9 worst pitfalls when choosing invoicing software

If you want a direct replacement for your trusty MS Word created invoices you might be in for a shock. Many of the invoice vendors only want you ensnare into their ecosystem of apps, which might suit some, but can prove painful when switching a vendor at a later date. 

But that's just the beginning. Let's have a closer look at the issues when selecting an invoicing vendor.

#1 - Payment Links

Some of the firms that offer a “free” service indeed provide tools to create invoices at no cost. But is it really free? Well, look closer and for many you find out that, not really.

How does it work and how does the vendor make money? Typically, your invoices are automatically sent to your customers with a payment link. Your customer pays the invoice, the invoicing company take a fee and the balance is sent to you at some point in the cycle. Even more worrying is that you may not get an option to get paid (for free) via your own bank.

Payment links might work better if you are selling to consumers and not established businesses, and it might be easier to get the money up front if you haven’t an established relationship.

Clearly if you are supplying a business that has an accounting payment process already, payment links won’t be of much use to you. Remember too that paying to get paid is intrinsically "bad business" and very annoying.

Additionally, the processing fees are quite high, so that “free invoicing” claim doesn’t really hold water.  

#2 - Check the price you pay includes everything.

Another tactic of invoicing vendors is to offer cheaper initial deals for a defined period like 3 or 4 months, then returning to a normal prices. QuickBooks does this a lot, offering 50% or even 75% off. Using an invoicing software system usually means using it for many months and even years. Consider the price factored over 24 or 36 months to get a better idea of real world cost. 

Many companies also don’t display tax in their headline rate. Worse still, many small businesses aren’t VAT registered so can’t claim the VAT back. Best bet, know and plan what your payments will be over the whole year.

#3 - Zero monthly fees, % on invoice transactions

Some firms don’t charge a monthly fee for using their service at all. Sounds great huh? Well, instead they charge a percentage of the invoice amount as a transaction charge.

The problem with this is that the transaction charge on multiple invoices soon rack up, and could cost you more in the long run. Sometimes the break-even point is as little as £240. So, if you are billing more than £500 a month it might be more cost effective to select a paid monthly vendor with a lower headline percent charge for payment links, 

#4 - Payment card readers.

If you are invoicing in arrears to established businesses then this probably won’t make much sense to you. The invoicing software might be good, but if it’s tied into the card payment platform then its usefulness is diminished.

There are better choices. 

#5 - Get paid quicker…yeah right!

Some of the vendors claim that by using their tool you will magically receive your payments quicker or on time. It won’t. Really it won't

If you are sending invoices to your customers, when you get paid is pretty much out your hands. We are not really talking about late payments either. 

Getting paid on time is about your contractual agreement with your customer, not you’re fancy invoicing software. It’s about building a relationship of trust & respect with your customer. You will stand a better chance of getting your invoices paid on time if you are valued by your customer. Building trust and respect usually works better.

#6 - 101 Features you don’t want or use.

When you run a search for invoicing companies, many of the companies being returned are "full-on" account software vendors. As such, they offer lots of features that say “a plumber” might never need (such as multiple currencies or forecast cashflow and advanced reporting). Whilst this may be essential for larger international corporates, it won’t be used for many smaller businesses. 

A better tactic is to use software that meets you needs right now. Paying more doesn’t necessary benefit you, especially if the features are designed for larger companies and don’t impact you straight away. You may not know how you business will evolve so its best not to burden yourself with high subscription charges.

#7 - Invoicing software that only works on your smartphone.

Some of the highly rated invoicing apps only work on your phone. For many the flexibility of being able to create invoices on any devices is of primary importance. Sometimes vendors offer slightly different functionality dependant on the platform you are using. 

You need to check that your chosen software works anywhere. On your work laptop and your phone, accessing the same data with the same functions & processes. 

#8 - I’m a business owner, not an accountant

A general observation regarding established accounts platforms, is that many are targeted at accountants and not business owners. They use industry technical terminology that you may not understand or care about.

Technical products pitched at small businesses or start-ups should adjust their language to suit the market, or customers may be put off, or worse intimidated by technical jargon. Go with a vendor that you can understand,

#9 - Crazy restrictions that don’t make sense

Some vendors put restrictions on operating usage (on their platforms) in a bid to convince you to upgrade to a more profitable (for them) plan. Clearly you can’t get paid unless you invoice, so our advice is think hard when selecting a budget plan as you may need to upgrade sooner than you think.   

Some restrictions to be especially wary of are, are when you can only have 3 "live" customers or limits on how many invoices you can create in a month.  best to avoid or select an unrestricted plan.

Conclusion

Invoicing companies can generally be grouped into two types:

• Free to use software (no monthly fees) 
• Pay monthly software (subscriptions).

Many free vendors don’t charge you a monthly fee but they charge a percentage on the invoice you have billed your client. Typically, you generate invoices and check you’ve been paid via their platform. You won’t get paid via your own bank directly. The vendor takes their fee before they pay you.

Pay monthly platforms charge a recurring fee usually monthly, and many are long established accounting platforms that supply large corporates & small businesses alike. Many of these vendors have mature products offering advanced features such as banking feeds for statement reconciliation and automatic MTD HMRC submissions.   

However, many small businesses and charities might already have accounts software with many years of data. Many won’t want the effort to migrate to a different accounting platform.  

Additionally, many small businesses that are creating their invoices using a MS Word templates (or similar), and want a direct replacement, may find the popular invoice vendors lacking. For those businesses that just want an app to create and send invoices to customers, use their own bank account to take payments and not be tied into a corporate ecosystem, the options are fewer.  

Still confused?

I’m not surprised, selecting an invoicing vendor can be a challenge, but it needn’t be.

Envoyce is a free & open invoicing platform that is focused on its ease of use and efficiency. At Envoyce, we have no shareholders and our primary desire is to improve the invoicing experience. We offer an unrestricted base platform with paid add-ons as you need them. 

Try Envoyce today, sign up here.