What is invoice software and how does it work?

Invoicing
Invoicing

Stripe Invoicing is a global invoicing software platform built to save you time and get you paid faster. Create an invoice and send it to your customers in minutes – no code required.

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  1. Introduction
  2. Why do businesses need invoice software?
  3. How does invoice software work?
    1. Creating an invoice
    2. Sending the invoice
    3. Getting paid
    4. Tracking and follow-up
    5. Reconciliation and reporting
  4. What are the advantages of using invoice software?
    1. It saves you time where it counts
    2. It protects your brand image
    3. It tracks invoice status
    4. It speeds up payments
    5. It drastically minimises errors
    6. It helps you manage cash flow
    7. It works with the tech you already use
    8. It scales with your business
  5. What features should you prioritize when choosing invoice software?
    1. Flexible invoice creation
    2. Integrated payment options
    3. Real-time tracking and notifications
    4. Tax and compliance management
    5. Customisable payment terms
    6. Automation and recurring billing
    7. Reporting and analytics
    8. API access and integrations
    9. Customer portal
    10. Scalability and global readiness
  6. How does invoice software integrate with accounting systems?
    1. Automatic transaction syncing
    2. Real-time updates
    3. Tax reporting integration
    4. Unified chart of accounts
    5. Expense tracking and reconciliation
    6. Multi-currency support
    7. Customisable data syncing
    8. Refunds and adjustments
    9. Accurate financial reports
    10. Flexible workflow automation
  7. What are the costs associated with invoice software?
    1. Invoicing fees
    2. Payment processing fees
    3. Recurring billing fees
    4. Post-payment invoice fees
    5. Stripe Tax fees

Invoice software is designed to generate, send, and track invoices. It can improve client communication, get invoices into clients’ hands (and paid) faster, and handle tax calculations, currency conversions, and more. The revenue of the invoice processing software market was valued at $22.0 billion in 2022 and is projected to reach $25.3 billion by 2033 as more companies automate their invoices.

Invoice software can benefit most businesses, but it can be especially helpful for those that work with many clients or operate internationally. Below, we’ll explain how businesses can benefit from invoicing software, what features to prioritise when choosing software, and the costs involved with adopting this tech.

What’s in this article?

  • Why do businesses need invoice software?
  • How does invoice software work?
  • What are the advantages of using invoice software?
  • What features should you prioritize when choosing invoice software?
  • How does invoice software integrate with accounting systems?
  • What are the costs associated with invoice software?

Why do businesses need invoice software?

Manual invoicing is an error-prone, time-consuming process that involves paperwork, calculations, and frequent client follow-ups. Invoice software can automate many aspects of the invoice process to make transactions faster, more accurate, and easier to work through. It can generate professional invoices in seconds, track their status in real time, and send reminders to clients with overdue payments. This decreases the administrative burden on the business while improving service for clients. Invoicing software can also make it easier for clients to pay invoices, creating a better customer experience and minimising the impact of delayed payments on cash flow.

Increasingly, invoice platforms can also integrate with other aspects of business operations, including accounting software, project management tools, and inventory systems. These advanced options give small businesses, freelancers, and gig workers access to the kind of sophisticated financial tracking once reserved for large companies with in-house accounting departments.

How does invoice software work?

Invoice software generates, sends, and tracks invoices. Many software options can also process payments and update accounting records as payments come in. Stripe Invoicing is a comprehensive platform that incorporates invoice and payment processes and integrates with other business systems. Here’s how it works.

Creating an invoice

In the Stripe Dashboard, you can create an invoice manually by searching for the customer details, adding line items for products or services, and specifying payment terms – such as due dates and discounts for early payment. If you have recurring invoices, you can automate the process. There’s also room for personalisation: you can add your logo, adjust the colour scheme, and make your invoice an extension of your brand.

Sending the invoice

Once your invoice is ready, you can send the invoice directly to the customer by emailing a PDF or a link to a hosted invoice page. This is particularly useful for businesses that handle recurring or online transactions. These hosted pages are mobile-friendly and fine-tuned for any device so customers can view and pay their invoices on the go.

Getting paid

Customers can pay directly through the invoice. They can choose from a variety of methods, such as credit cards, Automated Clearing House (ACH) bank transfers, and international options (e.g., SEPA Direct Debit). Stripe handles the backend so you don’t have to worry about currency conversions or payment processing delays. This makes it easier for the client to pay and can lead to faster payments.

Tracking and follow-up

Stripe starts tracking the invoice as soon as it’s sent. You’ll know if the customer has paid it, and you can implement automatic reminders for unpaid invoices, eliminating the need for awkward emails or phone calls to chase down payments. You can also create alerts for when payments come through.

Reconciliation and reporting

When a payment enters your bank account, Stripe automatically matches it to the correct invoice. You also get access to detailed reports and analytics, with information such as which clients are paying late and which payment methods are most popular. This kind of insight can help with day-to-day management and long-term strategies.

What are the advantages of using invoice software?

Using invoice software can change the way you manage your business. Here are some of the benefits of using invoice software.

It saves you time where it counts

Invoice software saves businesses time in several ways: it automates calculations, creates saved templates for recurring invoices, establishes automatic reminders for late payments, and pulls customer information from your database instead of relying on manual entry.

It protects your brand image

Your invoice is a chance to leave a strong, positive impression on your client. Invoice software enables you to customise every aspect of your invoice: your logo, brand colours, and the email that goes with it. A polished invoice can show your clients you’re trustworthy and convince them to return in the future.

It tracks invoice status

Invoice software offers you visibility into invoice status at a glance. If an invoice is overdue, the software can nudge the customer with a friendly reminder on your behalf.

It speeds up payments

Many platforms let you add payment buttons directly to the invoice so customers can pay with a credit card, bank transfer, or Apple Pay without leaving the page. This means fewer delays and fewer excuses for late payments.

It drastically minimises errors

Mistakes on invoices can cost you time and money. Forgetting to include a service, miscalculating a discount, or sending an invoice with outdated pricing can lead to difficult conversations and delays. Invoice software handles the maths and ensures all required fields are filled out so your invoices are accurate every time.

It helps you manage cash flow

Invoice software gives you a clear, up-to-date picture of your cash flow. You can sort invoices by status (paid, unpaid, overdue) and see how long it typically takes certain clients to pay. This kind of clarity helps you make better decisions about when to follow up or when to adjust payment terms.

It works with the tech you already use

The best invoice software integrates with your other systems. If you use accounting software such as QuickBooks or Xero, you can set up your invoices to automatically sync with it, which saves you from manually entering payments. Invoice software can also link to your customer relationship management (CRM) or inventory management system so you don’t have to retype customer details or product information.

It scales with your business

When your business is new, creating and sending invoices manually might not feel like a major inconvenience. But as your business grows, those invoices multiply and so does the effort to keep track of them. Invoice software grows with you and can easily handle bulk invoices, recurring billing, and international payments – whether you’re billing 5 customers or 500.

What features should you prioritize when choosing invoice software?

When you choose invoice software, prioritise features that make sense for your business needs. Stripe Invoicing is a comprehensive platform with a wide range of features that combine ease of use with powerful automation and integrations. Here are the included features and why they matter for your business.

Flexible invoice creation

Flexibility in invoice creation ensures your invoices are professional, on-brand, and customised to your client base. Stripe Invoicing allows you to create invoices manually through the Dashboard or automatically using its application programming interface (API), depending on your needs. Look for:

  • Customisable templates with options to add logos, adjust colours, and include personalised messaging

  • Line item options to break down services and products with custom pricing, tax rates, and discounts

Integrated payment options

The easier you make it for customers to pay you, the faster you get paid. One of Stripe’s standout features is the ability to embed payment options directly into invoices. This feature includes:

  • Multiple payment options, such as credit cards, ACH transfers, digital wallets (e.g., Apple Pay, Google Pay), and international options (e.g., SEPA Direct Debit, iDEAL)

  • Instant payment links or “Pay Now” buttons directly on the invoice

  • Automatic payment reconciliation in accounting systems

Real-time tracking and notifications

Tracking eliminates guesswork and helps you manage unpaid balances. With Stripe Invoicing, you can track an invoice’s journey – when it’s sent, paid, or overdue. Look for payment status updates and automatic reminders for unpaid invoices.

Tax and compliance management

Tax compliance is non-negotiable, and automation helps avoid costly mistakes. Stripe’s invoicing features include tools to simplify tax handling, such as:

  • Stripe Tax’s automatic tax calculation for sales tax, value-added tax (VAT), or goods and services tax (GST) based on customer location

  • Invoices that are compliant with local invoice regulations and requirements (e.g., adding tax IDs, itemised breakdowns)

  • Multi-currency support for over 135 currencies

Customisable payment terms

Custom terms help you balance flexibility for your clients with clear boundaries for payments. Different clients require different terms, and Stripe Invoicing lets you customise due dates, late fees for overdue payments, and discounts for early payments.

Automation and recurring billing

Automating recurring billing reduces manual work and ensures predictable payments. Stripe’s invoicing features work with Stripe Billing to process recurring payments. These features include:

  • Automated invoice schedules for weekly, monthly, or custom billing cycles

  • Automatic payment collection using saved client payment details

  • Automatic retries on failed payments

Reporting and analytics

Clear insight helps you manage your business finances proactively. The Stripe Dashboard includes detailed analytics on invoice performance, such as:

  • Aging reports to identify overdue invoices at a glance

  • Payment trends (e.g., which clients consistently pay late)

  • Tax summaries to simplify tax filing

API access and integrations

Integrations minimise manual data entry and keep your systems connected. Stripe Invoicing’s API enables you to build custom workflows and connect with other tools in your stack, such as:

  • Accounting software like QuickBooks or Xero

  • CRM systems like Salesforce or HubSpot

  • Time-tracking tech like Harvest or Toggl

Customer portal

A customer portal improves the experience for clients and reduces administrative tasks. Stripe’s portal lets customers manage invoices, view payment history, and securely save payment methods. Look for:

  • Self-service options so customers can download invoices or receipts without contacting you

  • Secure payment storage so customers can store card details for faster checkouts

  • A process for resolving payment disputes if they arise

Scalability and global readiness

Your invoice software should grow with your business. Stripe is built for businesses of all sizes, with features that scale as you grow. Look for:

  • Multi-currency and language support for global businesses

  • Enterprise-grade features such as bulk invoicing, advanced fraud protection, and team permissions

  • Transparent pricing, with no hidden fees or surprise charges

How does invoice software integrate with accounting systems?

Invoice software integrates with accounting systems to simplify billing and bookkeeping. Here’s how it works with Stripe Invoicing.

Automatic transaction syncing

When you send an invoice through Stripe and a customer pays it, Stripe can automatically share the payment details (amount, date, and payer) with your accounting software (e.g., QuickBooks, Xero). Stripe records the invoice as “paid” in its system and pushes that data to your accounting platform, where it’s categorised as revenue. This means you don’t need to manually input payment details or reconcile bank statements with invoices– Stripe and the accounting system handle the task for you.

Real-time updates

Stripe sends updates to your accounting software in real time. An invoice’s status – partially paid, fully paid, or overdue – is reflected in your accounting records immediately. This keeps your records up-to-date without manual tracking, which is especially useful for high-volume invoicing.

Tax reporting integration

If you use Stripe Tax, it calculates taxes based on customer location and automatically includes them on the invoice. It syncs with your accounting software to report these tax amounts.

Unified chart of accounts

Stripe can map your invoice categories to your accounting software’s chart of accounts. For instance:

  • Revenue from consulting services can be tagged as “Consulting Income.”

  • Sales of physical goods can be tagged as “Product Revenue.”

This ensures that your accounting system organises revenue correctly, which makes financial reports more accurate and easier to analyse.

Expense tracking and reconciliation

Stripe matches payments to their corresponding invoices automatically, which simplifies reconciliation in your accounting system. Stripe passes recurring expenses, such as payment processing fees, as separate line items to your accounting software. For example, a $1,000 invoice with a $40 Stripe processing fee would be automatically recorded in your books as $1,000 in revenue and $40 in expenses.

Multi-currency support

If your business handles invoices in multiple currencies, Stripe converts payments to your home currency and shares the converted amount with your accounting software. Stripe provides a breakdown of the applied payment and fees so your accounting system accurately reflects the net income.

Customisable data syncing

Stripe’s API allows you to specify how data flows between Stripe and your accounting software. For example, you can set rules to tag specific clients’ invoices under different revenue streams or customise reports to include metadata such as client regions and product descriptions. This level of customisation helps businesses with complex billing needs or those that rely heavily on data analytics for decision-making.

Refunds and adjustments

Stripe integrates refunds directly into your accounting system. When you issue a refund for a paid invoice, Stripe notifies your accounting platform to log the refund against the original revenue. Refunds are often overlooked in manual accounting processes, which can lead to inaccurate financial records, but Stripe prevents this by automating the workflow.

Accurate financial reports

Stripe works with accounting tools to generate reports, whether you’re focused on accounts receivable, outstanding invoices, or revenue trends. For example, if your accounting software provides monthly profit and loss reports, Stripe ensures all invoice data is accounted for without requiring you to double-check line items.

Flexible workflow automation

As your business grows, Stripe’s integration ensures your accounting system keeps up. You can automate bulk invoice data imports and exports, use pre-built templates for recurring billing scenarios, and sync thousands of invoices with no degradation in performance.

What are the costs associated with invoice software?

Different invoice software options come with different pricing models and fees to consider. Stripe uses a pay-as-you-go model so you’re not overpaying for features you don’t use. Instead, what you pay depends on how much you’re invoicing and the types of payments you’re processing. Here are the costs associated with Stripe Invoicing.

Invoicing fees

Stripe charges a small percentage per paid invoice. You’re charged when your invoice is paid, and there is no cost to create or send unpaid invoices.

Payment processing fees

Stripe processes payments directly through your invoices and charges a standard fee per transaction. Another fee is added for international card payments and currency conversions.

Recurring billing fees

Stripe charges different associated fees for sending out repeat invoices for subscriptions or ongoing services. The exact fees depend on how you configure additional tools to automate subscription payments.

Post-payment invoice fees

Stripe charges a percentage fee on the total transaction if you use Stripe Checkout or Payment Links for one-off purchases and decide to issue an invoice afterward. This fee might apply to you if you’re handling both e-commerce and invoicing workflows.

Stripe Tax fees

Stripe can handle tax calculations through Stripe Tax, which calculates sales tax, VAT, or GST based on your customer’s location and adds it to the invoice. Stripe charges a small additional fee for Stripe Tax.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.

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Invoicing

Invoicing

Create an invoice and send it to your customers in minutes – no code required.

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Create and manage invoices for one-time payments with Stripe Invoicing.