An incoming invoice is an invoice you receive from your suppliers when you buy goods or services from them.
If you don’t pay with cash or card when you purchase something from a supplier, you’ll be sent an invoice. This is a request for payment and is called an incoming invoice.
The opposite of an incoming invoice is an outgoing invoice, which your business sends to clients to request payment for goods or services that you’ve sold.
You have to pay your incoming invoices
The paid invoice is documentation of what you owe your supplier, and it’s a payment obligation that you’re required to pay.
There are some exceptions to this rule:
- If there are errors on the product or omissions in the service you’ve received. If that’s the case, you should complain to the supplier to try to get them to annul the invoice, or to get a replacement product or get them to redo the service
- If the supplier cancelled the product or service, you won’t have to pay the invoice. In these cases, you should ask for a credit note, which documents that the invoice was cancelled.
- You haven’t actually brought a product or service from this supplier. It could be a misunderstanding, or, worst case, an attempt at fraud.
Cash flow issues
If you’re having trouble paying your incoming invoices, this could be a sign that your company has poor cash flow, also called negative cash flow.
Negative cash flow is when you have more money going out of your business than coming into your business. If this is the case, you’re likely struggling to cover your bills, pay employees, and take on new projects or make investments in your business.
Common reasons for this are having a lot of costs, that you have low sales, that your products and services are priced wrongly, or that you were surprised by unexpected costs.
The good news is that you can get control of your cash flow by budgeting and reviewing your general ledger to figure out where you can save money, investing in more marketing to increase sales and pricing yourself correctly.
See also: Mastering cash flow management