractor invoices include necessary details like hours worked and materials used.
• Set clear payment terms and ensure contractors are aware of them.
• Regularly review and reconcile contractor invoices with work records.
• Bonus point – automate contractor invoicing as much as you can.

6. Inadequate Billing Management Practices

Inadequate billing management practices are another common mistake. These practices can lead to cash flow issues, customer dissatisfaction, and potential legal problems.

Billing is the very process of issuing invoices and collecting payments from clients. Basically, billing involves sending an invoice to customers who must then make a payout within a specific time period.

However, beyond just sending invoices, billing management involves some other necessary actions. It includes approving payment sums, following up on unpaid invoices, and reconciling issues in case the sums expected and paid do not match.

Certainly, inadequate billing management practices end up with unpleasant things, and client dissatisfaction is the least of the evil. Failure to comply with invoicing regulations can lead to litigation. 

It’s easy to fix it when the matter is about a couple of bills. But with large deals involving big sums, businesses may end up with disputes and lawsuits, and blocked bank accounts and problems with cash flow as a result. Therefore, it's crucial to have adequate billing management practices to ensure smooth operations and maintain good relationships with customers.

Best practices:

Here are some best practices for billing management:

• Regularly review and update billing procedures.
• Use invoice software to track payments and follow up on unpaid invoices.
• Regularly reconcile invoices with payments and bank statements.
• Set clear payment terms and ensure customers are aware of them.

If your business is still struggling with setting up adequate billing management, have a look at the Juggl solution for the automated contractor invoicing. It allows you to track contractors consistently alongside your other workforce. Besides, the system autogenerates invoices for contractors based on the information that they submit for their services.

7. Not Utilizing Invoice & HRIS Software to Its Full Potential

Invoice software is a powerful tool. It can streamline the invoice management process, reduce mistakes, and save time. But many businesses fail to use it to its full potential. For example, they only use it for basic tasks. They might use it to create and send invoices, but ignore features like automation, integration, and analytics.

This underutilization of invoice software is a mistake – not so costly, yet annoying. It means businesses are missing out on the benefits these features offer. They spend more time on invoicing than necessary, and they just don’t get the insights they could have.

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To avoid this mistake, businesses should invest time in learning about their invoice software. They should explore all its features, and use them to improve their invoice management process. This will help them save time, prevent mistakes, and make more informed decisions.

Invoice software offers features like:

• Automation of repetitive tasks
• Integration with other business systems
• Real-time reporting and analytics
• Customizable invoice templates
• Mobile invoicing solutions

The Juggl software also offers some automation features that make it a good choice for enterprise-level invoice keeping. It has reports and analytics that adds transparency on total expenses per client, per project, or per legal entity. There is also a multi-entity feature for handling several businesses or over different locations.

8. Ignoring the Importance of Invoice Reconciliation

Invoice reconciliation is a crucial part of the invoice management process. It involves matching invoices with purchase orders and receipts to ensure accuracy. Why do businesses overlook this step? Probably because it's time-consuming and complex, or maybe also because of this attitude to “what’s done is done” and why bother.

Ignoring invoice reconciliation can lead to:

• Overpayments or underpayments
• Financial fraud
• Discrepancies in financial records
• Damage to business relationships

Best practices:

Ignoring invoice reconciliation is a big mistake. It's a vital step in ensuring the accuracy of invoices and financial records. It can help businesses avoid overpayments, detect fraud, and maintain good relationships with their suppliers and customers.

To avoid this mistake, businesses should make invoice reconciliation a regular part of their invoice management process. They should also consider using invoice software that automates this process, to save time and reduce the risk of errors.

9. Delayed Follow-Ups on Unpaid Invoices

Unpaid invoices can be a major drain on a business's cash flow. Yet, many businesses are slow to follow up on these invoices. And then they see the sad faces of contractors chasing their invoices. Finally, the unplanned payouts that sooner or later must have a go, may end you up in a total mess closing your next fiscal year report.

When businesses delay follow-ups on unpaid invoices, they risk having:

• Cash flow problems
• Strained business relationships
• Unclear budgeting.

These risks can have a significant impact on a business's financial health. This delay is often due to a lack of resources, lack of time, or a fear of damaging customer relationships. But it's a mistake that can cost companies much in the long run.

Best practices:

Timely follow-ups on unpaid invoices are crucial for maintaining cash flow and ensuring that businesses get paid for their goods or services.

To avoid this mistake, businesses should have a clear process for following up on unpaid invoices. This process should include:

• Regular reminders or email notifications
• Clear communication procedures
• And a plan for dealing with non-payment.

As part of the invoice reconciliation process, the Juggl platform has a self-service portal where both the company and its contractors can access their contracts and payout history. There they can check what has been paid and what is due.

10. Lack of Training on Invoice Management Systems

Invoice management systems can greatly improve a business's invoicing process. They can automate tasks, minimize errors, and save time. But these benefits can only be realized if users are properly trained on how to use these systems.

A lack of training on invoice management systems can lead to:

• Misuse of the system
• Inefficiency and mistakes
• Underutilization of system features

Without proper training, the regular staff as well as independent contractors may not use the system correctly or efficiently. Typically, they forget to submit their work hours or services rendered. They may also make typos when entering their pay rates or hours data.

Best practices:

Well, this mistake is easy to fix at the very start with a comprehensive training on the invoice management system that the company uses. The training should cover all aspects of the system, from basic functions to advanced features.

However, on the other side of the coin, there is the very system itself that shouldn’t be a starship to run. The Juggl platform solves it pretty well. It has a simple and intuitive interface, and new users are onboarded with two clicks. The system assumes that you just log in and start using it immediately. You can see it yourself – book a personalized demo and see it in action.

Streamline Invoice Management to Remove 90% of Issues

The invoice management process is a critical aspect of any business. It directly impacts cash flow, client relationships, and overall company efficiency. Avoiding the common mistakes outlined in this article can significantly improve financial health and simplify the routine in work with clients, independent contractors, and literally anyone for whom you need to track work duties and payroll.

Remember, a well-managed invoice process can lead to improved cash flow, reduced errors, and more time to focus on growing your business. So, take the time to review your current process, identify any mistakes, and implement the necessary changes. Your bottom line will thank you.

The Juggl solution offers automation and consistent tracking in invoice management, helping businesses enhance their experience when working with contractors. This is what complex enterprise-level automated payroll solutions often lack due to complexity, abundance of features, and heavy setup. Feel free to ask questions, our team will guide you through in a personalized demo.

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