Wondering what a digital invoice is? Keep reading to find out.
We all know what an invoice is. It is a piece of paper depicting details of a transaction between a buyer and a seller. What is a digital invoice? Is it a whole new type of invoice? In this article we explain what a digital invoice is, what it looks like, and how it differs from an electronic invoice. Let’s dig into it.
When you purchase something from a business, the business issues you a document that depicts all the details of the transaction. These details describe the items or services purchased, number of units, price of each, amount already paid, amount due, date of the transaction, etc. You’re supposed to keep this invoice for your own records as it will help you when filing taxes.
Benefits of invoices
A traditional invoice is paper-based. Invoices have a few important benefits that make them a necessary part of transactions. An invoice does the following:
Plenty of businesses prefer paper invoices because of familiarity. This is especially true for small businesses that have been around for decades and are hesitant to switch to paperless. They’re accustomed to using paper invoices and electronic or digital is a new concept to them as it is for a lot of us.
From cabinets to cloud
If your business does paper invoicing, it means you print and mail paper invoices to your customers. Then, your customers most likely send you a check in the mail. Your accountant makes copies of the checks and then stores the entire paper trail for every single transaction in filing cabinets.
Traditional invoicing has worked for you and for several other businesses for many years and that’s why you’re wondering if it’s even worthwhile to go paperless. The short answer is: Yes! It is 100% worth your time and resources to adopt paperless invoicing.
There are some strong and valid arguments in favor of transitioning to paperless invoices. Here are a few reasons to ditch traditional invoices. Paper invoices often involve:
- Shipping costs
- Chances for human error
- Difficulty communicating with customers
- Competitors offering convenient paperless options
- Highly time consuming
- Labor intensive
- Physical storage
- Paper wastage
Some of the above reasons are more potent than others. Ultimately, customers love convenience. If they lose a paper invoice, they want to be able to retrieve it as easily as checking their email inbox. This is exactly what paperless invoices do!
If your business isn’t offering paperless invoices, your competition is, and you don’t want to lose customers, it’s a lose-lose situation overall. That’s why we strongly recommend the paperless route and saving all records to your devices or cloud.
What is an electronic or e-invoice?
An electronic invoice (e-invoice) is an invoice that can be created, sent, and stored electronically. Such invoices are drafted using some type of accounting software. This system enables customers to make payments electronically.
A typical e-invoice includes details such as date of purchase or service, items or services availed, pricing, taxes, shipping costs, payment terms, etc. Basically, businesses can create invoices electronically, send them to their customers, and get paid without needing to print copies, mailing them out, and waiting to receive checks in the mail.
Benefits of e-invoice
Electronic invoices or e-invoices have several benefits, which is why the industry is projected to reach a market value of over $6000 million by 2029. Explore some of these benefits:
E-invoices are easy with the right system. The two main reasons that businesses switch to e-invoices are because of their convenience and cost effectiveness.
E-invoices save a lot of time, and that saves the cost of man hours. There’s no more having to track down invoices, wait for the post office to deliver them, personally reach out to follow up, or manually enter card information.
E-invoices can save your team a lot of time and avoid headaches.
It is to be noted that customers today care about the environment. A study claims that 88% of customers claimed that they would be more loyal to a brand or company that supports environmental causes.
What is a digital invoice?
When an invoice is presented digitally in Word or PDF format, it becomes a digital invoice. What is a digital invoice? It is an invoice that can be digitally viewed, processed, shared and stored. Digital files can be sent with the click of a button and can be saved on a device or cloud for safekeeping.
You don’t have to maintain stacks and stacks of documents as they can all be stored on your computer. Another interesting feature is that some accounting software will help you process a digital invoice while preparing taxes.
Free digital invoice template
This digital invoice template provides a great example of how a digital invoice should look. Click the image below to open a free editable Canva template. You can add your logo, add information, and save it as a PDF. All you need is a free Canva account to access the design.
You can open, edit, and download this free digital invoice template. If the linked image above doesn’t work, you can access the Canva template here too.
A digital invoice should include information about who the invoice is coming from and being sent to, along with some sort of organizational information. The invoice itself should list purchased items in a way that’s easy to understand. This invoice clarifies quantity of items purchased, a brief description of them, their individual prices, and the total price of the transaction.
Benefits of digital invoice
Digital invoices have several benefits and that’s why they find their place in modern day bookkeeping, accounting, maintaining records, tax preparation, and more. Take a look at some of these benefits:
All of these benefits outweigh the sense of familiarity we tend to share with paper-based invoices. Thinking of going digital? You’re on the right track!
Difference between e-invoice and digital invoice
At a glance, they both seem alike. However, there is an important difference between e-invoice and digital invoice.
A digital invoice is a non-paper invoice that a person can easily read and decipher. This involves scanning paper invoices and then using OCR (Optical Character Recognition) software to identify details such as date, invoice number, amount due, etc. No manual data entry is necessary. They are usually saved in PDF or Word format.
If you receive invoices in Word or PDF form, you don’t have to manually scan them. You can just download them from email attachments if they were sent via email, and let the OCR do its job.
On the other hand, an electronic invoice is a type of digital invoice, but it is processed a little bit differently. Unlike invoices where everything is spelled out in a legible way, e-invoices are in computer language. It is often in an XML or EDI file format that can be processed by accounting software. E-invoices can’t be read by a person.
Good news! Acumen Connections is your payment expert. We can help your business learn more about digital invoices, e-invoices, and more! Take a look at our online payment processing solutions including payment gateways and payment links. We are committed to providing exceptional credit card processing, business tips, and more.
Invoices are important to document transactions between two parties. Digital invoices bring benefits that paper invoices lack. As the world leans towards all things digital – books, concert tickets, e-receipts and what not – it makes sense to introduce digital invoices to your business.
We hope this article was able to answer the question: what is a digital invoice? Got questions or queries? Contact us today!
Anna Reeve, MBA