Invoice Tracking 101: Tips, Tools, and Techniques

Have you ever heard of the man who scammed Google out of $100 million just by issuing invoices, pretending to be a partner company? If not, you should because it’s one of the best examples of why invoice tracking is so important.

Even big organizations, with all their market-leading tools and staff, sometimes make mistakes. And that risk becomes so much greater when you’re running an SMB and handling all of your activities from negotiation to execution and invoicing yourself.

That’s why this guide will tell you everything you need to know about tracking invoices and payments, including the best techniques and tools for invoice management.

Key Takeaways

• Choose the Right Software: Select cloud-based accounting software that’s user-friendly, secure, and meets your business needs.
• Follow Best Practices: Ensure detailed, accurate invoicing, with correct due dates and contact information.
• Follow Up on Late Payments: Use software notifications to track overdue payments and follow up promptly.
• Utilize Reports: Regularly run profit and loss reports to inform your financial strategy and decision-making.

What Is Invoice Tracking?

Invoice tracking refers to the process of monitoring the status of your inbound (you > client) and outbound (client > you) invoices. Its goal is to maintain absolute clarity in your cash flow to ensure you get paid your dues and do not end up in the red.

It is also one of the final parts of the larger invoice management process, which observes an invoice’s journey through your organization from creation/delivery, verification, approval, payment, and back-up. 

There are two main ways to keep track of invoices, which we will discuss in more depth shortly: manually (pen and paper, spreadsheets) or with invoice tracking software. But first, let’s take a closer look at how invoice tracking works in practice.

What Does It Mean To Keep Track Of Invoices?

Of course, the main thing you will be interested in when looking at a sent or received invoice is the payment status. However, there are several other pieces of information you should keep track of for effective invoice management. These include:

• Invoice Number,
• Transaction Details,
• Customer/Supplier ID,
• Invoice Due Date.

We’ll discuss the best way to organize invoices and track billing a little later. For now, just remember that you should always track and update invoice details in a single centralized location/software so you never miss (out on) a payment.

The Importance Of Tracking Invoices For Businesses

Obviously, making sure you get paid on time is one of the main drivers for investing time and thought in your invoice management efforts. However, there are several more reasons why you should make invoice tracking a priority. These include:

1. Avoiding Delayed Payments:
   Late payments are not uncommon. According to an independent survey, 54% of SMEs were forced to take out a loan due to missed invoice due dates in 2022, and far more businesses experience some form of late payment.
   Clearly, the negative effects are palpable. Missing payments significantly reduce agility in making business decisions, lower purchasing power, and can even affect personal wealth (self-employed, sole traders).

   Tracking invoices and payments and being able to anticipate potential issues ahead of time is crucial in avoiding delayed payments. To combat them even more effectively, check out our Guide to Unpaid Invoices in 2024.

2. Avoiding Late Payment Fees:
   One of the tips we give to punish and discourage future late payments is incorporating Invoice Terms & Conditions for late fees. So, if you miss a due date yourself, you shouldn’t be surprised if you get charged too.
   Beyond the emotional hardship that comes with paying an easily avoidable fee, unexpected costs like these impact your business just as negatively as standard late payments.

   Because of that, implementing processes or an invoice tracker app that can handle account payables (AP) as well as account receivables (AR) is key if you work with consultants, suppliers, and other vendors

3. Cultivating Better Customer Relationships:
   In a certain sense, the current economic structure is no different from the quid-pro-quo barter system of the past. You treat your customers well, they’ll do the same, and vice versa.
   By staying mindful of your obligations and keeping track of due invoices for both yourself and your clients, you’ll nurture a culture where neither of you has to worry about errors or scams disrupting your business operations.
4. Simplifying the Tax Season:
   They say there are only two sure things in life – death and taxes. And since we’ve all come to accept that there’s no avoiding them, the best thing you can do when tax season rolls around is to make the process as easy as possible.
   An automated Excel/Google sheet or invoice tracking software can help you achieve this by calculating your total revenue and expenses and making filling out your tax forms a complete breeze.
5. Improving Overall Business Efficiency:
   Whether you work alone, have an accountant, or employ an entire finance team, saving hours on repetitive tasks is nothing to scoff at. It allows your company to react faster and accomplish more tasks simultaneously.
   Furthermore, if you track payments, you also get a better insight into your expenses, which allows you to optimize your spending to avoid unnecessary costs and strengthen your bottom line.

What Details Are Important To Track On An Invoice?

As we’ve mentioned earlier, there is more to invoice tracking than whether a document’s been paid or not. Below, you’ll find a comprehensive overview of all the information your invoice tracker app/solution should monitor and why. 

Invoice tracking information to keep an eye on:

• Invoice Number:
  Identifies in what order and to whom (depending on numbering strategy) an invoice was issued. Vital for tax purposes.
  
• Invoice Date:
  Specifies the date when the goods or services were provided, helping to establish the timeline for payment and ensuring accurate financial records.
  
• Invoice Confirmation:
  Confirms the receipt and acceptance of the invoice by the customer, ensuring clarity and avoiding disputes over billing.
  
• Invoice Due Date:
  Indicates the deadline for payment, facilitating timely transactions and preventing delays or late fees.
  
• Payment Status:
  Tracks whether an invoice has been paid, pending, or overdue, providing insight into cash flow and outstanding liabilities.
  
• Payment Date:
  Records the date when payment was made, aiding in financial reconciliation and monitoring transaction timelines.
  
• Method of Payment:
  Specifies the mode (e.g., cash, credit card, bank transfer) used for settling the invoice, facilitating accurate accounting and financial analysis.
  
• Customer Information:
  Includes details such as name, address, and contact information of the customer, essential for communication and maintaining accurate records.
  
• Invoiced Items & Descriptions:
  Lists the goods or services provided along with their descriptions, ensuring transparency and enabling verification of charges.
  
• Tax Information:
  Specifies applicable taxes (e.g., sales tax, VAT) included in the invoice amount, ensuring compliance and accurate financial reporting.
  
• Penalties & Discounts:
  Highlights any late payment penalties or early payment discounts, encouraging timely settlements and managing cash flow effectively.
  
• Payment Receipts:
  Provides evidence of payment received, serving as proof of transaction and facilitating reconciliation with accounting records.
  
• Aging Reports:
  Displays the aging of outstanding invoices, helping to prioritize collections and manage cash flow effectively.
  
• Reconciliation:
  Involves matching payments with corresponding invoices, ensuring accuracy in financial records, and identifying discrepancies for resolution.
  

How To Track Invoices & Payments In 3 Simple Steps

So, by now, you should know what invoice tracking is and what it involves, but not how to do it yet. It’s time we change that. Below, you’ll find all the information you need to start tracking invoices and payments effectively. 

#1: Choose The Right Tool For The Job

We’ve mentioned earlier that there are three main ways you can keep track of invoices: manually, with spreadsheets, and via invoice tracking software. However, choosing may require more thought than you’d expect. 

We’ll dedicate a stand-alone section to contrasting spreadsheets and invoice tracker apps a little further in the article, but we can tell you right now – go digital. 

Printing out invoices and keeping track of them via pen and paper has been a relic for a long time and for very good reason. It’s time-consuming, inefficient, prone to errors, and far from ecological (if you care about sustainability).

Digital spreadsheets are at least easily editable and shareable and can offer some automation. They’re also very affordable since Microsoft, Apple, and Google all offer their solution for free, though they tend to take some getting used to.

Meanwhile, invoice tracking software like Billdu can do it all, including quick document generation, automatic tracking, payment reminders, accountant collaboration, and much more. They’re also easy to use but cost money.

At the end of the day, the decision is yours. However, it should be based on your operation size, budget, and overall feature needs and wants. 

#2: Track Payments

After you’ve picked out your tool of choice, it’s time to start tracking. We recommend checking out a few guides on formulas if you opted for spreadsheets. If you decided to invest in an invoice tracking app, you should be ready to jump straight in.

At this point, you’ll want to consolidate all your invoices (at least for the current tax season) in the new system, along with all the information outlined in the previous section. From there, it’s all about maintaining momentum.

Each time you issue or receive a new invoice, input it into your tool and track its progress until it’s finalized. Make sure to highlight the due date and status to guarantee nothing’s forgotten.

#3: Regularly Evaluate Results

As shown at the beginning of this article, sometimes invoices fall through the cracks, and even big companies make mistakes. That’s why it’s important to schedule a review at least once per quarter (though we’d advise doing this on a monthly basis).

Contrast your tracking system against your company bank account to make sure all payments are accounted for (both inbound and outbound). Double-check you received the money you were supposed to and didn’t forget to pay anything yourself.

And if you find anything that doesn’t add up, make sure to rectify the situation as quickly as possible, whether it be through an email, call, or late fee notice. 

Invoicing Software For Tracking Invoices

Ready to kick-start your journey into invoice tracking? In that case, let’s start with the first step explained above and give you some vital insights into the options you have.

Spreadsheets Vs. Billing Software Comparison Overview

What You Should Know About Reminders & Follow-Ups

As we’ve said before, the chances of you avoiding late payers altogether are slim at best. Therefore, it’s vital you prepare for this eventuality and know how to resolve the situation as quickly and professionally as possible.

• Invoice Tracking Software:
  If you use an invoice tracking app like Billdu, the process is fairly simple. First, you notice in your system that an invoice is close to or past its due date. So, you hover over the “•••” button and click “Send Reminder”.
  
  At this point, a window will open, allowing you to write an email right in the interface. You should choose an eye-catching subject line, such as “Urgent: Your Invoice #1234 Is Due Soon,” and elaborate further in the body.
  
  And then you just hit send. If that doesn’t work, you can always check out our Guide to Unpaid Invoices in 2024 for more ideas on how to move forward and ensure you get paid.
  If in the meantime, the invoice gets paid, you’ll be notified automatically and see the updated status in Billdu.
• Microsoft/Google/Apple Spreadsheets:
  If you opt to work with spreadsheets, you don’t get the advantage of a fully automated reminder system, so you’ll have to do most of the work yourself.
  In other words, once you notice an invoice you should check on, you’ll have to look up the document, find the client information, and find their corresponding contact in your email system.

  After that, you’ll want to write an email like the one outlined above and hit send. From this point, you’ll have to continue checking your inbox and company account for any signs of a payment or update.

  If and when you know more, you’ll have to update your spreadsheet and continue until the payment is finalized. In case you have any trouble, you should still check out our guide on this topic, linked above.

What You Should Know About Storing & Backing Up Data

After investing so much time and effort into tracking your invoices and payments, it’s good to make sure you don’t lose them. A lost laptop or tripped cable combined with some bad luck can cost you hours of work at best and a lot of tax trouble at worst.

• Invoice Tracking Software:
  Accounting solutions like Billdu offer a wide variety of security features, including encryption, firewalls, and even automatic backup servers. And since all your data is saved in the cloud, you don’t have to worry about data.
  

• Microsoft/Google/Apple Spreadsheets:
  Spreadsheets are a different story. While Google’s Sheets and Apple’s Numbers will sync automatically to your cloud (assuming you have access to this feature), an unfortunate misclick or targeted attack can still ruin your data.
  
  The situation’s even worse if you save your spreadsheets locally, as is often the case with Microsoft Excel documents. In those situations, you’re as vulnerable as you can be, which means you have to take precautions.
  
  Ideally, you’ll want to share the documents with multiple people/devices. But if you work alone and only have a single dedicated device, your only option will be to create a manual backup and hope for the best.
  

4 Tips & Best Practices For Billing The Best Way

If this article showed you anything, it’s that there’s a lot that goes into invoicing efficiently. Ensure the entire process works as well as your invoice tracking, and start using these 4 tips today.

• Integrate Invoicing w/ Accounting:
  Automation is the best way of making invoicing easy. Tools like Billdu can directly integrate with your bank account to compare statements against tracked invoices and update information to save you hours each month.
  
  Alternatively, you can invite your accountant to oversee and maintain your Billdu account for free as part of your subscription and let them worry about the entire process. No more email back-and-forth necessary.
  

• Offer Multiple Payment Methods:
  A common reason for late payments is restrictive payment methods the client may not be comfortable with. Start offering online, card, QR, and transfer payments to maximize your chances of getting paid on time.
  

• Write Down and Discuss Invoicing T&C:
  Terms and conditions are crucial in communicating to clients how your business works regarding delivery, payments, and late fees. Implement general or custom T&Cs for each client for even better cooperation.
• Drive Continuous Improvement:
  There’s no shame in not getting everything right on the first try, but there’s also no excuse for tolerating bad practices. Make sure to review your process regularly, evaluate what works, and fix what doesn’t. 
  

Streamline & Simplify Your Invoicing With Billdu

Throughout this article, we’ve eluded multiple times to the fact that Billdu’s invoicing software might be one of the best ways to create financial documents, track invoices and payments, and ensure your data security. But that’s not all.

Depending on your subscription tier, you can automate recurring invoices, implement online payments (Google/Apple), send payment reminders, track expenses, and much, much more.

And the best part? You can do it completely remotely on any device via Billdu’s app and for 30 days completely free, regardless of which plan you want to try. So, if you take away one more thing from this article, it’s that you should check out our plans!

Conclusion

Invoice tracking is no simple task. But considering how vital of a process it is for keeping your business afloat, perhaps that’s only right. At any rate, you now have all the information you need to get started.

Remember, stay away from pen and paper, choose a tool that fits your budget and needs, don’t underestimate late payments and data backups, and give Billdu a try! And with that said, all we can do is wish you the best of luck. Happy tracking!