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What is Invoice Management and How Can it Help Your Business?
Invoice management is an essential function in every business. This is why and how it can help you.
Invoice management can also regulate the company’s payable process seeing to it that invoice approvals are done accurately to avoid penalties and to take advantage of early payment discounts.
Proper invoice management will prevent human errors, avoid time-consuming data entry, hasten the billing and collection process and iron out workflows that may impede the company’s collection process.
What is invoice management?
Invoice management is an essential function in every business which involves processing and management of invoices from suppliers. It is, therefore, connected with the exchange of products or services undertaken by the company.
The process in invoice management usually includes:
- Receiving the invoice
- Extracting invoice information
- Validating and verifying the invoice information
- Approving payments
- Archiving the invoice for future reference
With this, invoice management may be able to track down the cash flow of a business. This is essential, especially for small companies. Businesses should be able to keep track of their expenses, particularly those in paper invoices, to handle their assets well and be used for future decisions involving money.
Invoice reconciliation is, then, done to make sure that the cash on hand and the business’ expenses complement each other.
It is a process wherein the incoming and outgoing invoices are made sure to be clean and correctly matched to all accounts.
Invoice Management For Accounts Payable Vs. Accounts Receivable
The invoicing process is complex and it needs policies and rules to be done consistently with your accounting workflow. When doing invoice management, it is important that the business’ accounts payables and accounts receivables are fully documented and presented. The assets, liabilities, equity, revenue, and expenses must be released.
These documents involve critical auditing as these include the sales, for which are the income of the company, and the liabilities, which is the amount of what they owe to others.
What is Invoice Management for Accounts Receivables?
To define the first term, accounts receivable are those that are to be collected in cash within an established time frame agreed by both the customers and the company who sold the goods or service. It is the amount that hasn’t been paid to vendors or suppliers for the goods or services received. These are classified as the current asset of the business in the balance sheet. Accounts receivable is usually seen as the trade accounts receivable, notes receivable and other accounts receivable.
Invoice management for accounts receivables means being able to issue customers the right invoice data reflecting the details in the purchase order. Invoices should also be monitored until the time they get paid.
Invoice management for accounts receivables may include;
- Communicating with the client on confirmation of order and delivery
- Issuing of invoice on or before delivery to avoid late payments
- Checking receipt of invoices by the customer
- Monitoring accounts receivables
What is Invoice Management for Accounts Payables?
Accounts payable, on the other hand, shows the amount that has not been paid to the vendors or suppliers for the goods and services that are received. This is considered the current liability of the business.
In a simpler sense, accounts receivable is the amount that the customer owes to the company for the goods while the accounts payable is the amount that the company owes to its suppliers.
Simply put, accounts receivable is the amount that the customer owes to the company for the goods while the accounts payable is the amount that the company owes to its suppliers.
The invoice management process for accounts payable
Despite their similarities, the invoice management process for the accounts payable and accounts receivable are different from each other.
The company must be able to resolve all the business transactions. Therefore, one should think about what they need to pay and who they should give their payment to. In processing of the accounts payable, this procedure is most commonly used:
1. Completing a purchase order
The first step would settle the services or goods that will be purchased and their price. This would also include the terms and conditions for the transaction, the timeline of delivery, and such. Both parties, the supplier and the business, should have a clear understanding of the terms and conditions to avoid any misunderstanding or conflict.
2. Processing a receiving report
The company would, then, record the goods and services that are provided and list down how much is owed to the suppliers. This must be checked thoroughly in order to not overlook anything that may lead to any misunderstanding to both parties. The receiving report would be the documentation of the company as to what they have received. This part is critical because the amount listed should be correct or else the business would pay too little or too much than what must be. This would affect the whole account.
3. Receiving and processing the supplier invoice
The business may now process the payment. The details have already been checked and match the goods or services that have been received or are expected to be received.
This process only follows 3 steps that look easy enough for limited people. Companies usually limit the persons who are assigned to this area. Apparently, the invoice management process for accounts payable is vulnerable to theft. The more people present, the more at risk of fraud within the group. One small mistake can lead to a bigger problem. Honesty and trustworthiness of the employee are exercised in this part.
What Is Invoice Management System
An Invoice management system is an internal business system in which the invoice documents of the vendors and suppliers are being processed online. The company may make use of invoice management solutions that can improve business processes. This makes the transactions faster and more organized as this connects the company and the suppliers online.
With the processing of both accounts manually or through automation software, accuracy is always important. Tracking and checking vendor payments should be practised when managing invoices. This is because of the possible human errors that may slip away that are just under your nose.
One simple mistake can affect the company greatly.
Manual data entry is sometimes used by businesses with not many transactions to streamline processing costs. Although, this way of data entry may be prone to many mistakes. For example, a wrong number being inputted can affect cost management. Both parties may suffer the consequences due to misunderstanding. This just shows that processing invoices can be a great responsibility in monitoring the company’s cash flow. The ap department or payable teams in charge of the process should be critical in checking the data.
With all the applications present, there are other easier ways to process a company’s invoice, both for the accounts payable and accounts receivable. There is an invoicing software that could really be a big help when the receivable process and payables process on a regular basis. This software can check the payment status through accounts payable automation and record the invoices. They can also manage the contacts needed for the transactions.
Why Invoice Automation Is Relevant To Small Businesses
Invoice automation would be a big help to small businesses in maintaining a reliable supply chain. There are many recurring transactions including procurement that need to be processed. In this case, this would help in making things easier, eliminating time-consuming tasks.
Spenmo is an invoice management and bills payment system that automates your AP workflow. Simply upload your bills to your Spenmo dashboard (you can upload upto 1000 invoices all at once!) and use the system to notify the manager to approve the said invoice. Once approved, the bill is paid and automatically reconciled to your accounting software. Click the button below to learn more about our automated bill payment system.
How An Invoice Management System Works
Invoice management systems make invoice processing easier for an accounting system as the transactions and documents of the company and suppliers are done online. How does it work? Well, they are basically the third party in the transaction which checks the legitimacy of the transaction, tracks the transaction, and much more.
The software manages the documents and spots frauds in the transaction. The processes would be done automatically. Businesses also have the freedom to choose the payment process in which they can pay online or print checks to mail to the suppliers. After the transaction has been done, the system would automatically document it and process the invoice with its smart processing functions. These functions would depend on the software and its abilities.
Benefits Of Using An Invoice Management System
- Accurate data processing
- Faster processing
- Quicker payment approval
- Save time and money
- Real-time insights
- Secure Cloud Encryption
- Easily accessible archives
- Premade professional invoice templates
- Direct integration
Things To Consider When Choosing An Invoice Management System
Though the invoice management system seems to make the job easier, there are things to consider when choosing which one suits your business better.
- Premade professional invoice templates
- Ease of payment requests and deposits
- Ease of doing business
- Arrange invoices based on payment plans
- Automated accounts payable and payments
- Ease of use for approvers
- Provide customizable reports for business analysis
- Ease of Setup
- Group and schedules outgoing payments
- Ease of Admin
To help you choose which invoice management software would fit your style, this website has sorted out the recommended accounting software that is used by many. They have also provided some ratings to help you decide.