Manual invoicing vs invoicing software: Which is better?

New businesses may not have well-defined processes in place when they're just starting out, so it's common for them to do invoicing manually. Sometimes this means creating a paper invoice from scratch. It could also mean finding and downloading invoice templates for a word processor or spreadsheet program and manually editing the fields. These usually then get sent out as email attachments.

Let's say you're running one of these new businesses. As you expand, it would be inefficient to continue handling your invoicing processes manually because of how time-consuming and error-prone it can be. That's where automated invoicing comes into the picture. Automated invoicing refers to the process where invoices are automatically created and sent to the customer through invoicing software.

In this article, we'll break down and compare manual invoicing done via downloaded invoicing templates and automated invoicing done via invoicing software to show you why the latter is better for your businesses.

What is manual invoicing?

Manual invoicing in this piece refers to using a spreadsheet or word processor template that can be downloaded or created from scratch. The fields in this invoice template need to be filled by the person sending the invoice and sent to the customer by attaching it to an email. Manual invoicing, even by digital means, is no longer considered a holistic approach to invoicing since it can't be integrated with payment gateways, payment reminders can't be configured, reports can't be created in real-time, and invoices will need to be manually stored on a hard drive.

What is invoicing software?

Invoicing software is a tool that comprehensively handles accounts receivable processes like generating invoices for products sold or services rendered, sending payment reminders, collecting payments, and keeping track of your sales and receivables with reports. Invoicing software comes with prebuilt templates that can be applied to your invoices. Fields related to the customer and sale can be simply selected from a dropdown box, thus creating the invoice almost instantly.

Manual Invoicing vs invoicing software

Here are the differences between manual invoicing and invoicing software:

1. Automation made easy

Prefilled invoices at your disposal

When manually invoicing clients, you will have to input information about your business and sales manually. This includes uploading your business's logo, adding chronological invoice numbers, discounting, calculating taxes, and finding the total invoice amount. And since all this work is done manually by an employee, there is scope for error that could also lead to further issues when doing bookkeeping and inventory management. Not to mention that, for a growing business, spending so much time and effort on invoicing might be detrimental.

With invoicing software, information that is repeated on all your invoices, such as your business's logo, name, address, and contact information, needs to be uploaded only once and they will be automatically generated in all future invoices. Invoice numbers are generated automatically as well. You'll also have the option to select details about the products and services that you sell from a dropdown list, and details such as SKUs, descriptions, and prices will be auto-populated. Ultimately, the possibility of errors is negligible and this helps the business save a lot of time and create invoices effortlessly.

No more manual follow-ups

In the manual invoicing method, you'll have to follow up with your customers for payments manually. This means either calling them or sending emails that highlight the right amount and the due date of the invoice for each customer.

With invoicing software, you can configure payment reminders that will be sent automatically to the customers, letting them know about their upcoming payment due date at configured intervals.

Reports generated in real-time

In the manual invoicing method, you will have to retrieve and collate data manually from past invoices and create reports using charts in spreadsheets and word processors. This process is time-consuming and, because of delays, the reports may be rendered irrelevant by the time they're ready.

When using invoicing software, you will have access to the reports in real-time, enabling you to make well-informed decisions for your business. Some of the most commonly available reports in invoicing software are reports on payments received, bad debts, and outstanding invoices, which can be used to make important business decisions.

2. More than just invoicing

In the manual invoicing method, a downloaded invoice template can't be used for estimates and other documents since the fields, formatting, and layout would vary depending on the document. This means you will have to find and download different templates for every document type, which could be time-consuming.

When using a dedicated invoicing tool, you can create all the necessary documents from the same tool—estimates, proforma invoices, sales invoices, recurring invoices, payment reminders, and credit notes. Invoicing software often offer multiple templates for these documents so you can pick the one that suits your business. You can also set up a seamless quote-to-cash process that automatically converts accepted estimates into invoices.

3. Simplify scaling for your business

Your very own space on the cloud

When manually invoicing clients, your files are probably stored on your device or an external hard drive. As your business scales, organizing that many files becomes cumbersome and demanding on your digital storage space. There are also chances of losing these files due to faulty hard drives and manual errors.

If you're using online invoicing software, the invoices and other documents that are created are stored in the cloud. Past documents are categorized neatly and archived so you can easily retrieve them when needed. You'll also be able to create backups of your business's data to retrieve it whenever necessary. This means you won't have to spend excessive amounts of money on external drives for storing invoices, and you can stay organized without any effort.

Effortlessly collaborate with your team

In the manual invoicing method, sharing files with other team members in the organization can be a daunting task since you'll have to upload the file into a cloud storage service manually. You also can't track the changes made to your invoices by your staff.

If you're using an invoicing application, you can add multiple users to the organization and assign roles to these users to limit their privileges to view, edit, and manage organization data. Similarly, you can also track what changes are made to invoices and by whom.

Do business across borders

When following the manual invoicing method and working with overseas clients, you'll have to use a language translator or download a different invoice template in the client's language and manually convert the invoice's total amount into the foreign currency.

In invoicing software, the application automatically converts the invoice amount into its respective foreign currency and sends the invoice in the client's preferred language.

4. Accepting online payments is simple

When manually invoicing your clients, there is no direct integration with third-party applications. To collect payments, you'll have to attach your business's bank account details to the invoice or accept cash.

When using invoicing software, you can connect to a payment gateway to accept payments online effortlessly. This means your client clicks on the payment link in the invoice and is taken to a checkout page. They can then pick their preferred payment mode (Eg: Credit card, ACH, UPI), enter their payment information, and complete the payment. Meanwhile, the software automatically updates the invoice's status to 'paid'.

5. A load off your customer support team

Since manual invoicing isn't an end-to-end accounts receivable solution, most exchanges with the client, such as negotiations, sending estimates and invoices, and requesting customer statements, are done via email or phone calls.

Invoicing software comes with a self-service portal where clients can log in to view invoices, accept or decline estimates, make payments, update addresses and payment information, and download customer statements. This empowers the customer with the information they need instead of forcing them to reach out to your customer support team every time, and this convenience can boost your overall customer experience.

6. Invoicing on the go

When invoicing clients manually, your ability to manage and send invoices from your mobile phone is hindered since the invoice is stored on your desktop's hard drive. The workaround to this is to upload the invoice template to a cloud storage system, download it to your phone, edit the file with a word processor or a spreadsheet from your mobile phone, and send the invoice to the customer via email.

When using a dedicated invoicing tool, the invoices are in sync across multiple devices like desktops, laptops, mobile phones, and even compatible smartwatches in real-time. You can view, edit, manage, and send invoices without having to be tied to your desk in order to get paid.

The final verdict

We'll rest our case with this—if you are just getting started with your business and are offering your services only to a handful of customers, manual invoicing does the trick. But as your business grows and your clientele expands, you'll need a more effective method to create, track, manage, and store invoices since you can automate most of these processes via invoicing software.

And if you are looking for invoicing software for your business that is robust, intuitive, and scalable, you should check out Zoho Invoice. Zoho Invoice is invoicing software that you can use to handle invoicing and payment collection for your business, and it's completely free. Go ahead. Sign up for Zoho Invoice today!