Invoicing software vs. Excel
As a business owner, you may have noticed that there’s an abundance of different programs available to help businesses create invoices. It can be overwhelming to find the ideal invoicing solution for your business.
Many small businesses opt to use Word or Excel invoice templates, while others prefer to use software that was specifically designed for creating invoices.
This article explores the benefits and drawbacks of using Excel and invoicing software and explains how to find the best invoicing software for your business.
Invoice requirements and localisation
Invoices are an official request for payment that are sent from a business to its customers when payment for a sale is due. There are mandatory invoice fields that must be included for it to be considered valid.
If you use Excel to create invoices, you’ll need to ensure that the mandatory fields are input correctly. If any of the fields are missing, or any data is incorrectly entered, it will take you twice as long to fix. You’ll also need to keep up with any changes in local regulations and tax rates.
On the other hand, invoicing software will make sure that your invoice is fully compliant prior to sending it to your customer. In addition, most invoicing software is localised for each country and will be updated regularly if there are any changes to invoicing regulations or tax rates.
Automated invoices
Compared to Excel, invoicing software automates a lot of the fields for you. You can upload customer and product lists for quick selection instead of having to manually type in or copy & paste a customer’s name and address.
Each invoice also needs to include a unique invoice number and your numbering sequence can’t contain any gaps or repeats. With Excel, you’ll need to check the invoice number for each invoice to make sure that it’s correct. If you skip or repeat a number, you’ll need to cancel the invoice with a credit note and create a new invoice from scratch.
With invoicing software, invoice numbers will be automatically generated and follow a sequence. Also, fields like the invoice date, due date, and payment terms can automatically be filled in for you.
VAT
If your business is registered for VAT in the UK, you’ll need to issue VAT invoices to your customers. VAT invoices require more information than non-VAT invoices, and this is where many businesses make invoicing mistakes. There are also several different VAT schemes available that may require a different invoice format.
HMRC is very strict when it comes to VAT reporting. If you miscalculate VAT on a single invoice, it can affect your tax return and may cause you to incur fines. Even the smallest mistake can be very costly to fix.
With Excel, you can use formulas to auto-calculate your totals and VAT, however, it’s recommended that you always double-check your numbers and VAT rates prior to sending it to your customer.
With invoicing software, the VAT is calculated automatically, and you can select the different VAT rates accordingly. The totals are added up automatically for you, and some software will even automatically create your VAT Return so you can submit it to HMRC in a few clicks.
Invoice customisation
Customising your invoices is a great way to market your business and set you apart from your competition. With both Excel and invoicing software you can create your own custom professional invoices.
With invoicing software, you can select a premade template, colour scheme, logo, fonts, and images. With Excel, it’s a little more difficult as everything will need to be placed manually and formulas would need to be input correctly for the amounts to add up.
Invoicing to foreign customers
If you invoice to customers in foreign countries, invoicing software can make this process seamless. Most software will allow you to change the invoice language and currency in just a few clicks. Again, invoicing software is localised and will know what’s required on foreign invoices and will make sure it’s compliant.
Excel does not offer this functionality. If a customer wishes to be invoiced in another currency, you’ll need to find the current exchange rate and calculate it yourself. In addition, if your customer requests the invoice in a different language, you should find a qualified translator because online translators are not always correct.
Offering invoices in your customer’s local language and currency offers many benefits. It shows that you’re willing to go the extra mile and minimises any confusion between yourself and the customer.
Recurring invoices
If your business offers recurring services and issues the same invoice on a regular basis, this is where invoicing software has a major benefit compared to Excel.
Invoicing software allows you to set up automatic recurring invoices with a schedule of your choice. Once set up, your recurring invoices will be created and sent to the customer automatically without you having to lift a finger. If you prefer to check the invoice before having it sent to the customer, most software will allow you to do this as well.
On the other hand, Excel doesn’t offer an option for recurring invoices. Each invoice will have to be created and sent manually to the customer.
Keeping records of your sales
Another important aspect of invoicing software is how your invoices are saved. In the UK, you need to keep a record of your sales for at least 6 years from the end of the tax year they relate to.
With Excel, you need to download the invoice to your computer and then send it via email or by post. If your invoices are saved to your computer hard drive, you risk losing your data if your computer crashes. It’s recommended to upload your data regularly to cloud-based software so you can access it from any device.
There are a variety of different types of invoicing software, but nowadays, online cloud-based software is the norm. This means that as soon as you create your invoice, it’s saved to the cloud and can be accessed from any device. Therefore, there’s no risk of losing your invoices if your device crashes.
Customer support
Another way that invoicing software surpasses Excel is the customer support and documentation that is provided.
Most invoicing software offers free customer support or documentation such as tutorials, blogs and help guides.
Customer support agents are knowledgeable not only about the software but also about invoicing regulations and accounting practices. Using these resources can help you get any questions you have answered quickly and accurately.
Additional sales documentation
Invoices are only a single part of the sales process. There are other documents that you might issue to your customers, including quotes, payment receipts, delivery notes, proforma invoices and credit notes.
Since Excel is not specifically designed for creating sales documentation, each document will need to be created manually. However, invoicing software can help you create and issue several different documents, from initial quotes to payment receipts.
Invoicing and accounting integration
Some invoicing software will also have accounting features. This may include reports such as the balance sheet and profit and loss statement, or bank reconciliation. This will help you to reconcile your accounts and complete your tax return.
Summary - Excel vs. invoicing software
Excel is a useful tool if you only occasionally issue invoices, however, invoicing software is specifically designed for creating professional, compliant invoices quickly. Invoicing software offers many advantages and is a good option if you issue more than a couple of invoices per month.
SumUp Invoices is invoicing software that helps you create and send valid invoices in less than 1 minute. You can add your business logo, issue quotes, invoice in foreign languages and include an online payment link directly on your invoice.
If your small business prefers to use Word or Excel to create invoices, you can download our free Word or Excel invoice templates.