Digitization has changed the way companies receive invoices today. You still can receive the odd invoice per post, but far more invoices will be delivered as email attachments, and invoices for software applications/subscriptions can be retrieved from online platforms. Electronic invoice delivery can help environmental and wastage issues, but will not necessarily improve your invoice management. If your invoicing workflow still includes re-entries, double-handling, printing, or storing in different places, there is much you can optimize with an invoice management system.
What is an invoice management system?
At its simplest, an invoice management system is software that tracks and enables the payment of suppliers’ and vendors’ invoices.
Typically, many people or even departments exchange invoice related communications, validate invoices and approve payments. If you are not using an invoice management system, the process will be time consuming, invisible, and prone to errors. Smart companies take advantage of technologies that streamline the entire invoice cycle management, make it transparent, and channel all communication into one place.
What do invoice managers do and how can a system help them?
Invoice managers oversee the development of policies and procedures that ensure timely and accurate customer invoicing. They are responsible for reconciling billing accounts to the general ledger and interfacing with the accounts receivable and credit/collections. Invoice managers contribute to resolving inconsistencies, disputes, and inquiries. They also plan billing and understand financial metrics.
Processing invoices with a system cuts out manual entries and eliminates unnecessary communications. The system will notify managers of incoming invoices, and the managers validate and approve them and monitor the payments. The data will be automatically exported to an ERP system or an accounting tool. Processes and tasks are automated, providing for consistency and accuracy.
Having the entire invoicing cycle visible in one place will enable invoice managers to manage billing in timely manner and to focus more on planning, customer relations and process improvements.
4 tips to master invoice management in 2023
Small businesses especially need to keep an eye on their cash flow as the reserves can be thin. Relying on customer payments might not be the best strategy. Managing Accounts Receivable efficiently is a better way to achieve financial health for the company, and invoicing is the core element of AR. Here are 4 tips on how to move beyond manual entries and to manage a growing number of invoices with ease:
Automate your billing processes
Smaller and middle-sized companies greatly benefit from automation. Manual processes leave a lot of room for human errors, which can have painful impact on a company’s bottom line. A software will recognize duplicate invoices, over-payments, and other potential errors. It can prevent late payments and, in some cases, late payment fees. You can track invoices, monitor statuses, and centralize communications. Repeatable tasks are automated, procedures followed, and due dates are not missed.
Enter essential information for each invoice
Your chosen software will prompt you to enter all the essential information such as the customer, invoice number, invoice date, delivery date, due date, the details of what you are invoicing for, and the PO number. This will ensure that customers and their AP team have everything they need to process your invoice without a delay. An invoice template for each customer with pre-filled recurring details will speed up the invoicing process.
Set up a payment frequency that is favorable to your cashflow
If you have multiple ongoing projects, set up reasonable payment intervals with the customer. It could be monthly or even weekly - don’t wait until projects are delivered. It helps if you agree on payment terms with the customer at the beginning of a project or relationship.
Sending regular invoices sets up expectations with the customers who are more likely to pay scheduled smaller amounts than a large sum at the project’s completion. When using a system, regular invoices can be automated and reminders sent automatically. You can monitor payments status in real-time and some software tools allow you to receive payments directly into your bank account.
Monitor your Accounts Receivable
Keep monitoring your AR and make sure invoices are sent regularly and as soon as possible. Evaluate the efficiency of your current system and have a think whether you can offer incentives for quick payments, introduce late payment fees, or change due dates on your invoices. Small steps can have a big impact on a small business’ cash flow.
It has become obvious that not only large, but also small and middle-sized companies benefit from an invoice management system.
How invoice processing should look
- Invoice Receipt - Point-of-contact receives an invoice from a supplier by email (or by post).
- Invoice Register - The data is entered into the invoice management system according to the created invoice checklist. (Customize the checklist according to your needs).
- Approval/Rejection - The manager is automatically notified and can approve or deny payment in the same system.
- Payment - The finance manager (or AP officer) is then notified, and can pay the invoice.
- Archive - Keep and manage all data in one ERP system. The data can be exported to the company’s accounting tool.
The importance of invoice management in your mid-sized company
Accurate invoicing will prevent delays and errors in receiving or paying for services or goods. Small and mid-sized companies especially need to be on the top of invoicing so that they can meet their tax responsibilities, avoid any penalties, and cut unnecessary costs. Automated invoice management will provide an accurate overview of a company’s financial health and leverage the entire invoicing process.
What are the benefits of invoice management?
Track and manage all invoices in one system – All invoices from vendors and suppliers are managed by one system. Transparency and visibility will ensure that invoices are raised on time and money is received. No due bill will be missed or paid overdue.
Faster invoice processing – All invoices are captured by the system and sent for validation and approval to the assigned department or personnel. Approved payments are processed and recorded in one system.
Streamline the billing process – Digital tools and automation enable departments to view invoices’ statuses and their progress. There is no need to pass information manually - assignees and all responsible will know what to do next and by when. All invoices will be archived in the invoicing system, holding all relevant information for audits in the future.
Bill with ease – Having all the billing information you need at hand will make billing easy. Notifications and alerts will notify assignees about any delays or discrepancies, so no errors should occur. You will know what invoice has to be billed/paid for and by when.
Get an insight into the invoice life cycle – Companies have a large scale of invoice influx, which all have different payment terms and deadlines. Using an invoicing solution will allow you to set up the frequency and due dates. With few clicks, you can view which stage of its life cycle each invoice is at.
Prevent overbilling – This is a common error if invoicing is handled manually. No invoices will be paid twice if you use invoicing management system. Equally importantly, you will not miss paying a due bill either.
Increase financial controls – Having all relevant data at hand increases control over your finances. You will be able to evaluate your financial planning and make corrections where necessary. You should not end up paying bills too soon or run low on cash. Accounts Payable and Accounts Receivable will be well balanced out if you establish the processes correctly.
Real time insights – Invoicing solutions provides real-time insights into the invoices’ life cycles. At a glance, you can see stats and values for how many invoices are open, in progress or completed.
Read on: 30+ financial KPIs and metrics.
How Vault ERP can help you manage your invoices
The Invoice Module in Vault ERP is only one element of a scalable, complex financial module. You can work just with invoices or add more modules to manage your finances according to your preferences. The Vault ERP Invoice Module is a great tool to manage, track and store your invoices in one place. On the module’s dashboard, you get a quick and real-time stats overview of invoices by their status, by client and can see invoiced amount by months. A filter allows you to search for older invoices or by client. Depending on your purchase plan, you can have more options available such as accessing other modules directly from an invoice line.
Read on: How Vault can support IT companies.
The clear view structure, custom fields and quick access to information will save you a great deal of time and help you get organized. Once you have defined your invoicing processes, you can create a checklist of tasks to ensure the procedures are followed and tasks assigned. The system takes care of itself, and your financial control will be increased without frequent checks.
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