Invoicing: Paid vs Free software

Many of the vendor really do want you intwined in their ecosystem of apps, which might suit some, but would generally prove painful when switching a vendor at a later date.

Some of the notable considerations when selecting a invoicing supplier would be:

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, no not really. How does it work and how does the vendor make money? Typically, your created invoices go to your customers with a payment link. They may not provide Pay by Bank details, so that you could be paid bay BACS (for free) via your 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 havent an established relationship defined.

Clearly if you are supplying an established business that has an accounting payment process, then payment links wont be of much use.

Additionally, the processing fees are quite high, so always check the rates. You wont get the full value of your invoice from your customer.

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 price. QuickBooks does this a lot, offering 75 or 50% off then beefing up the price. Using an invoicing software system using 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 dont display tax in their headline rate. So, a 3 a month becomes 12 a month in 4 months which is actually 14.40 with VAT applied. Hmmm, thats some way from 3 a month advertised. Worse still many small businesses arent VAT registered so cant claim the VAT back.

Know and plan what your payments will be.

Zero monthly fees, % on invoice transactions

Some firms dont 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. If you are billing more than 500 a month it might be more cost effective to select a paid monthly vendor.

Payment card readers.

If you are invoicing in arrears to established businesses then this probably wont make much sense to you. The invoicing software is might be good, but if its tied into the card payment platform then its usefulness is diminished.

Get paid quicker... oh really!

Some of the vendors on this list claim that by using their tool you will magically receive your payments quicker or on time, it wont. When you get paid is pretty much put of your hands. Getting paid on time is about your contractual agreement with your customers not youre fancy invoicing software Building trust and respect with your customer & enforcing late payments might work better.

101 features you dont want (or will use).

Many of the companies in this roundup 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 wont be used for many smaller businesses.

Buy the software that meets you needs. Paying more doesnt necessary benefit you, especially if the features are designed for larger companies and dont impact you straight away.

Invoicing software that only works on your smartphone.

Some of the highly rated invoicing app 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 difference functionality dependant on the platform you are using. You need to check that your chosen software works anywhere.

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 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.

Restrictions that dont make sense

Some vendors put restrictions on operating usage (on their platforms) in a bid to convince you to upgrade to a more profitable plan. Clearly you cant get paid unless you invoice, so think hard when selecting a budget plan as you may need to upgrade sooner than you think.

The list of vendors can generally be grouped into two types:

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

Some free vendors dont charge you a monthly fee but they charge a percentage on the invoice you have billed your client. Typically, you generate invoices and check youve been paid via their platform. You wont get paid via your own bank directly. The vendor takes their fee before they pay you.

Some free vendor convince you payment links are you best bet & they make a percentage from your invoice amount.

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 wont 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 list 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.

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