What is an open invoice, and how do you close outstanding ones?

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Invoicing is an integral part of any business. Learn more about what happens after you send an invoice and what it takes for those invoices to go from an open invoice to a closed one.

Part of doing business as an independent contractor or small business owner is sending payment requests to your clients. Learn more about what happens after you send an invoice and what it takes for those invoices to go from open to closed.

We’ll dive into the meaning of an open invoice and why you should pay attention to open invoices.

Open invoice meaning.

So, what is an open invoice? An invoice is an official request for payment in exchange for your services. Open invoices, also known as outstanding invoices, are invoices that have been sent to the client but have yet to be paid.

Why are they important? Keeping track of open invoices helps you monitor your business’s cash flow, as well as show you which clients still owe you payment.

Why you should pay attention to open invoices.

Monitoring open invoices is essential because it helps you keep cash flow predictable and steady while maintaining open lines of communication with your customer base about expectations. As a supplier, you’ll want to send a notice to customers with unpaid invoices once the payment is past due and a late fee to motivate clients to pay their invoices on time in the future.

Interest on overdue invoices should be decided during the contract signing phase and can be referenced when your customer or client is past the number of days allowed.

Types of open invoices.

There are multiple types of open invoices, each with different priority levels.

These open invoices may create challenges in your business, but by taking action early on, you can create smooth sailing for cash flow and customer satisfaction.

How to handle challenges with open invoices.

It’s necessary to ensure open invoices are paid in time to keep a steady cash flow and help you stay focused on upcoming business initiatives rather than past overdue payments.

You can choose to take advantage of an invoice discounting service. This third-party service offers up-front payment but will require a percentage of the invoice once it’s paid. This improves cash flow and rids your company of debt in the short term.

The best long-term solution is to set clear payment terms from the start and stay in communication with suppliers to ensure everyone is on the same page. Review open invoices regularly and follow up with suppliers to help eliminate any issues early on.

Timeline from open invoice to closed invoice.

When you send an invoice to a company, it’s typically forwarded to the accounting department or accounts payable department, which is responsible for examining the invoice and processing payment. If there’s a problem with your invoice, such as a missing invoice number or certain line items, your invoice could be sent back to you for reissue.

How frequently your invoices are paid depends on the company you’re working with and your contract agreement. Some can take anywhere from 30-90 days to process payments, whereas others may process payments immediately. Once the department has successfully processed your payment, the invoice will be marked as paid and, from then on, referred to as a "closed invoice."

Tools to get open invoices paid promptly.

Go from open to closed invoices with digital signatures that keep your business moving. Explore what more you can do with Adobe Acrobat today.