Why You Shouldn't Raise Your Invoices in Word

Why You Shouldn't Raise Your Invoices in Word

For many small businesses and freelancers, using Microsoft Word to create invoices might seem like the simplest and often the most accessible option. However, this common practice could be costing you more than you realise, not just in terms of time, but also in accuracy and security. This article delves into why Word isn’t the ideal tool for invoicing and how switching to specialised accounting software like Xero can streamline your billing processes, enhance security, and improve your financial management.

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The Drawbacks of Using Word for Invoices

Increased Risk of Mistakes – Invoicing in Word leads to a higher likelihood of errors such as incorrect invoice numbers, duplications, outdated dates, or even incorrect amounts. Manually updating each invoice increases the chance of human error, which can lead to disputes with clients and delayed payments.

Lack of Security – Documents created in Word are easy to manipulate. This lack of security can be a significant issue if invoices are altered after issuance, whether intentionally or accidentally, leading to financial discrepancies and potential losses.

Time-Consuming Management – Using Word for your invoices often means manually tracking which invoice number was last used and deciding what number should come next. This process is not only prone to errors but also time-consuming, diverting valuable time away from core business activities.

Difficulty in Allocating Payments – When invoices are managed manually through Word and a basic filing system, it’s challenging to track which invoices have been paid and which haven’t. Relying on a system of subfolders in your computer or email to manage paid and unpaid invoices is unreliable and can lead to important documents being misplaced or accidentally moved.

Poor Control Over Overdue Invoices – Without a more advanced system, managing and following up on overdue invoices becomes a cumbersome task. This can result in significant revenue loss, as tracking down who to chase for payment and for which invoices becomes an administrative nightmare.

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The Solution

Switching to Accounting Software Like Xero

Sequential Numbering – Accounting software such as Xero uses automatic invoice numbering, eliminating the need to remember or determine which number comes next. This automation reduces mistakes and ensures every invoice is uniquely and correctly numbered.

Prevention of Duplications – Xero and similar platforms prevent duplication by warning you if you try to use an invoice number that’s already been assigned. The system ensures each invoice is unique, which is crucial for accurate record-keeping and financial tracking.

Easy Tracking of Outstanding Invoices – With integrated accounting software, you can easily see at a glance which invoices are outstanding. This feature simplifies the process of managing your receivables and improves your cash flow through more effective payment collection strategies.

Efficient Tax and Accounts Preparation – Using software like Xero for invoicing automatically keeps your financial records up to date and in one place. This integration makes preparing your annual taxes and accounts much quicker and reduces the likelihood of errors during financial reporting.

Secure and Unchangeable Records – Once an invoice is created in Xero, it cannot be altered by accident, ensuring the integrity of your financial data. This feature prevents accidental changes that could confuse you or your clients and helps maintain clear, consistent records for auditing and analysis.

While using Word for invoicing might seem convenient for new or small-scale businesses, the long-term benefits of using dedicated accounting software like Xero far outweigh the initial ease of use. By investing in proper invoicing software, you protect your business from errors, enhance security, save time, and ultimately, support better financial health and growth for your company.

And if you’re worried accounting software can be too expensive, Xero has various packages so even small businesses and start-ups can benefit from the latest technology.

At Joanna Bookkeeping, we support business owners when it comes to topics like invoicing, tax, VAT, etc. If you want to avoid getting stuck in red tape and make sure everything is done correctly from the beginning and beyond, let us show you how! Book a free call with our Oxford accountant to see how our Oxford-based accountancy and bookkeeping team can help. Not based in Oxford? No problem!… We provide our services to businesses all over the UK!

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