As a B2B or B2C organizations, you will be encountering over a thousand invoices on a daily basis. This time-consuming and mundane task can take its toll on your in-house resources, eating away precious time and effort. Poorly managed invoice processing can result in incorrect or delayed payments that will not only result in a cash crunch but also have an impact on your market reputation.
To cut the cost that may accumulate in any given business setting, the need to look for a person to outsource the Invoice processing services turns out to be the best available option. The very nature and embodiment of private enterprise are to such an extent that there is no single, characterizing plan of action or element that will stay consistent but instead, there will be a characteristic back and forth movement as some business sorts will prosper and others will fall by the wayside and wilt.
Timely and accurate payments to every single vendor is a must. Even a very small deviation can have a huge impact on your business credibility and authenticity. It can also hamper the perception that customers have about your company.
Some Benefits of Invoice Processing Service
Improves internal procedures
Automation allows a company to put in place various procedures, o that its accounting systems follow a formal process for invoice approval and payment, as well as processes for chasing unpaid debts. This allows a business to reduce duplication of effort and to eliminate errors or rogue practices, bringing a more streamlined process to the finance department.
Automation of the entire process
Your outsourcing service provider can receive invoices on your behalf. This is a great way to save yourself from dealing with thousands of invoices. Trained invoice processing professionals will scan, index and get the invoices authorized for the transaction and sanctioning.
Inappropriate or wrong payments can have a deep impact on your organizations. While lower payments can spoil your brand image, overpayments lead you to a cash crunch. Outsourcing invoice processing can get rid of such possibilities by ensuring on-time accurate payments.
The cost of manually dealing with a single supplier invoice can vary between $10 and $100, whereas fully automating the process can reduce that cost to $2. Automation also saves on other resources, such as staff time. The amount of time spent analyzing business information, manually creating invoices and chasing for payment is also dramatically decreased. This staff time can be redeployed to other, more efficient tasks such as revenue generation.
Invoice processing in real-time
The best part of outsourcing is that you can monitor the entire process in real-time. Every invoice had a stamp on it. At any given time, you or your team can get details about the payment authorizer, exact payable data and if there are discrepancies in the amount payable. You can also get a precise picture of the total liability of the company when it comes to vendor payments.
Your organization’s accounts payable (AP) operations can have considerable impact on your overall success. This means you should follow modern business practices in order to make a mark and stay ahead.
One such practice is to pay your vendors accurately and on time. Late payments can result in a number of problems, including:
Duplicate payments: If an invoice is not paid on time, the vendor is likely to send follow-up invoices, and this can result in duplicate payments.
Negative impact on suppliers’ cash flow: When you’re late to pay a supplier, this can lower the supplier’s closing balance, resulting in financial challenges for them.
Broken Business Relationships: When a supplier doesn’t get paid on time, your business relationship is negatively affected. A good customer-supplier relationship is critical, as it points to things like valuable trade credit and more favorable payment terms.
Increased cost and workload: Late payment makes your AP team consume time handling supplier queries and renegotiating their terms. This increases your costs of operation.
Damaged reputation and distrust: Your company’s reputation and trustworthiness are important. If you’re known for late payments, you’re likely to be distrusted by suppliers, financial service providers, and potential business partners.
Supplier frustration: When payment has been withheld for a long time, suppliers become disappointed after numerous calls or visits.
Inaccurate financial reports: A businesses that does not pay invoices on time will eventually find it difficult to give an accurate reporting of its financial standings.
Wouldn’t it be better to avoid all these problems and instead put your business in a favorable position, where it can often easily take advantage of opportunities like early payment discounts?
Speeding up your invoice payments yields a healthy cash flow for your company. But how can you accelerate your processes such that you pay accurately and on time? Which strategies can you deploy to honor payment terms?
While some cases of late payments are a result of a company’s poor cash flow, others are unambiguously caused by poorly managed AP business process. In this post, we’ll focus on how to deal with the latter. Below are our recommendations on how your company can stop making late payments forever.
1. Push for an invoicing method based completely on electronic data interchange (EDI)
By now, you should already know that paper invoices take more time to procedure. With electronic invoices, you immediately bypass the time-wasting steps associated with paper invoices.
EDI lets you and your vendors exchange documents electronically, following a set standard. When all vendors follow the same standards in sending their invoices, this results in quicker cycle time, and ultimately, rapid payments.
2. Workon the go
If you want to be able to approve invoices quickly, then you shouldn’t limit yourself and your team to the bounds of your office. An accounts payable tool that works as a mobile app lets you handle these tasks regardless of where you are.
The ability to approve invoices from any location moves things along more quickly. You can get tasks done whether you’re attending a conference, watching Star Wars with the kids, or dealing with a cancelled flight at O’Hare Airport.
3. Get suppliers to send accurate invoice data the first time
When an invoice arrives with incorrect details, two things are likely to happen: you’ll waste time trying to figure out the details, or you push it into the exception folder for later correction.
Either way, payment is delayed.
It makes sense if you can get your suppliers to send accurate invoice information every time. You might want to tell them to keep an eye out for any line item information that looks out of place and make appropriate corrections before sending those in. You might also provide a system that causes suppliers to always send in the complete and correct invoice information.
This will go a long way towards reducing the time your team puts into processing invoices, meaning your business more readily makes payments on time.
4. Analyze how your team members spend their time
Time analytics will let you notice patterns and discover areas for improvement.
Consider looking at metrics like receipt-to-pay time, early payment discounts secured or missed, late payment penalties incurred, approval turnarounds, and the like.
Remember, the goal here isn’t just to track and analyze, but to use this information to expedite payments.
5. Reduce approval steps and processes
“Keep It Simple” — applies to lots of things, but it definitely applies to accounts payable too. Keep your AP processes simple, straightforward, and quick. This will reduce invoice processing time and speeds up payments.
Figure out which steps you actually need and get rid of the rest. By tracking, analyzing, and testing your AP processes, you’ll be able to determine whether or not your license flows have more steps than necessary.
6. Streamline internal communication
Without a good communication system, tasks will fall through the cracks. You need a secure, easy-to-use system that lets your team members collaborate and exchange information in real-time, from wherever they are.
The ability to communicate in real-time boosts efficiency and create a means for your employees to feel comfortable sharing ideas. But that’s not all; they’ll be able to build stronger working relationships amongst themselves, which is specifically important for remote teams. This all leads to quicker turnaround time for paying invoices.
7. Make it easy to receive and respond to queries
When an invoice is overdue, the supplier will more often than not call or send an inquiry. The easier it is for your team to receive and respond to these queries, the more quickly they’ll resolve issues and get invoices paid. Otherwise you need to deal with unnecessary delay.
There should be a structured management process for resolving overdue invoices. Create a communication channel through which suppliers can send their queries, and have an internal structure which allows the right person to respond accordingly and in a timely manner.
8. Know your suppliers
It’s not only the suppliers that will be contacting you; sometimes there will be cases where you need to contact them in order to clarify something that could otherwise lead to a delay in paying them.
It’s always in your interest to have suppliers’ contact details at hand.
You might also consider categorizing your suppliers for the sake of more easily prioritizing them. For example, you can prioritize suppliers with late payment penalties or early payment discounts to make sure that their invoices are paid quickly.
When you payment these suppliers on time, you contribute to improved cash flow for your company.
9. Delegate intelligently
Sometimes late payments are as a result of work overload. If you find your team members being overwhelmed with other activities, chances are that processes will get bottlenecked.
This means you ought to put some thought into how you delegate tasks. Be strategic! Ease the workload by spreading it out. Get staffers that are less busy to take over part of a procedure. Give the right task to the person with the right skillset to be most effective at completing it.
With your work delegation right, processes will fast track. Idle time goes out the window, mistakes are eliminated, productivity is restored, and your employees are more happy.
10. Schedule invoices for payment as soon as they arrive
This is a no-brainer, but some AP teams still miss it. Why do you have to wait until invoices are nearly overdue before processing them?
Processing an them from the get-go will only make it simplest to pay it on time.
11. Establish a routine for processing invoices, and follow it every time
When you regularly follow a routinize plan of action, you standardize your accounts payable process and reduce its cycle time. This promotes consistency, reduces costs, and increases expertise, as your team makes it a habit, instead of finding new ways to work.
12. Automate your accounts payable
We saved the best for last. If you decide to do nothing else, this step alone could completely change your accounts payable game.
From eliminating late payments to preventing errors, automation save you time and money, as it is proven to be the best solution for AP teams looking to optimize how they work.
It’s costly. On average, it costs about $25 to manually process just one invoice. It has also been reported that invoices with specific conditions (like exception and non-PO invoices) can cost as much as $50 to manually process. If your organization manually processes thousands of invoices annually, you can just do the math! Manual operation is hardly ideal.
It’s time-consuming. With a manual system, it takes days or even weeks to grant an invoice. Your team spends more time to get less significant work done. This further commits to higher cost of operation, as you’d have to pay more people for longer working hours. But, wouldn’t it be better to get more done in less time, and with as little human workers as necessary?
It causes you to lose money. Issues of duplicate payments, late payment penalties, overpayments, fake, missed discounts, and forgotten credit notes are all very typical with manual invoice processing. Whenever this happens, you lose money and your company’s bottom line is impacted.
It’s boring. And often annoying. This leads to corporate tedium and inadequacy for your team. Nobody wants to sit at the same old desk and enter mind-numbing data for hours, each business day, but unfortunately, that’s what manual invoice processing is all about.
It’s prone to human error. Since procedures are manned by error-prone humans in a manual system, mistakes are immient. They can even lead to bigger issues, which only ever means wasted time and money for your organization.
It’s a lot of hassle. Manual invoice processing is often intricate and inconvenient. After a vendor sends in an invoice, you have to print it out, register it into the ERP or accounting system, extract information, match details, send it back and forth for different workflows like approvals, prepare checks, and do a lot of other complicated stuff. Who wants to do any of that?
It’s outdated. Clinging to a manual system nowadays makes it feel like you’re still operating in the 1940s. Smart, modern businesses move on and comply with the best technology can offer. Relying on an antique system puts you in the backseat and creates opportunities for your competitors to outclass you. Bad news!
It’s been impeding your team’s communication. With a manual system, communication becomes a drag, slow, and expensive. There’ll even be issues of miscommunication, something that slows down processes, makes your team seem incompetent, and makes you lose money.
It requires more hands.Amanual invoice processing process needs more human workers to function, given that the related processes are hand-operated. And you would have to pay all of those humans.
Invoice information is not readily available and accessible. In a manual system, invoice information is stored locally in a physical office. This means you can’t access it outside of the office. There’s absolutely no way a team can work remotely in this way, which impedes productivity.
It delays progress. In a manual invoice processing system, since your workers are always sitting on the same desk entering data or performing some other related tasks, their time is not freed up to work on more value-adding or growth-oriented action items. This slows down improvement and development, making it difficult to implement new strategies and make progress on other fronts.
It adds to discrepancies. A manual approach needs vendors to send in paper invoices. Due to manual attribute, discrepancies are more common, as there are likely to be differences between the paper documents.
You can’t easily track your accounts payable metrics. With the right accounts payable metrics, you’d have an insight into how effective your AP processes are, so that it becomes simple to identify and resolve bottlenecks. A manual system doesn’t let you track this very easily.
Financial reports become taxing to prepare. With a manual system, preparing financial reports for tax, audits, or other purposes becomes a task nobody wants to complete. You would have to manually collate information, go through heaps of documents to find numbers, compile notes, and more.
It wastes your resources. If you’re operating a manual invoice processing system, you had better be ready to put in more resources than necessary. This includes paper, office space, and all the other materials necessary to process invoices by hand and store paper documents.
It’s vulnerable to security risk. A manual system is simply exposed to security problems like data theft, data loss, and the like. When stored locally, anybody can illegally access and use your data as they want. Data security is important in accounts payable because it represents the financial operation of your organization and suppliers.
It’s the reason why your AP team is inefficient. Every business organization wants their employees to be highly efficient. But how do you do that with a system that’s inefficient in itself? It’s paradoxical, and it simply won’t happen.
You lose visibility and control over your processes. With a manual AP system, you can’t easily control workflows or monitor progress. Processes easily get stuck and tasks fall through the cracks more readily. Workers’ accountability is compromised.
Your workspace becomes disorganized. Due to manual invoice processing being a paper-intensive activity, your work environment will become cluttered with paperwork. Studies repeatedly find that a cluttered work environment makes you less productive.
It makes work unexciting. A vital key to a satisfying career is to love and enjoy your work. With the disadvantageous characteristics of a manual invoice processing system, it becomes almost impossible to enjoy what you do.