Invoice documentation is extremely important to all businesses, regardless of size or the type of business they conduct. Any business which doesn’t use invoice documentation of some kind and manage and organise it effectively will surely not only experience a myriad of problems at the end of the financial year, but throughout each and every business quarter as well. Here are three reasons that help to explain why invoice documentation is so important to all businesses.
- Fulfilling tax obligations
Every business has tax obligations that need to be fulfilled and in order to fulfill such obligations in a simple and straightforward manner, high-quality printed invoice books should be used. By using these books for invoicing, business owners will know exactly where all their invoices are, but not only that, their invoices will also be:
- Numbered and kept in a chronological order that enables the business owner to easily access the invoices they need to access when they need have need of them.
- Their invoices will correspond with those of their clients or customers, which means that there will be much less chance of conflicting records at the end of the financial year.
- Easy to comprehend and understand, especially when expenses or costs have been listed in an order that makes sense to the business owner and their clients and customers.
Fulfilling a business’s tax obligations is important for every business owner and using invoice documentation is one of the best ways to lodge tax returns and quarterly reports.
- Financial analysis and management made easy
Using invoices has also been found to make financial analysis and management much easier for business owners, especially those that don’t hire an accountant or bookkeeper to manage their finances. Using duplicate, triplicate or quadruplicate invoice books makes cash flow management much simpler and easier to comprehend because it systemises the business’s cash flow, enabling the business owner to keep track of invoices and, for example, follow up invoices that haven’t been paid on time.
- Aids business planning
In order to apply for finance, like a short-term business loan, for instance, business owners need to know exactly where they stand financially. Because the use of invoice documentation systemises the business’s finances, the business owner is able to get a more complete picture of their finances and they are better able to plan their loan applications and repayments much more easily as a result. This aids:
- Applying for financial products, e.g. short-term business loans and credit cards.
- Reporting to investors and other stakeholders who need a picture of the business’s finances.
- Factoring in quiet or sluggish financial periods in which the business may need to operate more cost-effectively than usual.
Because invoicing is so closely tied to a business’s finances, it’s imperative that invoice documentation which aids good bookkeeping practice is used by the business owner and their employees. What’s more, this invoice documentation must be kept organised and well-managed throughout the financial year in order for the business to reap the full range of benefits.