Is it Mandatory to Use Invoicing Software?

As long as they include the legally-required essentials, you can send invoices in pretty much any format. From handwritten ones, to Canva masterpieces, you can even present them in hieroglyphics if you’re feeling fancy.

That said, some formats may feel too messy to use, and without robust invoicing processes in place you may find it takes longer to get paid, and more difficult to sort out your tax return.

Using invoicing software isn’t mandatory, but it can help you get paid more quickly and ensure your invoices are HMRC compliant. In this article we’ll explain more about how to get the most out of using invoicing software.

What is invoicing software?

Invoicing software is essentially a tool businesses use to generate and send invoices to customers.

Most invoicing software allows you to create branded invoices, track what you’ve sent, and even schedule recurring transactions so you don’t need to recreate invoices for the same thing, or start all over again.

What are the legal requirements for sending an invoice?

Invoices need to cover specific points to be considered valid, including:

If you’re a sole trader, you’ll also include your name and business name (if you have one) and an address where legal documents can be delivered to (this is if you’re using a business name).

Limited companies will also show the full name of the company that appears on their certificate of incorporation, along with the company registration number. You don’t normally need to add the names of the company’s directors, but if you do – make sure you show all of them, not just one!

Why should I use invoicing software?

If you’ve been using the same template to create invoices ever since time began (or even if you’re brand new to running a business) then the idea of relying on unfamiliar software to produce your invoices might make you uncomfortable. But there are lots of benefits to switching things up.

The automation of invoicing software saves you time

One of the great things about digitising processes is the fact lots of tasks can be automated. When you use invoicing software, you can set up recurring invoices depending on your schedule.

Avoid common mistakes

Everyone makes mistakes, so it’s completely normal that human-error might sometimes creep into processes and trip things up. Like those days when you check your email over before hitting send, and then realise you didn’t attach the invoice to go with it. Creating invoices manually means there’s a much higher risk of something going wrong.

Invoicing software helps minimise this risk. For example, it stops the same invoice number being used twice, helping to reduce confusion (and stress) in the future. Good software will also calculate how much VAT to add to your invoices.

Set up automatic payment reminders without having to chase customers

When running a busy business, the last thing you want to do is chase customers for payments. Invoicing software allows you to set up automated reminders that will give clients a gentle nudge (or firm prod, it’s up to you) so you no longer need to spend so much time on the phone.

You can even set polite reminders to go out before the payment deadline, helping get the money in sooner.

Create invoices which are automatically tracked in your bookkeeping

You can use standalone invoicing software, or you can use accounting software which includes an invoicing function. This second option can be incredibly useful because it means every invoice you create is automatically entered into your bookkeeping.

Lots of good software providers like Pandle (we gave up being subtle) will also include a payment processing option so your client can click a payment link. The incoming payment will then be automatically tracked in your records, and the invoice marked as paid.

It’s less time consuming than creating the invoice, sending it, logging it somewhere else, chasing the payment manually, looking at the bank account every five minutes to see if you’ve been paid, sending 3 follow-up emails threatening to sing outside their window until they pay you, and then finally crossing it off your list.

Do I have to use invoicing software?

In short no – your business doesn’t need to use invoicing or accounting software, but many accountants recommend it! It can be particularly useful if you’re VAT-registered, because good software will use your invoicing records to prepare your MTD VAT submissions ready to go straight to HMRC.

For example, under MTD rules you’ll need to store your financial records digitally if you’re VAT registered, so using software which can both send invoices and help you meet your MTD responsibilities can be a real time-saver. The same goes for MTD Income Tax.

Good bookkeeping software (such as Pandle!) often includes invoicing tools where you can automate the majority of the billing process. If you’re confused about where to start, you can compare different software online or chat with your accountant for more advice.

Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.