What Is an Invoice Payment? | Business Tips for Paying Bills on Time
An invoice payment is submitted by a business to pay for products and services purchased from vendors. Small businesses don’t just need to send invoices to their clients, they also have to pay invoices for the services and supplies they buy to run their operations. Every small business should have a consistent invoice payment system that keeps them organized and simplifies their small business accounting process. Companies should ensure they pay their invoices on time to avoid late payment fees and to maintain strong relationships with their vendors.
These topics give actionable tips on making invoice payments promptly:
Tips for Making Invoice Payments on Time
Review Invoices When You Receive Them
It’s best to establish a consistent practice of reviewing invoices as soon as you receive them from your vendors, so they don’t get misplaced and so the details of the purchase are fresh in your mind. When an invoice comes into your business, review it for the following:
- Check the invoice due date: Note the invoice due date so you can make sure you don’t miss the deadline.
- Review the goods or services provided: Read over the itemized list of the products or services you purchased and make sure it aligns with what you actually received. If it doesn’t, follow up with the company to discuss the discrepancy.
- Check the total cost: Check the total amount owing on the invoice to make sure it aligns with what you discussed with the vendor.
Choose the Right Payment Method
Check what payment methods the supplier accepts and choose the payment method that’s smartest and most convenient for your small business. If, for example, your business credit card allows you to collect cash back or travel rewards every time you use it, it might be the best option for your invoice payments, as long as you make sure to always pay off your credit card bill when payment is due.
Organize Invoices According to a Payment Schedule
Set up a consistent accounts payable system for tracking all the invoices you receive by due date. You can create an invoicing schedule in Excel that sorts your invoices by due date or you can use a cloud-based accounting solution to create an invoice payment schedule. The frequency with which you pay invoices will depend on the volume of invoices your business receives: if you receive several invoices at different times of the month, it might make sense to pay invoices on a weekly basis, to prevent them from piling up over the course of the month.
It’s important that you don’t overlook or lose any invoices received so you can avoid paying late fees. To help you manage all your invoice due dates, you can set reminders for every invoice you receive. The easiest way to set invoice payment reminders is to create alerts in a digital calendar to remind you of the bill a week before the invoice payment due date.
Automate Bill Payments
The easiest and most reliable way to ensure your business never misses an invoice payment is to automate all your bill payments, if possible. With automatic bill pay, you can schedule recurring bill payments so that the money is automatically withdrawn from your credit card or bank account according to the payment schedule you set. That way, you don’t even have to think about your bill payments; your bills will be paid automatically ahead of the invoice payment deadline.
Cash in on Early Payment Discounts
Make note of any of your vendors that offer discounts for early payment and always schedule your bill payments to meet those early deadlines. It’s common for businesses to reward customers for paying promptly by offering a discount on the invoice total if the customer pays within a certain early-payment window. Often, businesses will offer a two percent discount on invoices if they’re paid within ten days of the invoice date, even though the actual payment deadline might be thirty days after the invoice date.
Stick to an Invoice Filing System
Develop an invoice filing system that works for your business, so you can keep track of the invoices you’ve paid, when and how you paid them and the total payment amount. This will help you create accurate accounting reports for your business. It’s also a good idea to store the payment confirmation details in case a dispute ever arises with a vendor about whether an invoice was paid.
How Do I Make an Invoice Payment?
To make an invoice payment, you’ll have to choose the payment method that works best for your small business. Here are some common invoice payment methods to choose from:
Pay By Check
Paying by check is a cheap and relatively secure way of paying invoices, but it can be time consuming. You’ll need to fill out the check and address an envelope and then send the payment by mail, which takes time away from more important business matters.
Steer clear of cash payments for any large invoices, especially if you aren’t paying the bill in person. Cash offers no security, since it can be stolen or lost easily and there’s no way to replace it.
Online Credit or Debit Payment
Online payments by credit or debit card are simple to process, saving you time. Not only that, online payments through reputable vendors offer several layers of security and encryption to keep your personal data safe.
Mobile payments are convenient and secure, especially if the vendor comes to you to complete a service, such as a contractor. With mobile payments, you can use a credit or debit card to pay quickly and securely through an app.
Automatic Bill Payment
If vendors offer the option, small businesses should consider setting up automatic bill payment to schedule their invoice payments in advance and ensure they’re never late making a payment. Automatic bill payments are fast and secure. You’ll just need to make sure there’s always enough money in the account associated with the automatic bill pay, so you aren’t hit with overdraft penalties.
What Is a Bill Payment?
An online bill payment is a service offered by banks that lets businesses quickly and easily pay all their bills online. Online bill payments can save you time and help you pay your invoices before they’re due. Here are the steps to set up online bill payment:
- Collect all the invoices you need to pay, as well as the associated account numbers.
- Enter each payee’s name and your associated account number into your bank’s online bill payment platform.
- Choose when you’d like to process the invoice payment.
- Decide whether it will be a single payment or if you’d like to set up recurring payments for that particular payee.
- Set reminders to track invoice due dates.