Spenmo's CEO and Co-founder, Mohandass Kalaichelvan, details the company's next steps following its recent Series A Funding announcement.
How To Process Accounts Payable Invoices
Spenmo, a Singapore-based payables software startup, today announced the appointment of Kevin Fitzgerald as the company’s first Chief Revenue Officer (CRO).
Accounts Payable (AP) automation allows businesses to adopt a smooth and efficient process that controls and manages financial transactions through one system only. This automated and digitized approach minimizes effort and reduces risks and mistakes due to human error.
Invoice processing is a critical aspect of an organized and systematic business. This process involves tracking and managing the business’s financial transactions, particularly orders and payments. Traditionally, enterprises send invoices through fax, mail, or email, which can be messy and disorganized most of the time. Considering this, businesses should find a way to keep these documents and transactions properly handled and systematized.
Creating a system for your accounts payable process can create an efficient method to handle company orders and payments. Learn some solutions through automated accounts payable invoice processing benefits and design.
What is Accounts Payable Invoice Processing?
It is crucial for people who are just dipping their toes in businesses to understand that proper accounting is critical to tracking how your money moves. Managing your invoices through an invoice processing system can provide you with an organized list of your business transactions. To give you a better idea, we will provide you with a comprehensive invoice definition and a complete discussion about invoice processing meaning.
First off, an invoice is a type of business or commercial document used to detail a transaction between a buyer and a seller. The paper provides a breakdown of the contract, including material costs, professional fees, and labour fees.
The seller or vendor typically uses an invoice to collect payment and may include details about the transaction, such as specific terms and agreements. Moreover, the buyer can use the invoice as a legal document to protect against any disagreement with the seller.
It is common for a startup or small business to use hand-written invoices to record and track buyer contracts. However, this is not the most efficient way of handling and managing invoices.
Hand-written contracts are easy to lose and simply difficult to keep track of as you further your business through the years. Compiling hand-written invoices for years-long is inefficient and organized at high volume.
An invoice can serve as a legal contract documenting your transaction with another business. A hand-written invoice risks tampering, which can be critical for settling payment. An automated, reliable, and cost-effective invoice processing system can help ease managing these documents.
As the name itself, the accounts payable (AP) department is the business function that deals with short-term payable accounts or liabilities of a company. Through this department, businesses can keep track, file, observe, and manage the company’s financial transactions.
Generally, the AP department is responsible for reviewing and recording invoices, routing invoices for approval, remitting payment, analyzing and presenting financial reports, and building supplier relationships.
Invoice processing is a specific function of the AP department that focuses on handling, managing, and recording company invoices. The AP department’s general invoice processing cycle includes facilitating the steps from the receipt to the payment of supplier or vendor service, up to recording and filing these transactions on a general ledger.
Steps in Invoice Processing
The invoicing process can be a complex matter depending on the size of the business. Logically, a prominent company would have more transactions, and invoices would flood the AP department. High volumes of invoices can easily overwhelm the AP workflow if there aren’t efficient AP processes to follow.
Generally, invoice processing follows the following basic steps:
1) Receive the invoice from a vendor or supplier.
The first step needed to process invoices is for the AP department to receive an invoice from a supplier and verify that the service was acquired as stated on the purchase order (PO). The accounting department should cross-reference the invoice from the vendor with their record and ensure that the billing details are consistent. Then, they should settle discrepancies between the given receipt and the purchase order with the supplier before proceeding with invoice approval.
2) Record transaction details.
Once the invoice details are verified, it is the responsibility of the AP department to record the transaction to a general ledger for tracking purposes. Smaller businesses tend to opt for manual data entry, but this method is labour-intensive, time-consuming, and carries high risks of human error. Invoice processing solutions include automated general ledger coding software to improve managing and tracking invoice transactions.
3) Approve invoice
If there are no faults or discrepancies on the invoice provided by the supplier, the invoice is then further processed for approval. The approval process requires the AP department to tediously check the details and information provided on the invoice and ensure it is in line with its policies and regulations.
4) Pay invoice.
After the supplier invoices pass through two verification steps, the AP department handles the payment for the services or supplies procured. Depending on the agreed-upon payment terms, the company can pay within due or even earlier to take advantage of possible early payment discounts.
Why You Need to Use AP Invoice Processing Solutions
Since invoice processing is a critical part of an organized accounting system, implementing an invoice automation solution can help provide your business with a more efficient and reliable invoice tracking process. To further convince you, here are the advantages and benefits of using an AP invoice processing system:
Go paperless with electronic invoice processing
As mentioned above, it is pretty standard for small or startup businesses to opt for a hand-written or manual invoice processing system as it is the most accessible. However, hand-written invoices can be easily lost, tampered with, and destroyed, which does not make it an ideal way of tracking and managing your business’s cash flow.
Automated electronic invoice processing solutions or e-invoicing allow you to manage your invoices by digitizing invoice data and compiling entries into easily manageable and navigable accounting processing software.
A comprehensive AP automation solution starts by changing how you receive vendor invoices. Depending on the vendor’s compliance, you can send the invoice document electronically through email or scan the contract and later input it into your automated invoice processing system.
Keep your accounting data in one centralized system.
Since your invoices are all electronic or digitized, they could be easily entered, managed, and tracked using an integrated AP system.
Having all accounting information in a digital system provides you with an easier way to optimize your accounting processes. You can track every business transaction and financial activity through one computer program and within a couple of clicks.
Automating your invoice processing promotes efficiency as each step would be tracked through the AP invoice processing system and could be easily verified, approved, and completed. Pulling information for a specific purchase order can be achieved with a few clicks instead of diving through piles of files and documents.
Monitor your KPIs with ease.
The key performance indicators (KPIs) are a business tool that helps you measure your business’ efficiency in achieving your objectives or goals. An invoice automation software allows you to easily track and monitor your weekly, monthly, quarterly, and yearly KPIs.
The automated AP invoice processing system can easily track the business’ productivity by monitoring audit trails and consolidating gathered data to an invoice management dashboard. The summary of department performance can help you adjust certain lacking business aspects to improve the overall AP productivity and efficiency.
Manual Invoice Processing vs Automated Invoice Processing
|Eco-friendliness||Electronic invoices limit paper use and reduce paper waste between manual and automated invoice processing. Unlike manual processes that may use several sheets of paper throughout the invoice process, automated invoice processing is completed online and is ultimately paperless.|
|Productivity||Productivity is improved when employees do not need to complete tasks through unnecessarily labour-intensive methods. Automated invoice processing simplifies invoice tasks and boosts efficiency.|
|Ease of access||
Accessing older documents can be extremely difficult if your employees need to dig through piles of papers stacked under newer transactions. Unlike manual invoice processing, automated AP invoice processing solutions offer accessibility through its centralized electronic AP system.
With automated invoice processing, employee productivity will increase.
Automated invoice processing is an incredible way to improve efficiency. Spenmo is here to help you. Visit us now!
Get the Best Automated Account Payable Invoice Processing
If you are starting a business, it is essential to understand that accounting for your business’s financial transactions can become complex once you begin to transact and deal with other companies at higher volumes.
There wouldn’t be much of a problem with manually processing and managing your invoices if you only deal with a handful of transactions. However, the story will surely change once your business deals turn to hundreds and your invoice documents stack to thousands as the years pass by.
Not only is this method labour-intensive, but piling your invoices into filing cabinets is not the most organized, manageable, and systematic way to track your financial transactions. Documents can easily get lost, invoices can be accidentally damaged or destroyed, and searching for a year-old invoice can take longer than necessary.
AP invoice processing solutions offer you a way to manage and track financial transactions by automating each step of the invoice process. Receive, record, verify, approve, and pay invoices through a centralized accounting system that can track every purchase order in a matter of minutes. Visit Spenmo’s website to learn more about accounts payable invoice processing and incorporate it into your business.
FAQs on Accounts Payable Invoice Processing
Is automated accounts payable software safe and secure?
AP software comes with security features that safeguard it from data breaches and ensure that the program is updated with the latest technology changes. AP protective and security features include fraud detection, backup resources, and disaster recovery to maintain a reliable AP processing system.
Can we ditch the paper with AP software?
While it is difficult to say that businesses should altogether ditch paper, adopting an automated AP invoice processing system allows you to reduce paper use for your company. Encouraging other businesses you transact with to follow the same process can further cut down paper use in invoice processing.
Is AP automation a good fit for your company?
While your accounts may be manageable when your company or business is just starting, an automated AP system is ideal for companies that want an organized and systematic method of managing their financial transactions in the long run.