You’d be forgiven for thinking that digital and electronic invoices were the same thing.
After all, they both show up on a screen and can be transmitted online for easier billing than previous manual methods allowed for.
But these two invoice types actually have some major differentiating factors that are worth combing through if you’re in the process of building a startup, especially in the tech industry.
IT and web development companies both provide tech solutions and support for their customers, which means that all aspects of their business need to be run as efficiently as possible.
As such, choosing the right invoicing system is crucial for meeting client expectations and maintaining a high standard of internal efficiency that results in higher productivity, increased revenue, and more.
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What Is A Digital Invoice?
First things first, let’s take turns defining what these two invoices really are. A digital invoice refers to any invoice that has been made into a digital file. It’s typically made from scratch through a simple program such as Microsoft Word, Canva, or another free document-building program.
You will typically find a digital invoice in the form of a PDF or Word file, making it easy to transfer between different systems and small enough to send via email.
Digital invoices are extremely easy to create but can also be made from a template for people who lack design experience. They’re super accessible, free to make and use, and fully functional as professional invoices in the modern business world.
However, while digital invoices are certainly a step ahead of manual paper invoices, they’re still somewhat limited in their ability to be systemized into a greater invoicing system.
For example, digital invoices need to be filled in from scratch pretty much every time you have a new client, and small or large adjustments may need to be made for each one. You’ll have to add line items manually and do all your calculations every time. This can be a tedious and time-consumptive process, adding complications to your startup’s billing process.
But overall, digital invoices offer an extremely practical and accessible approach to billing, especially if you are a small company or startup that is still growing its client base.
What Is An Electronic Invoice?
Electronic invoices are essentially digital invoices that get created, processed, and managed by an electronic system. Instead of being made by a person, electronic invoices are automatically drawn up via a computer and are closer in structure to data files than invoices how the human eye recognizes them.
While electronic invoices may take on the visual appearance of a digital invoice, they are typically found in either XML or EDI file types that are much more structured and contain data that other computer systems can recognize and process more quickly.
Electronic invoices are files that contain structured data from your startup that your client’s financial system will automatically recognize without the need for any manual input from a human operator.
Another thing that differentiates electronic invoices from digital ones is the fact that electronic invoices are often developed and even sent out to clients via an invoice operating system. These systems are designed to streamline financial operations, making billing easier, faster, and more accurate.
Electronic invoices are a more elevated, sophisticated version of digital invoices. They offer many efficiency-related benefits, such as faster processing, automated sending, reliable accuracy, and more security for both your and your client’s financial details.
However, due to these additional benefits, electronic invoices are typically the more expensive option, making them less accessible to small start-ups.
Digital vs. Electronic Invoice: Which One Is Best?
If your startup is still in the early phases of development and is seeking to implement a new billing system, you may be wondering which of these two options to choose. While neither digital nor electronic invoices are a bad choice, clearly, they both come with different pros and cons.
- Free and easy to use
- Meets basic industry standards
- Prone to human error
- Time-consumptive to make
- Can’t accommodate for growing client base
Digital invoices are a perfectly passable choice for small businesses or IT startups that just want to reach their clients in a simple yet qualified way. It may require a bit of extra effort to ensure no mistakes are made and that the structure/formatting is sound. But if your company is small, this will be manageable, especially if you use a printable invoice template.
- More accurate
- Less direct input is needed from the company
- Automation allows for increased productivity
- Accommodating for growing client base
- It may require some training to navigate
Ultimately, it’s important to bear in mind that electronic invoicing is always going to be the faster, more efficient, more organized option of the two. It simply offers more in terms of security, structure, and productivity. However, it’s only worth it if you have the budget.
There are plenty of high-ranking electronic invoice software programs available online for small, growing companies to use.
Conclusion: Start With Digital, Grow Into Electronic
There is no perfect invoicing system, and there’s no one size fits all solution.
Both digital and electronic invoices offer their own unique advantages and disadvantages. But neither is a “bad” option, and can both be used to facilitate professional, effective invoicing systems for startups in the tech industry.
That said, it’s evident that electronic invoices offer more in terms of productivity, efficiency, speed, and accuracy. Manual input just can’t compete with automatic processing!
Electronic invoices are clearly the stronger choice of the two.
However, if you can’t afford to obtain those kinds of services, starting off with a simple digital system is absolutely fine. Particularly if your client base is still small enough to manage without feeling admin-overwhelmed.
But once your startup expands and grows into a more in-demand business, moving over to electronic invoicing can bring loads of benefits. Consider your budget, weigh up your current needs, and allow your startup to evolve at its own pace. Electronic invoicing isn’t going anywhere.