Invoicing systems help businesses create and manage invoices. These systems often include features such as customisable invoice templates, automatic reminders for overdue payments, integration with accounting software, and detailed reporting. They are also an increasingly popular business solution, with the value of the billing and invoicing software market projected to increase from $4.3 billion in 2024 to $13.1 billion by 2031.

Below, we’ll explain what to know about invoicing systems: how they work, how to assess if you need invoicing software, and how to choose the right system for your business.

What’s in this article?

• Types of invoicing systems
  
• How do invoicing systems work?
  
• Do you need invoicing software?
  
• How to choose the best invoicing system for your needs
  
• How Stripe can help
  

Types of invoicing systems

There are numerous types of invoicing systems serving businesses of various sizes, with different needs, and across industries. Here are the main types.

Manual invoicing systems

These systems create invoices manually using word processing or spreadsheet software. The user fills in the details, calculates totals, and sends the invoice to the customer via email or mail. Manual systems are generally less expensive and highly customisable, but they’re also time-consuming to manage, prone to human error, and lack automation and the ability to integrate with other systems.

Spreadsheet-based invoicing systems

Spreadsheet-based invoicing systems use spreadsheet software such as Microsoft Excel and Google Sheets with predesigned templates. They might include some basic formula or calculation automation, but the input is largely manual. These systems are more organised than fully manual systems, customisable, and usually affordable. But they still require manual effort, are less efficient for high-volume invoicing, and lack payment tracking and other sophisticated features.

Basic invoicing software

Basic invoicing software offers the important features for generating, sending, and tracking invoices. These systems can handle recurring invoices, simple payment reminders, and some fundamental automation. They’re often user-friendly and accessible and offer more automation than manual methods. But they might not integrate with all payment and accounting systems.

Advanced invoicing software

Advanced software provides a comprehensive suite of invoicing capabilities along with features such as detailed reporting, automated tax handling, and integration with other financial tools. These systems are often on the cloud and accessible online, so businesses can manage their invoicing from anywhere. Advanced software offers a high level of automation, integration with payment platforms, support for complicated billing needs, and detailed financial insight. But it typically costs more than basic software options and might require some training for optimal use.

Enterprise resource planning (ERP) invoicing modules

ERP systems provide invoicing as part of a broader suite of integrated business management tools. These modules connect invoicing with many processes from supply chain management to human resources (HR). They provide a holistic view of operations and are highly flexible, so they suit large organisations with diverse processes. But these modules tend to be expensive and require substantial setup and management.

Custom invoicing systems

Custom systems are built to fit a business’s specific needs. Either the companies themselves or specialised developers build these systems to integrate perfectly with existing processes and workflows. While this can be a distinct competitive advantage, custom systems are costly to develop, can take longer to implement, and often require ongoing maintenance and support.

Mobile invoicing apps

Mobile invoicing apps are designed specifically for mobile devices and enable businesses to create and send invoices on the go. They are particularly useful for freelancers or small businesses that operate in highly mobile environments. These systems are extremely convenient but typically have limited functionality compared to full desktop or cloud-based systems.

How do invoicing systems work?

Invoicing systems can reduce manual work and provide more visibility into finances throughout the entire billing process. Here’s how they operate.

Invoice generation

Users often create invoices through customizable templates. They can input detailed information, including line items, variable tax rates, volume discounts, and specific payment terms. Advanced systems such as Stripe Invoicing go further by including dynamic fields, multi-currency options, and custom branding elements so each invoice reflects the business’s identity and needs.

Recurring billing

Invoicing software can automate recurring billing cycles for businesses with subscription models or repeat customers. This automation involves implementing flexible billing schedules, applying usage-based charges, and managing prorated fees. This feature creates a consistent, accurate billing experience while integrating with subscription management systems to handle upgrades, downgrades, and cancellations without manual intervention.

Delivery methods

Once an invoice is prepared, the system can deliver it via multiple channels including email, customer portals, and application programming interfaces (APIs) for integration with other client systems. This flexibility supports a range of client preferences for higher customer satisfaction and fewer barriers to prompt payment.

Payment processing

Modern invoicing systems are closely integrated with payment gateways and allow customers to pay directly from the invoice with their preferred payment method. With Stripe Invoicing, for instance, businesses can offer multiple payment options directly on the invoice and protect the payment process with Stripe’s fraud prevention features.

Tracking and follow-ups

Invoicing software offers real-time visibility into each invoice’s status – whether it’s sent, viewed, or paid. For overdue payments, it automatically sends follow-up reminders based on pre-defined rules, reducing the effort required to manage collections. This helps maintain cash flow without straining customer relationships and uses data-driven insight to balance assertiveness with customer care.

Tax compliance

Invoicing systems can dynamically apply the correct tax rates based on location and context, which helps businesses operating in multiple jurisdictions avoid compliance issues. Some systems integrate with tax software to stay up-to-date on new rates and rules and to further simplify the process of managing local and international tax obligations.

Payment reconciliation

By automatically matching payments to outstanding invoices, updating records, and flagging discrepancies, invoicing software facilitates the reconciliation process. This minimises the time spent on manual reconciliation and reduces the risk of errors. With built-in logic for handling partial payments, overpayments, and credits, the system keeps financial records accurate and up-to-date.

Reporting and analytics

Invoicing systems have comprehensive reporting tools for insight into payment trends, customer behaviour, and cash flow predictions. This data can help businesses identify patterns, refine payment terms, and make informed decisions to improve financial management.

System integration

For many businesses, the real power of an invoicing system is its ability to integrate with other tools such as accounting platforms, customer relationship management (CRM) systems, and ERP solutions. These integrations ensure that invoicing data flows across departments for greater transparency. This connectivity is particularly valuable for businesses that want to scale.

Do you need invoicing software?

Your business’s size, transaction types, and billing needs can all help determine whether or not you should use an automated invoicing system. ​​Here’s how to assess if invoicing software is right for your business.

Volume and frequency of invoices

If your business handles a high volume of invoices or sends them frequently (e.g., daily, weekly, monthly), invoicing software could add value. Automated invoice management can be faster, less prone to error, and less labour-intensive than other processes.

Subscription models

Businesses that operate on subscription models or offer services requiring recurring billing might benefit from invoicing software. An invoicing system can create a more consistent and accurate process for managing billing cycles and repeat invoices and for applying prorated charges.

Payment tracking and follow-up

If it’s becoming harder to track payments, send reminders, or follow up on overdue invoices, consider implementing invoicing software. Automated reminders, real-time status updates, and integration with payment gateways can reduce a team’s administrative burden substantially and help maintain positive customer relationships.

Billing structures

Businesses with billing structures that include tiered pricing, multiple tax rates, discounts, or international customers can benefit from a more advanced invoicing system. Software can manage these complicated billing rules, as well as compliance with local and international tax regulations.

Data integration

If your business relies on data across accounting, CRM, or ERP systems, an invoicing system that can integrate with these systems can be a major help. Integration can reduce manual data entry, minimise errors, and synchronize all financial data to clarify financial health.

Reporting and analytics

If you need more insight into financial performance metrics such as cash flow, payment trends, and customer payment behaviour, consider using invoicing software. These systems provide dashboards and reports that can inform decision-making and help you refine payment terms, manage cash flow, and identify potential areas for growth or improvement.

Manual errors and compliance

Invoicing errors can lead to costly mistakes, strained relationships, and compliance issues. If errors or inconsistencies occur frequently in your manual processes, a more automated invoicing system can help standardise your billing practices and automate calculations, reducing the risk of mistakes.

Scalability and growth

If your business is growing or if you anticipate scaling operations, relying on manual or basic invoicing methods can create a bottleneck quickly. Advanced invoicing systems can scale with your business without frequent reconfiguration.

How to choose the best invoicing system for your needs

Choosing the best invoicing system for your business depends on a variety of factors, from your specific billing needs to your budget and desired integrations. Here are some of those considerations.

Business needs

Consider the size of your business and your invoicing needs. A freelancer or small business might need only basic invoicing features such as customisable templates, simple payment tracking, and automated reminders. A larger company or one with more complex billing practices might require a more advanced system with automation, tax handling, and integration capabilities.

Core features

Think about the features that are important for your business. These might include the following:

• Automated recurring billing for subscriptions or repeat customers.

• Integration with payment gateways and payment processors for methods such as credit cards, Automated Clearing House (ACH) transfers, and digital wallets.

• Automatic tax calculations based on location and in compliance with local and international tax laws.

• Customisable invoice templates for standardised branding and adding specific fields, logos, and styles.

• Payment reminders and follow-ups to reduce overdue payments and facilitate collections.

• Reporting and analytics for insight into cash flow, outstanding invoices, and customer behaviour.

• Multi-currency and multi-language support for businesses that operate internationally.

Integration with existing systems

Look at how well the invoicing system integrates with your existing software stack. If you already use an accounting, CRM, or ERP system, the invoicing solution should be able to connect with these systems easily. For example, integrating with accounting software helps with automatic reconciliation, while integrating with CRM systems can improve client management and reporting.

Ease of use and user experience

Finding an invoicing system that’s easy to use is especially important if you don’t have a dedicated finance team or if multiple team members will interact with the system. A user-friendly interface, intuitive navigation, and comprehensive customer support can reduce the learning curve and improve system adoption across your team.

Costs and pricing structure

Invoicing software comes with different pricing models; some charge a flat monthly fee, while others might charge by the invoice or based on the number of users. Understand the total cost of ownership, including any hidden fees for additional features, payment processing, or premium support. Consider your budget and choose a solution that provides the most value without unnecessary costs.

Security and compliance features

Security is paramount when handling financial data. Ensure that the invoicing system complies with industry standards and regulations such as Payment Card Industry Data Security Standards (PCI DSS) for payment processing and the General Data Protection Regulation (GDPR) for data privacy. Look for features such as two-factor authentication, encryption, and secure data storage. This is especially important if you handle sensitive customer information or operate in highly regulated industries.

Scalability

Your invoicing system should be able to grow with your business. Consider whether the system can scale in terms of the volume of invoices, the number of users, or the complexity of billing processes. Find systems with flexible APIs, customisation options, and modular add-ons that can adapt as your needs change.

Customer support and onboarding

Customer support can make a major difference, particularly during the setup and onboarding phase. Choose software with strong support options such as live chat, phone support, tutorials, and comprehensive documentation. Some providers also have dedicated onboarding specialists or account managers who can help customise the system to fit your needs.

Industry-specific requirements

Some industries have unique invoicing requirements, such as medical practices that require compliance with the Health Insurance Portability and Accountability Act (HIPAA). If your industry has specific demands, find invoicing systems designed to accommodate these nuances or with custom options to fit your sector.

Reviews and recommendations

Research the experiences of similar businesses. Read user reviews, case studies, and testimonials to understand each software’s strengths and weaknesses. Seek recommendations from peers in your industry or professional network to gain real-world insight into the performance and reliability of different systems.

How Stripe can help

Stripe Invoicing is a cloud-based solution that allows businesses to create, customise, and automate invoices directly through the Stripe platform. It supports a range of features including one-time and recurring invoices, customisable templates, automatic payment reminders, multi-currency support, and subscription management. Here are the benefits Stripe Invoicing offers:

• Advanced features: Stripe Invoicing has advanced features including automated tax calculation, detailed reporting, and integration with a variety of business tools. It can handle complex invoicing needs such as high invoice volumes and complex payment schedules.

• Integration with Stripe products: Stripe Invoicing integrates with Stripe’s product suite, providing businesses with a unified platform for invoicing, payment processing, fraud prevention, and financial analytics.

• Automation and efficiency: Stripe Invoicing automates repetitive tasks such as sending recurring invoices and payment reminders and retrying failed payments.

• Flexibility: Stripe Invoicing can scale with small businesses, startups, and large enterprises alike due to its flexible API.

• Global reach: Stripe Invoicing supports more than 135 currencies and numerous local payment methods, making it a natural fit for businesses with global customer bases.

• Cloud-based technology: As a cloud-based software-as-a-service (SaaS) solution, Stripe Invoicing enables businesses to access invoicing functions from anywhere, manage invoices in real time, and adopt regular updates and security enhancements without managing on-premises software. Businesses can easily integrate it with other cloud-based systems and collaborate in real time.

Read more about Stripe Invoicing and how to get started.