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In: Accounting

What is open-invoicing and which types of businesses would use it? Compare it with the balance-forward...

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?

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Expert Solution

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


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