How to pay an invoice

Only 36% of invoices in the US are paid on time. 

It's an issue that causes problems for businesses all across the world, whether you're waiting for payment of an invoice or working out how to pay an invoice.

Proper management when paying an invoice is critical for retaining healthy cash flow, delivering accurate financial reports and maintaining strong business relationships.

But slow payments don't arise out of choice. Most often, they're down to individuals and businesses struggling to actually pay their invoice. When trying to work out how to pay an invoice, there are regularly unclear payment terms, missing banking information, incorrect business details and slow payment processing.

With today's mishmash of traditional and digital payment platforms, it feels like every invoice has a different process for being paid. As the payer, you end up jumping from traditional checks to digital payment platforms, even cryptocurrency, just to keep your suppliers happy.

So wouldn't it be great to find a way to consolidate all your bill payments?

In the next few minutes, we'll walk you through everything you need to know about how to pay an invoice efficiently and the best tools out there to help you both create and pay your invoices from one platform.

The invoice payment process

An invoice is a commercial document that lists the goods or services provided, along with the total amount due for payment. It's similar to a bill you might receive in a restaurant where every item you had is listed with a price before everything is totalled up for the amount due, including taxes.

Commercial invoices also need to contain essential components to make payment, reconciliation and tax compliance easier for both the payee and the payer. Too often, missing or incorrect information on invoices makes it hard to pay and causes payers to miss invoice due dates.

The main components of a business invoice include:

• Contact information of both parties, including business name and address

• The invoice number

• Terms of payment

• Invoice issue date and due date

• A list describing goods or services and their cost

• Sales tax and the total invoice amount

• Payment details

With millions of businesses still creating invoices manually, studies show that up to 18% of accounts departments make errors daily, causing knock on effects, including late or missed payments.

In many sectors, invoices aren't due to be paid immediately, often having payment terms such as "Net 30," allowing a business to pay the invoice up to 30 days after it's issued.

Ensuring you have a structured process for your invoices will help to prevent errors that lead to missed payments and stubborn cash flow. 

If you're leaving your invoice payments to the last minute, such as paying on the due date can cause unforeseen issues. For example, any banking letdowns or missing information on invoices may mean you're unable to pay. This could cause issues such as late payment penalties, damage your credit rating and frustrate relationships with your suppliers.

You should also take the time to understand other payment terms included in your supplier invoices, such as discounts for early payments that can save you money.

Plus, maintaining records of your invoice payments is legally required in most jurisdictions, often for three to seven years, to help support your tax filings and future financial audits.

How to pay an invoice: Top invoice payment methods

Next, we'll go through the easiest ways to pay an invoice. You'll learn the pros and cons of each and suggest platforms that can make it easy to issue and pay any invoice.

1. Bank transfers and direct deposits

Bank transfers, such as ACH (Automatic Clearing House) payments, require you to set up the vendor as a payee with their banking details. You need the bank name, business details and bank account details.

Once set up, they enable you to transfer funds directly from your bank account to their bank account. For domestic payments, this can be an efficient way to pay an invoice with low fees.

The problem with bank transfers for payment of an invoice:

Errors in transfers, such as paying bank transfers to the wrong account, can be hard to recover. Like many traditional payment methods, they can take days to confirm and rack up high fees for international payments.

To make international payments with bank transfers, you need to add information like SWIFT, BIC and IBAN numbers. These numbers can be long and complex, so any errors can cause payment rejections and delays. Even when all goes smoothly, processing times can still reach five days or more, along with high fees for currency exchanges.

Wire transfers also provide secure payments across the globe, but run at higher fees, hitting between $15 and $50.

When setting up vendors in your online banking, you should confirm account details by voice, over the phone, or in person. This protects against email bank detail scams where fraudsters can intercept and change bank details on an invoice.

2. Card payments

Paying an invoice with credit cards is a convenient, quick way to settle bills with potential rewards and added consumer protection.

Some credit cards can generate 1 to 2% cash back on your payments, which effectively reduces costs. Plus, you have the ability for chargebacks, which provides extra protection against fraud and disputes.

Debit cards provide a similar convenience, but generally without incurring debt, although there's less opportunity for chargebacks and rewards. Some banks even allow you to use virtual cards for online payments, which can be handy to reduce fraud with a single use virtual card.

Card payment limitations:

Often, you won't be able to pay an invoice with a credit or debit card. They can be expensive for the vendor to process, costing between 1 and 3% for every transaction. 

Particularly for large payments, companies don't like to offer credit card payments to protect themselves against chargebacks. Although convenient for the payer, the recipient might not receive funds for days or weeks as card payments need to be processed before being paid out to bank accounts.

3. Digital payment platforms

Frustration with high fees, slow processing times and limited global payments has led to the development of many digital payment platforms to solve these pain points. You'll have heard of platforms like PayPal, Stripe and Square, which provide simple invoice payments and complete transaction record tracking.

All these platforms allow a smoother process for both parties. A vendor can create and send invoices, and a payee can settle an invoice in the same format. For example, with PayPal, you can simply log into your PayPal account and pay an invoice in a matter of clicks, while Stripe allows you to pay invoices using a credit card via a payment link.

The main downside of most digital payment platforms:

Excessive fees. It can cost you to have an account with these systems, which incur fees for payments and get stung by FX rates, all of which can cost 5% or more on payments.

With so many different payment platforms, it can be confusing as a payee as to which account or style of payment you need to be making.

Platforms like Wise have tried to fix some of these problems with multi currency accounts and reduced fees. But that adds another layer of complexity to maintaining several different bank accounts.

On the other hand, Acctual provides complete flexibility in invoice payment and creation, including the ability to incorporate crypto payments!

4. Crypto payments

Cryptocurrency is quickly becoming helpful in paying international invoices. It allows individuals and businesses to send funds directly from one wallet to another in a peer to peer fashion. This means fees are reduced without extra middlemen, payments are settled in seconds (not days), and fees cost cents, not several per cent.

The only problem is that while you might want to pay in crypto, most businesses still don't accept this as a form of payment.

It's why platforms like Acctual have been developed, allowing you to pay and create invoices however you want. For example, a client could send you a bill requiring payment in US dollars, and Acctual enables you to pay it using USDC stablecoin. You can make the payment from your crypto wallet, and Acctual handles the rest, completing the payment to the vendor in their preferred currency.

Or vice versa. You can send an invoice to a client allowing them to choose how they want to pay the invoice, and you receive the funds in the way you prefer them, either into your crypto wallet or bank account.

5. Cash and check

Cash is king, right? It's simple and easy to hand someone cash or even a handwritten check. Well, that might be useful for paying local suppliers, but for most businesses, it's an ineffective, slow and obsolete way of working.

Firstly, it adds an extra layer of admin to your payments. You need to maintain detailed records of cash transactions to support your cash flow links. This is hard to automate with digital solutions and can lead to heightened scrutiny during tax audits.

Banks often reject checks with incomplete details or require extra legwork to create certified checks for the largest payments.

While cash might be appropriate for small transactions, it's impractical for businesses to pay and receive for day to day invoicing.

Invoice payment examples and scenarios

Let's look at some specific examples of how to pay an invoice online or internationally. Below you'll find the easiest way to make international payments, bulk and batch payments and even recurring payments.

1. International payments

International bills can be the trickiest invoices to pay. Not only do you have to think about how you're going to pay it, you also have to consider the timelines of moving money across the world and the costs involved.

Cost can mount up significantly, with 3 to 5% or more with currency conversion rates and added fees for international transfers.

Acctual simplifies this whole process, allowing you to make global cross border payments in a few clicks for as little as 1%. Simply upload invoices to the platform or forward invoices via a dedicated email address.

The system automatically fills in the vendor, the invoice number, the invoice date, the due date and the outstanding amount, then allows you to make the payment in your chosen currency. This includes stablecoin payments, where you can connect your wallet and pay the bill.

Simply put, you can pay however you like, and Acctual pays the invoice to the vendor in their required format.

2. Bulk and batch payments

If you have a global workforce of contractors and freelancers, it will be a huge drain on resources to pay everybody's invoices individually. Batch payments allow you to process and pay multiple invoices simultaneously. This is shown to reduce payment processing time by up to 80% compared to individual payment methods.

If you want to make batch payments, it's important to include proper reconciliation to ensure that financial records are accurate and complete to avoid the burden of manual reconciliation and payment discrepancies.

Acctual allows you to batch pay bills. Once you've added all of your invoices to the system, you can select the bills you want to pay in one batch and pay all your vendors in one go. Then, with integration to your accounting system, you'll have detailed payment entries in your journal.

3. Recurring payments

Paying recurring invoices automatically is the biggest time saver of all. If you've got regular vendor relationships, then setting up ways to automate settlement each month means you can concentrate on running your business rather than drowning in invoices. It removes the risk of forgetting payments and resulting in service interruptions or penalties.

Traditional payment methods like direct debit and bank transfers can mandate your vendor to take payment automatically and serve you with an invoice ahead of payment. Most digital platforms now allow vendors to create subscription models for people to be invoiced and paid automatically, monthly or annually.

The downside of this is making sure you have strong monitoring systems and track your recurring payments. Without close control, it can cause excessive costs and unexpected payments.

Payment confirmation and documentation

For all your transactions, you need to ensure you receive the correct documentation. All payments should have an invoice and a payment receipt for complete confirmation.

This will help you keep detailed records of all payments made to include in any tax filings and potential future audits. Proactive payment tracking and account management can help you avoid issues before you end up with late payments, which cause frustrated vendors and excessive fees.

For example, any updated payment information, such as new cards or crypto wallets, should be communicated with vendors well before invoice due dates.

Leveraging technology for invoice payments

Whatever payment method you choose, it's not just about how you pay an invoice. It's about how you manage the whole process, particularly as a growing or large organization. In fact, even sole proprietors can benefit massively from using accounting software integration.

Any payment provider you use should have integration into popular platforms like QuickBooks or Xero. This is going to be a huge time saver as it eliminates manual data entry.

Using tools like Acctual can help with your invoice matching so that everything is automatically reconciled directly in your ERP or accounting system. So every invoice you send, receive, or pay matches up in your accounts.

It's a big efficiency gain that frees up finance staff or individuals for more strategic work.

Flexible invoice payments with Acctual

So if you want to know how to pay an invoice, Acctual makes it easy. The platform offers complete flexibility while removing frustrating manual data entry.

Automating invoice management, payment and reconciliation saves businesses up to 80% of the time typically spent on managing payments. So your team can focus on growth rather than data entry.

Acctual offers multiple payment methods in one integrated system, so you can pay however you like and your suppliers can get paid however they like. The automated payment routing even allows you to make payments from your crypto wallet, and vendors get paid into their bank accounts, or vice versa.

So you could receive an invoice requiring payment in US dollars, but pay it in USDC from your digital wallet, and your payee receives funds like magic into their bank account.

Along the way, everything is integrated into your major accounting or ERP system, like QuickBooks or Xero. So your financial records are always kept clean and tidy without duplicate data entry or mistakes.

All of this is backed with international payment functionality, allowing you to make cross border payments without having to handle multiple currency accounts or get bogged down in compliance.

If you’ve got high volumes of invoices to pay, let Acctual's batch payment capabilities take care of that. You can add everything to the system and simultaneously pay invoices in one click… perfect for international payroll and contractor payments.

If you want a modern way to pay invoices, try Acctual today. Get started in two minutes with a free account.