With the COVID-19 pandemic and all of the havoc it wrought starting in 2020 and continuing onward, 54% of businesses expect late payment on invoices, which has negatively impacted cash flow, revenue streams and, thus, business overall. Financial management for businesses during these challenging times has become increasingly critical.
After selling or providing service, the initial step you should take in order to be paid is creating an invoice. While previously, payments were typically done with cash payments and manual bookkeeping and accounting practices were followed, with advances in technology, this trend has changed considerably.
One reason behind the change was due to manual bookkeeping and accounting, resulting in inaccurate billing, delayed account payables/account receivables processes and increased cash flow problems as a result of the outstanding receivables ratio.
Financial technologies such as card payments, electronic transfers, and online payments have revolutionized payment transactions significantly. At the same time, invoicing software makes the whole process faster and more professional. Plus, several invoicing solutions come equipped with invoice templates and payment reminder features!
Utilizing invoicing software would enable your business to better its cash flow, increase net profits, reduce losses and save both time and effort in doing so. Experts predict an 80% compound annual growth rate in digital e-invoicing markets by 2027 - surpassing $24,726 Million markets!
Are You Exploring Invoice Software Options for Sale? (Part One of Two Parts). Below, we outline all of the core features and key benefits offered by invoice software solutions as well as present one leading invoice software example for consideration.
What Is Invoice Management?
Invoice management refers to the practice of tracking and paying invoices from their receipt to being recorded, checked for accuracy, paid, paid off and tracked as payment history.
Management of accounts payables is handled by our account payable team; any discrepancies or discrepancies found are forwarded back to their suppliers and contact person in case some discrepancies require clarification or review.
An Overview Of Invoice Management Process.
Software designed specifically to manage invoices can automate some or all steps involved with invoicing and billing processes.
This section will outline a basic process for handling invoices.
Receiving Invoices
This step begins when either a contract point or Accounts Payable team (AP) accepts invoices from suppliers - either electronically via their AP software system, electronically over email, paper mail or facsimiles.
After receipt, our AP team examines each invoice thoroughly - paying particular attention to the date, amount, and description of goods or services being invoiced.
Validate Your Invoice
Next, perform a 3-way validation, which involves matching invoices against purchased goods and receipts; some invoices may even require matching with additional documents such as inspection reports (thus constituting 4-way validation).
Validation can either be accomplished manually by an account payable team or automatically with accounting software that compares information across documents.
Register The Invoice
Record-keeping can be accomplished either manually or digitally by filing invoices using scanning technologies, labelling them logically (such as supplier, date or type), and then filing away securely online or offline using manual filing as needed.
Record-keeping can also be conducted using accounting programs that extract and read data before exporting to a company system, such as an ERP or accounting program, spreadsheets, etc. Keep a list of invoices to aid with auditing, accounting, filing taxes and financial analysis.
The Invoice Must Be Approved.
Once an invoice has been approved for payment, its approval process varies based on each business. In contrast, some invoices can be automatically approved, and others need final sign-off by an executive. Budget availability and compliance with internal policies must also be taken into consideration before authorizing invoices for approval.
Notifying approvers can be done either through direct human communication or electronically using a workflow management system. Once approved, final signature approval can either be done using pen or electronic signer technology.
You Can Pay The Invoice.
Payment may be made using various means, including bank transfers, credit cards, checks, wire transfers and online platforms - provided an appropriate staff member has approved your invoice.
Automation allows invoice payments to be set and made multiple times without manual intervention. Payment must be received according to agreed-upon terms in order to avoid penalties or late fees.
The Invoice
Once payment has been processed, an invoice will appear as paid in your record.
Manual storage methods of paper invoices may include offline filing cabinets or scanning and uploading them online for storage in searchable repositories; automated systems offer much safer storage solutions that make accessing them during an audit easier than manual archives.
Automating Invoice Management Systems
Manual invoice management can be an arduous, time-consuming, and error-prone undertaking. With so much else on your plate, missing payments could end up costing your cash flow and incurring debt accumulation and credit damage that affects its stability.
Automation-powered invoice management can streamline this entire process from extracting information, matching invoices with purchase orders, and automatically routing invoices either towards an approver if it fits or returning them to the point of contact if it doesn't, etc.
Below are several steps businesses can take in 2023 to improve the automation of their invoice management process.
Pick An Appropriate Invoicing Software Solution
First and foremost, select a service tailored specifically to your industry and business requirements; next, consider:
- Cost - Comparing costs can help narrow your search down to find an online tool with optimal additional features that offer value for your dollar. Review various price plans and features until you discover one which meets all your criteria.
- Explore Features - That Align With Your Invoicing Needs - When looking for features for invoicing needs, such as security, scheduling, categorization and notification features, as well as integration features, be on the lookout.
- Ease of Use - The user interface plays an integral role in how effectively accounting teams and individuals utilize its functions. Be sure to find one with an interface that's simple to set up, use and maintain.
- Scalability - To effectively expand your business, find an invoicing software platform capable of accommodating an increase in invoice volumes and complexity.
Evaluate Software Integration Capabilities
Step two is to evaluate whether or not the invoicing software integrates well with existing business systems so as to streamline processes while eliminating data duplication or inconsistency.
Your invoice management tool must support the following:
- Accounting software - Integrating invoice management software with existing accounting systems helps sync expenses, create financial statements, and file taxes effectively.
- Email or a communication tool - Emailing or built-in communications tools enable you to keep in contact with vendors by sending documents and receipts directly from the software, eliminating the need to switch tools externally for data transfers.
Implement Digital Payment Systems.
Your invoice management tool portal should allow for seamless supplier invoice payments that reduce errors, duplicate payments and delays while keeping electronic records of transactions.
There are various digital payment solutions available today, such as:
- Credit cards - Widely utilized due to their convenience, credit cards can incur fees, interest charges and credit limits that might exceed anticipated usage levels.
- systems for accepting payments online - like PayPal, Stripe, or Square.
- They provide convenience, speed and international transfer; however, there may be transaction limits, currency restrictions and exchange rate issues which limit availability in specific regions or countries.
- Online business accounts - Like those offered by Payoneer, offer businesses multi-currency capabilities at reduced exchange rate fees and exchange fees compared to physical bank accounts. While such accounts offer many advantages over their physical counterparts, additional paperwork, verification procedures or limitations on availability could apply depending on which platform it uses.
Considerations when selecting your optimal payment solution include these factors.
- Compliance of Your Suppliers - Before paying, check that all suppliers can accept payment.
- Security - Select solutions featuring strong encryption, two-factor authentication and compliance with industry standards. Avoid storing sensitive information locally on devices or servers by opting for cloud or tokenized solutions instead.
- Ease of Use - Consider solutions with user-friendly designs compatible with your existing platforms and supporting various payment gateways and currencies, as well as features such as recurring reporting.
Automating Invoice Management Software Can Benefit Businesses In Multiple Ways
Automated invoice management works like an iterative decision-making system, progressing according to outcomes at each step. Additionally, with multiple automation features for various aspects of invoice management - like payment reminders and analytics capabilities - it provides various key advantages.
Let's have a closer look.
Faster Payments
Automated Bill Management Allows for Rapider Payments Since automated invoice management processes can be much quicker compared to manual ones, they allow for speedier verification, approval, and payments.
Through these means, it will be possible for you to avoid late fees and build meaningful relationships with suppliers. And if the supplier offers early payment discount policies, take full advantage of it - according to one survey, 73% of AP teams reported more early-pay discounts after automating.
Timely payments also play a vital role in building long-term business success.
Increase Efficiency And Productivity.
Automation allows businesses to eliminate manual tasks like data entry, printing and mailing - saving time, money and resources that could otherwise be spent elsewhere within their businesses. 76% of employees within Accounts Payable departments report increased productivity since adopting automation solutions into their daily work routines.
Increased Accuracy
Human errors such as typos, miscalculations, misclassifications, duplications and omissions may arise at any stage in manual invoice management processes due to fatigue or miscommunication resulting from workload overload; such mistakes can compromise timely payment, compliance and reporting obligations and cause costly disruption. To increase accuracy.
Automating invoice management can reduce mistakes significantly; according to one survey, 71% of AP teams report having experienced fewer errors after using automation.
Automating payment due dates helps even the most diligent accountants avoid mistakes; when handling multiple invoices at once, prioritization allows you to avoid cash flow issues or paying one early at the expense of finding cash for another due earlier - thus creating a failproof payment system! Automation truly safeguards all aspects of payments!
Enhance Security
Invoice automation software stores invoices in a secure cloud platform that protects against unauthorized access, loss or damage to your data. Furthermore, encrypted professional invoices and digital signatures allow for authentication purposes and ensure you stay within budget.
Manual Vs. Automated Invoice Management
Though invoice management can be done both manually and automatically, each approach has different applications depending on a number of circumstances. Here is an introduction to both approaches for quick reference.
Manual invoice management presents several unique challenges. One such obstacle lies within its approval rate - approval times tend to take much longer, potentially delaying payments altogether. Furthermore, manual approaches often involve multiple stakeholders that create bottlenecks or inefficiency that affect invoice management efficiency.
Automated invoice management provides an alternative perspective. Here, the approval process becomes efficient and robust as automated systems swiftly route invoices through predefined workflows to ensure timely approvals while decreasing delays. This approach enhances overall payment system efficiencies.
Payment Processing should also be given careful thought. Manual invoice management necessitates team members manually initiating and processing payments - something which not only takes up valuable time but increases risk. Automated Invoice Management utilizes digital payment systems which offer more streamlined, error-free payment methods while seamlessly integrating with financial institutions and decreasing the need for manual intervention.
Data analysis in manual invoice management poses some unique difficulties due to fragmented accounts payable data spread among different channels and individuals, hindering decision-making and analysis. By contrast, automated systems offer improved visibility and comprehension of accounts payable data, allowing organizations to make more informed decisions while optimizing financial processes.
Scalability should also be given careful thought. Manual invoice management methods often involve additional manual labour when dealing with increased business volumes and volumes; this could prove inefficient and lead to errors as your operations deal with higher volume invoices as you expand quickly. Automated invoicing software provides much-needed flexibility by efficiently handling higher invoice volumes during times of rapid expansion while remaining cost-effective and ensuring an effective invoicing process that remains efficient even as your operations expand rapidly.
Approval Rate
Manual approval involves several steps ranging from sending invoices directly to an approved individual, waiting for their response and subsequent follow-up, and then manual follow-ups based on this response. Multiple approvers might impede processing time significantly - 37% of companies identify manual invoice routing as their pain point. In contrast, reports state it can take as much as 8.6 days per invoice when processed manually.
Automated invoice software uses predefined rules to route invoices directly to their appropriate approver based on criteria such as amount, vendor or department. In addition to routing invoices quickly to them for approval and tracking them automatically throughout, automated software allows invoice processing times of 3 - 5 days using automation technology.
Manual Payment Processing
Manual payment processing requires team members to enter payment details into a system manually, print checks or initiate bank transfers as soon as they become due, record transactions in their entirety and reconcile accounts - meaning this requires lots of paperwork, data entry, verification steps and human intervention.
Automated payment processing utilizes a digital payment system which connects with various payment gateways like credit/debit cards, wire/ACH transfers and PayPal for seamless processing and generates and sends receipts/confirmations of payment confirmations automatically while keeping track of status updates with minimal human intervention required.
Analysis
Manual invoicing often creates data dispersions among various channels and people, leading to communication breakdown and time-consuming efforts of consolidating everything into an orderly structure.
Automated invoice processing provides greater insight and understanding into your accounts payable data, helping you analyze spending patterns, assess vendor performance, monitor discounts and key metrics more closely, generate reports more easily, etc.
One of the primary challenges associated with invoice management is disjointed or siloed departments not sharing invoicing data among themselves freely. With invoice management automation tools, all financial and invoice data can be put together into one consolidated view, showing where money has been spent rather than having to move through inefficient red tape processes. Every stakeholder can easily access this system for quick information access rather than waiting around on bureaucrats to view all this.
Scalability
Relying solely on manual labour to manage invoices may prove inadequate as invoice volumes increase, necessitating more staff as time progresses.
Personnel costs and complexity have to be factored into business costs and operations decisions, and hiring employees requires not only recruiting them but retaining them, too. Automating invoice processing means fewer invoices per employee to manage, improved time allocation and plan optimization at significantly less expense compared to hiring additional staff members.
Also Read: Quick Overview Of A Effective Invoice Management Software
Value Proposition For Invoice Management Software Solutions
Change can be daunting, but remember the benefits of electronic invoice management, often referred to as vendor bill management , far outweigh its associated costs. Let's explore these perks more in-depth.
Helps Reduce Late Payments
Ideal situations would include potential customers paying their invoices promptly; unfortunately, however, business owners rarely see perfect customer payments each time an invoice is sent out. Late payments do occur occasionally due to errors on invoices or slow manual processing - but they don't have to occur as frequently.
Invoicing management software enables you to send electronic invoices at times that suit both you and your customers - providing much quicker access than paper invoices that might get lost during delivery.
Additionally, online payment options with electronic invoices, such as credit card payments, can help make payments simpler for your customers and could reduce late payments. Providing customers with convenient ways of paying that align with their business or financial preferences could result in reduced late payments and better overall relationships between you and them.
Simplifies Billing Process
Making an invoice typically entails several steps:
- Collate client information.
- Label the invoice with information regarding your business, client details and invoice numbers.
- Write detailed product or service descriptions.
- Add payment terms.
- Send an invoice.
It would not be an efficient use of your time if each invoice were filled out manually with this data. In contrast, invoice management automation saves valuable time by streamlining billing by inputting business information, client details, product/service descriptions, payment terms and anything else required automatically into an invoice.
Don't forget that your customers will also appreciate an easier billing process. Each person likely has their system when receiving bills; sending invoices electronically could help save their accounts payable team time by speeding up processing time for bills they owe.
Prevents Overbilling
Mistakes are more likely to arise during manual invoice processing due to human errors - it's easy for mistakes such as missing interposed numbers or sending duplicate invoices through to happen accidentally, and this could cost your business dearly in terms of overhead expenses and lost revenue.
Overbilling can sometimes be considered fraud and lead to customer relationship service problems. Recognizing an invoice error takes days before rectifying it - leading to late client payments as a result and leaving both you and the client feeling frustrated about delays in payments for invoices already sent out. Furthermore, overbilling can harm relationships within businesses as a whole; its effects will become all the more dangerous when repeated overbilling occurs over an extended period.
Contrarily, invoice management software can assist in creating more precise invoices that save both you and your customers both time and effort, ultimately contributing to stronger relationships between businesses and clients. As well as decreasing invoice processing timeframes.
Automating Manual Processes Effortlessly
Manual invoicing tasks are complex and time-consuming - often leading to errors. But invoice management software can significantly cut back or even eliminate manual processes - creating autofill invoices from stored information is also possible, then sending them electronically directly to customers.
Automating invoices provides an essential safety net if you ever need to manually add information, as you can store this in an electronic repository for copying and pasting onto invoices. Your customers' accounts payable department could benefit from reduced manual processing as they could receive their invoices instantly and make electronic payments instead of mailing checks in.
Different Types Of Invoices
When it comes to invoices, it's essential to recognize their wide array of variations depending on the industry, nature of the business activity and prearranged terms. Each invoice type caters specifically for certain scenarios which require adjustments for effective management of invoicing procedures.
Let's review some of the more frequently encountered varieties.
Commercial Invoice
A commercial invoice is used in international trade transactions and must comply with global trade regulations.
Pro Forma Invoice
A pro forma invoice is often used when selling abroad to ensure mutual agreement, estimate costs or declare them to customs as export goods. It's often sent prior to shipping out goods. Its use can help facilitate faster business and is common practice among overseas sales companies.
Interim Invoice
It, in its purest sense, is an invoice which breaks payment into smaller portions and requests payment at predetermined stages in a project's development to request that portion.
Recurring Invoice
A recurring invoice is an invoice issued regularly for the same service at regular intervals, typically used with subscription models or instalment payments.
Top Invoicing Software In 2023
Now that we understand the fundamentals of invoice management let's take a look at a selection of invoicing software which can assist in streamlining invoice management in 2023.
Xero
Xero is an online invoicing software designed to streamline account receivable and accounts payable processes, from invoice download and import directly into online banking systems, batch payment features for multiple bills at once payment schedule, tracking unpaid invoices as well as getting an overview of bills which allows cash flow prediction.
Xero offers an intuitive user experience and is compliant with leading global ISMS standards while also offering encryption and multi-factor authentication features. Comes with a 30-day free trial and three plans starting from just 13 USD/month.
Zoho Invoice
Zoho Invoice, an account payable/account receivable software solution tailored specifically for small businesses, offers both account payable/receivable capabilities. With vendor portals for directly uploading invoices as well as multiple-invoice payment features - plus notifications systems keeping both you and your vendors updated about invoice payments!
Prioritize security through its framework that follows OWASP standards and Information Security Management System (ISMS). Furthermore, ensure data is encrypted, retained, and backed up to provide maximum protection of personal information. Zoho Invoice offers both free and upgraded plans starting from 10 USD monthly for users to take advantage of.
ZipBooks
Zipbook is an accounting software tailored specifically for small businesses that specialize in accounts receivable. In addition, its expense organization feature allows you to organize vendors and categorize expenses.
Your data is protected with Zipbook by using 256-bit TLS encryption in combination with multiple layers of protection such as multiple encryptions, optional two-factor authentication and regular security testing. Zipbook's basic features are free; for additional services starting at 15 USD monthly, you may opt to subscribe at an affordable monthly subscription plan starting from 15 USD per month.
Conclusion
Are You Struggling with Invoicing? If so, now may be the time to explore the incredible advantages of integrated business intelligence through invoice management software. Manual invoicing processes often lead to inefficiencies, delays and errors, which make business operations inefficient; invoice management software provides a transformative solution which addresses these obstacles directly.
By automating approval processes, streamlining payment workflows, improving data analysis capabilities, and offering scalability features, invoice management software empowers businesses to take charge of their financial operations and take back control. Not only does invoice management software save both time and resources while improving accuracy and transparency - empowering organizations to make informed decisions while optimizing cash flows to create smoother processes overall.
Bill management software's benefits extend far beyond mere convenience; they translate directly to tangible increases in productivity and profit for your business. So if your invoicing processes have become complex or ineffective, don't be put off exploring this world of invoicing management software; discover its power for creating more efficient financial processes in the future of your enterprise - your clients will thank you!
