5 Tips to Improve Invoice Accuracy & Streamline Factoring

Two in five invoices have at least one error, according to Ascend research. The impact of these errors weighs heavily on organizations and their clients plus can create additional issues for businesses that leverage invoice factoring. On this page, we’ll walk you through why your business should prioritize invoice accuracy, how it impacts invoice factoring, and tips to boost invoice accuracy so you get paid faster.

Why Accurate Billing Matters

Most people intuitively understand that sending accurate invoices impacts when and how those invoices are paid, but this only scratches the surface. Let’s take a deeper look at what happens when inaccurate invoices are sent.

Invoice Errors Increase Payment Delays

Currently, 55 percent of B2B invoices are overdue, according to Atradius research. That means if your company generates $250,000 per quarter (one million annually), $137,000 in payments will come in late. While a lack of liquidity is the leading cause, errors are a major contributing factor that can easily tie up tens of thousands of dollars of your money.

Invoice Accuracy Impacts Cash Flow

These payment delays impact your business’s cash flow, which can make it challenging to project cash flow, budget, manage payables, and more. These issues are more than an annoyance. Four in five business failures are tied to cash flow issues, per the National Federation of Independent Business (NFIB). Late payments can literally put your business at risk.

More Rejections and Non-Payments Occur When Errors Are Present

Sometimes, diligent customers catch the errors and send a formal rejection, while others simply don’t pay. The longer an invoice remains outstanding, the less likely your business is to receive any cash at all. Nine percent of all invoices are written off as bad debt, Atradius reports. That’s $22,500 per quarter lost for a company generating $250,000.

More Rejections and Non-Payments Occur When Errors Are Present

Invoice Accuracy Impacts Financial Reporting and Regulatory Compliance

Invoice errors don’t generally exist only on the individual invoice. The discrepancies also typically appear in your financial reports, which means your business may be making critical decisions with bad data. Because most businesses must file financial reports with various regulatory bodies, inaccurate reports can also create compliance issues and legal trouble for businesses.

Errors Diminish Customer Trust

Invoicing errors can break your hard-earned trust with customers and even cost you their business.

Invoice Accuracy is Crucial When Factoring

Invoice factoring provides you with immediate payment on your unpaid B2B invoices. Your invoice factoring company will verify each invoice before paying you so that any inaccuracies will delay payment. Serious discrepancies or ongoing issues may disqualify you from factoring altogether.

How Invoice Accuracy is Verified by Factoring Companies

You’ll typically submit your invoice to your factoring company through your online client portal, though some allow you to fax or email required documents. Once this occurs, your factoring company will attempt to verify the accuracy and authenticity of the documents you submitted. Each company has its own process for doing this. A few common methods are covered below.

Your Client’s Vendor Portal

Some large companies provide their vendors with a billing portal. If your clients offer this, you may be able to provide your factoring company with credentials to access the portal so they can verify invoices there. This method tends to be the quickest, and there’s generally no need for the factoring company to contact your client directly.

Signed Acceptance or Timecards

Each industry has its own standards. For instance, clients of trucking companies typically sign documents when a delivery is loaded or completed. Service-based businesses, such as staffing companies and security companies, often leverage timecards to indicate someone was on-site and billings accrued. Your factoring company may be able to use these types of documents when verifying invoices.

Email or Phone Call

When the first two options aren’t available, or there are questions, factoring companies may need to contact your clients directly to verify each invoice. This is usually handled via email or phone.

What Invoice Factoring Companies Look for During the Verification Process

During the verification process, factoring companies are looking for verification that:

  • The invoice is dated, and the date falls within guidelines (only newer invoices are accepted).
  • Payment for the invoice is due.
  • All products and services listed on the invoice were delivered.
  • All data, including the owed amount and business details, are correct.
  • The customer does not dispute any part of the invoice.

Common Issues During Invoice Verification

Although most invoices go through the verification process without a hitch, sometimes issues are caught. A few of the most common customer disputes involve:

  • Quality of services or goods.
  • Missing, damaged, or incomplete orders.
  • Administrative errors.
  • Inaccurate pricing.
  • Service or delivery dates.
  • Duplicate invoices.

What Happens When Invoices Fail Verification

Factors conduct verifications professionally and treat any interactions with your clients as if they’re taking care of their own clients. If issues like the ones covered above emerge, the factoring company typically lets the customer know that they’re bringing the issue to your attention and that your company will follow up. From there, your company will have an opportunity to correct the issue and can usually restart the verification process upon resolution.

5 Tips to Improve Invoice Accuracy & Streamline Factoring

Tips to Improve Invoice Accuracy

Now that we’ve covered the background, let’s explore some things you can do to improve invoice accuracy and ensure you get paid quickly.

1. Develop Standardized Processes

Determine in advance how your business will make decisions about pricing, contract terms, and extending trade credit. Invoices that follow your normal protocol are unlikely to have issues. When you deviate from the norm by offering select customers special terms, issues like pricing errors emerge. Also, develop processes related to invoice creation and management. Ensure your team is trained on all of the above and maintain written documentation for reference.

2. Digitize and Automate

If you don’t already have it, consider investing in CRM software to host all customer data, discussions, and documents. This will streamline communication between teams and allow you to automate many processes and avoid manual entry errors. Your CRM can also integrate with your invoicing software for greater time savings and accuracy.

3. Involve Sales and Accounting in Contracts

Even if your sales team is directly responsible for creating contracts and having the customer sign, ensure someone from your finance or accounting team reviews the contract and confirms everything is entered into your CRM or billing software correctly.

4. Maintain Clear Sales and Finance Documentation

Ensure your sales contracts are clear and that customers sign them and receive a copy. Do not rely on notes inside client accounts to share critical information. If your CRM doesn’t have fields for critical data, find out if you can add them to make it easier to track and search data and automate. Take advantage of drop-down menus and preset selections whenever possible to reduce errors at entry, too.

5. Audit Your Invoices Regularly

Go through your invoices at least once yearly and manually check them for errors. If you find any, identify why they happened and create a plan to avoid similar issues in the future.

Accelerate Invoice Payment with Factoring

Generating accurate invoices can help your business get paid faster. However, it’s not always enough, and cash flow gaps may occur, especially when your business is growing. Invoice factoring allows you to skip the wait and get paid immediately for your B2B invoices. If you’d like to learn more or get started, request a complimentary factoring rate quote.

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About Invoice Factoring Guide

Invoice Factoring Guide is your partner in navigating the complexities of invoice factoring in the United States, backed by a team with deep roots in alternative financing and decades of combined experience in invoice factoring. This platform, enriched by long-standing collaborations with top factoring companies and ongoing engagement with industry trade associations, delivers comprehensive insights into factoring services, agreements, fees, and more. Invoice Factoring Guide further aims to connect businesses across various industries with trusted factoring companies that understand their unique needs, offer tailored solutions, and are committed to being a partner in growth.
 
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