In: Accounting
What is open-invoicing and which types of businesses would use it? Compare it with the balance-forward method. Why wouldn't one or the other suffice for all companies?
Open invoicing is a process whereby entire payments are
apportioned to specific invoices rather than to a common account.
Open invoicing is an awesome way of maintaining track of payments
and assigning income directly to sections of expenditure. In open
invoice system, customers pay through invoice through returning a
remittance proposal turnaround papers and the payment check.
Remittances are used against particular open invoices. There are
definitely most of businesses for which this works. Nevertheless,
there are a collection of other businesses for whom this process
either does not ever work or for whom it collapses as they
scale.
Balance-forward method, customer pay allowing to the amount
indicated on a monthly statement rather than through invoice and
remittance are used against the net outstanding balance, applied
through department stores generally where customers create a large
number of littler dollar purchases. The lists transactions of
monthly statement since the last statement and lists the current
balance.
These would not suffice for all companies because of some threats.
These are:
1.Sales to clients with poor credit
2.Shipping errors
3.Inventory theft
4.Failure to bill clients
5.Billing errors
6.Cash theft
7.Posting errors
8.Loss of information
9.Poor performance