What are the benefits of using electronic invoicing?

• Reduce Days Sales Outstanding (DSO). E-invoicing helps retrieve money more quickly from your customers, by reducing the amount of time wasted whilst your invoice is in the post. The average DSO for a business is between 40 and 60 days, but businesses which have used e-invoicing have reported a fall in their average DSO.
• Reduced print and postage costs. If invoices are sent electronically, money can be saved on the cost of paper, print cartridges, envelopes and postage.
• Reduced requirement for sending out copy invoices. The direct delivery of invoices to the customer's inbox minimises the likelihood of them claiming they have not received them or that they must be lost in the post. Time delays are minimised, as copies can be resent and received by them immediately.
• Faster dispute resolution. The sooner your customer receives your invoice, the earlier they can alert you to any concerns they have about their account or the amount due.

Issuing your invoices electronically

It is advisable to state your intention to invoice customers electronically in your contract and to ensure that they are able to receive communication by this means. For existing customers, write to them informing them of the change to your terms and conditions, and seek their agreement. Also verify the correct email address for the person responsible for making payments.

It is important to protect the authenticity and integrity of the invoice when sending it electronically. Therefore, your invoice should either be written into the email itself, attached as a protected word file or sent as a pdf document. Keep the wording and lay out the same as previous paper invoices to avoid confusion and, if possible, use delivery tracking to check that your email has arrived safely.

Print off and keep a hard copy of all invoices you send electronically as a back up.

HM Customs and Excise have issued a useful guide to Electronic Invoicing on their website.

Software

There is also a wide range of software available offering a more sophisticated means of invoicing your customers electronically. Software packages should ensure the secure delivery of your invoices, as they use encryption which prevents the email being read by a non-intended recipient.

Is email delivery of electronic invoices legally binding?

Yes. The Law does not distinguish between modes or methods of delivery.

Receiving payments by electronic funds transfer

BACS is the organisation established and owned by the major UK banks to provide the facility for transferring funds between them to settle payments.

An electronic file of payments is produced, either by you or a third party acting on your behalf, and is transmitted to BACS, which undertakes the transfer of funds.

This method of transferring money is referred to as 'Direct Credit', and can also be used for paying wages, pensions and employee expenses, amongst other transactions.

Benefits of receiving payment by electronic funds transfer

• Can reduce late payment, as your customers' payments are automatically deposited in your account on the agreed date;
• Money is delivered directly into your bank account, meaning you don't have to wait up to a week for cheques to clear. Cleared funds are available to you straight away;
• Reduces the chance of cheques being lost or stolen in the post;
• Saves you the trouble of depositing cheques at your bank.

Arranging for customers to pay by electronic funds transfer

Provided you and your customers have bank accounts, it should be possible for you to arrange for payments to be made by direct credit.

You should write to your customers to advise them that you wish to receive future payments in this way and provide them with your bank details.

Of course, it may be the case that your customer would prefer to continue making payments in the way that they have done to date.