Invoicing & Automatic Reconciliation
The consequence of a growing business is its ability to manage their business process which is most likely changing when the company is growing bigger. With more and more orders and payment transactions taking place both online and offline, a business’s accountants will need more help in keeping track of the cash flow, invoicing, and reconciliation of each transaction being made. It is extremely difficult to manage this with just a spreadsheet or with multiple softwares since it requires accountants to work carefully with unsynced data. A system needs to be put in place to synchronize data and automatically reconcile payment transactions and create invoices to compensate for a business’s growing number of transactions.
What is reconciliation and why is it important?
Reconciliation is an accounting process of comparing a transaction and balance (the internal financial records of a business) to a bank statement provided by the bank. According to Investopedia, this process is to ensure that the actual amount of money spent or earned by the business matches the amount shown leaving or entering the account at the end of the fiscal period. To do so, businesses will have to verify every transaction individually which is usually done every month, but for businesses that deal with a higher volume of transactions, reconciliation could be done daily to avoid any fraudulent activity.
What is an Invoice?
One such document used to match payment transactions in the reconciliation process is an invoice. An invoice is a document that records a transaction between a seller and a buyer. It generally records the payment terms, product price, shipping cost, the basic contact information from both the seller and the buyer, and any other terms agreed on in the transaction.
There are some common mistakes and problems involved in the process of reconciliation and invoicing. Businesses need to consider these challenges and consider solutions for them to ensure they do not face any cash flow issues.
Creating an invoice requires you to input the basic information of the buyer and seller including the contact name, address, phone number, email and more. If the information is wrong, you would be sending the invoices to the wrong people. In addition, numerical errors like wrong prices or writing the wrong invoice number is a big deal because it is used for classification and buyers usually won’t pay for the invoice if it has an incorrect price written. Typing these basic yet extremely important information manually can take a lot of time and have the potential of errors that your business needs to watch out for. Additionally, many businesses pay way past the due date written on the invoice. This can lead to major losses and disruption of cash flow for companies.
As reconciliation is the process of comparing documents, it will take a lot of time to reconcile every single document by the end of the month or even daily if a company has a high volume of transactions. More importantly, if this process of reconciliation is done manually using multiple softwares, the chance of errors to occur is high.
With the growth of technology, the automation process has been expanded and many businesses are starting to use it. This process extends to the accounting processes as well.
To avoid any errors in the invoicing process, your business should consider a system that can automatically generate an invoice that customers receive, either online or offline, without having to type in the basic information of the invoice manually. Additionally, they should not forget to follow up on payment due dates with their customers to avoid problems with the incoming cash flow.
The laborious work of checking every single transaction manually can be simplified with an automatic reconciliation process. It would also help tremendously if there is only one software or system to manage the accounting process so that the system could easily and clearly recognize the documents which can then be automatically reconciled.
Having an automatic reconciliation and invoicing process will greatly reduce the risk of errors and reduce time spent on typing information and comparing cash flow documents manually. Odoo offers a solution to avoid manual inputting and provides an automation process. Creating a professional looking invoice based on quotes, sales, or purchase orders can be done with just a click in Odoo’s sales and invoicing app. When creating a new invoice, if the basic information of the recipient is set up beforehand, Odoo will automatically input all the information of the recipient. The invoice number will be made unique for every invoice as well. In addition, when creating invoices from a sales or purchase order, the quantity, price of goods, shipping price, and other important information from the sales or purchase order will automatically be inputted in the invoice without having to input it again manually.
Moreover, Odoo has the option to follow-up on payment due dates to remind customers to pay their invoices. Businesses can plan follow-up actions and how it’s triggered when the due date of an invoice has passed a certain number of days. The reminders include sending an email, sending a letter, and a manual action option.
For the reconciliation process in Odoo, the finance user imports a bank statement to Odoo. Odoo will recognize the bank statement line and will suggest a match with an outstanding invoice or bill that was previously recorded in Odoo. When the finance user reconciles the bank statement, the system automatically creates a reconciliation journal for that transaction.
IZI Marketplace Module
To take it even further, IZI has developed a module in Odoo known as IZI marketplace. With IZI marketplace, whenever a customer orders and pays for a product from a business’s online store, an invoice will automatically be created and confirmed without the user having to click on the create invoice button.
Similarly in IZI marketplace, the balance history from the online marketplace can be pulled to Odoo’s system and will be recorded as a bank statement. The system would then automatically reconcile those bank statements with the outstanding invoices or bills based on the invoice number. All the reconciliation journals will automatically be created as well.
Looking at the service that Odoo provides, it is clear that utilizing Odoo’s automation process can help your business manage the invoicing and reconciliation process easily. Avoid human errors, reduce time spent in reconciling documents, and keep your cash flow running smoothly by using Odoo. Start your Odoo journey here.