Invoicing plays a crucial role in the administrative side of running a business. Having an efficient system within which to create, fact-check, send out, and regulate payments is what keeps cash flow consistent and customers feeling like a top priority.
But while invoices were once a fairly straightforward, paper-based affair, the businesses of today are tasked with choosing from a much wider variety of technology-based options for billing.
Both digital and electronic invoices are popular amongst IT and web development companies, largely because of their speed and effectiveness. But digital and electronic invoices are not the same thing, and each of them comes with its own pros and cons.
In this post, we’ll take a closer look at the main differences between these two popular invoice varieties and discuss which one might be better for startups in the IT and web development industry.
Digital Vs Electronic: The Difference Between Digital And Electronic Invoices
If you’ve spent your entire career thinking that electronic and digital invoices are the same thing, you’d be forgiven. Their names alone are very similar and draw to mind an almost identical concept. However, these two invoice types actually possess a number of notable differences. Let’s talk about definitions:
- Digital invoice – A digital invoice is any invoice that comes in the form of a digital file. Typically this is a PDF, but it could also be a JPEG or even a PNG. It’s designed and created manually by a person.
- Electronic invoice – An electronic invoice is a digital invoice created by an automatic invoicing system. It’s typically created, edited, secured, and in some cases, automatically sent off to clients on a company’s behalf.
Both of these different types of invoices come with their own unique benefits and downsides. Let’s examine each of them a little closer so that your tech startup can make a choice that best aligns with your budgetary and client needs.
The Pros And Cons Of Digital Invoices
Digital invoices are highly accessible and easy to create. You don’t need any fancy technological equipment to make them, and they meet all the necessary criteria for contemporary billing systems. Digital invoices are a completely acceptable and valid choice for startup companies to use.
You can use Microsoft Word to make your own digital invoice template from scratch or use a free invoice online platform to perform the same function. Once created, you can store these invoices in the cloud so that all stakeholders have access to them.
In this sense, opting for digital invoicing as a young IT or web development business is a great idea. There is no cost involved. They look professional and high-quality. The design process only requires basic knowledge, and each one can be tailored to suit the exact needs of your startup business.
However, there are some cons to digital invoices worth noting.
First, creating invoices manually can be a time-consuming process. Your team might not want to waste so much time on invoicing when you could be working on other projects. Especially if they’re more technical than accounting or admin orientated.
Second, unless you have a natural eye for design, the task of creating a layout that looks visually appealing might be a struggle.
Another potential issue is that the human eye can’t always be relied on to spot errors or typos, which can lead to unprofessional inaccuracies that delay payments and negatively impact brand perception. But overall, it’s a simple and affordable option that ticks all the basic billing boxes.
The Pros And Cons Of Electronic Invoicing
Electronic invoicing (also known as e-invoicing) is like a more evolved, high-functioning version of digital invoicing. Instead of working on each invoice manually, e-invoicing takes each step of the billing process into its own hands, from the development of the document to the storing and sending out.
This leads to a variety of major pros, such as improved invoice security, reduced likelihood of human error, faster payment processing, less time spent on accounts management, and a higher overall level of customer satisfaction. They also come with a wide variety of other billing tools that make admin easier.
But naturally, not even e-invoicing comes without a couple of cons.
For one thing, many of the best electronic invoicing options available online cost money, typically between $15 and $30 per month. Very few startups have money to spare, which makes this aspect of e-invoicing impractical. There may also be some new systems to learn or upskill for, which can take time.
But when it comes down to it, electronic invoicing is a more efficient and productive choice for managing client bills and performing general financial administration.
Digital For Now, Electronic For Later
Now that you understand more about what separates digital from electronic invoices, let’s help you determine which option might work best for your IT or web development business in the earlier phases of its startup evolution.
Choose digital if: your startup is very new and working on a tight budget. Once you know how to make an invoice, digital invoices are a perfectly functional and acceptable approach to handling payments.
Choose electronic if: your startup is focused on delivering the highest-quality billing service to clients, and you have the budgetary leeway to do so. Big plus if the members of your team have experience with graphic design (which, if you’re in web development, you probably do).
There’s nothing wrong with starting small and opting for digital. Once your startup gains a little more strength and capacity for more advanced systems, electronics is a great target to work towards.
Conclusion: Digital Vs Electronic Invoices
Whether you’re a creative web development company or a small IT startup, every business needs a functioning invoice system, and there are plenty of great options available today.
While digital systems tick all the right boxes in terms of budget and accessibility, the variety of tools and design options that come with e-invoicing makes it the more efficient option.
The best approach is to start with digital and work towards eventually obtaining access to an electronic system. There’s no one-size-fits-all option when it comes to contemporary billing systems, but this guide might help you arrive at a decision that best fits your young business’ needs at this time.