The paperwork and administrative side of running a business can seem never-ending at times. The piles of paper or the constant filing of emails are not anything that entrepreneurs dream of when they start a company. However, having robust administration in place is one of the key ways a company can ensure they are a success. Without it, a company is far less likely to be efficient and as a result far more ineffective.
Invoices are a vital part of any company’s administrative side. Sending them out in a timely manner, while staying abreast of which one has been paid, which ones are outstanding, and which ones can be filed away is crucial to get running as smoothly as possible. However, to do so, it’s essential to understand what exactly an invoice is and why they’re so important to a business. If you’re wondering how long to keep invoices for businesses, read on. It’s only then that companies can begin to formalize how long invoices should be kept for after they have been paid.
How long business should keep invoices for
There is no one answer to this question, however it is wise to keep invoices, receipts and records for 3 years. It will vary depending on what country you’re in or what country your company is doing business in, for example in the US the Internal Revenue Service recommends keeping records for 3-7 years. For that reason, it’s vital to research the laws surrounding the legal requirements for invoicing clients in each and every nation your company conducts business. it’s then necessary to put robust procedures in place to ensure that every requirement is met.
Additionally, it’s important not just to keep invoices for as long as is required. Keep them in such a way that they can be easily found as well as being stored safely. Another important factor to bear in mind is how long you want to keep them for in your own individual business. It may be that keeping them longer than the legally required amount of time will be helpful to you and your company.
What is an invoice?
An invoice is a detailed list of products or services provided by a company to a customer. Those products or services will already have been transferred to a customer who now owes the company money in return. An invoice must therefore itemise each service or product sold as well as the cost for each. Finally, the company must calculate the final amount owed by the customer in addition to providing their payment account details and how a customer should pay the invoice.
Why invoices are important to a business
It may sound obvious, but it really is crucial to remember why invoices are so important to a business. In doing so, it reminds business owners why staying on top of them is so integral to the success of a company.
Invoices are important as without them, a company will not get paid for their services or products. When a company does not issue an invoice for its products, it’s essentially providing a customer with an interest-free loan on the final amount owed. Importantly, invoices are the only way of getting cash to flow back into the business.
As a result, they are fundamental in improving the cash flow of a company. Having a healthy cash flow is critical for a business as it allows a company to pay its own expenses on time, access the best possible funding, or make dynamic business decisions that require an injection of cash. Without invoices, cash on account will always be lower, thus minimizing a company’s capabilities in the future to do any of the above.
Keeping invoices – key takeaways
Keeping invoices for a stipulated amount of time is a way that governments put legislation in place to protect companies and their customers. Invoices can be used in the case of disputes, which is why they’re good to keep for as long as is deemed necessary by law. Remember — they’re there to protect you too which is why it’s so helpful to file them in a methodical and protected manner.