Effective invoice management is a crucial component of any business. However, this can become more complicated as transactions multiply within a growing company.
Modern technology is revolutionising this critical aspect of financial management and can offer several advantages to businesses seeking growth. Almost 80% of companies already enjoying the benefits of invoice automation expect to increase their investments over the coming three years.
Throughout this blog post, we explore the impact that modern invoice management systems can have on a company like yours and the potential complications of continuing with traditional, paper-based methods.
- What is invoice management?
- The mechanics of invoice management
- What are the advantages of invoice management?
- The features of modern invoice management systems
- Why you should consider an invoice management system
What is invoice management?
The invoice management process involves handling invoices from when they’re received until the moment they’re paid. It includes verifying the accuracy of invoices, gaining the necessary approvals, ensuring compliance and assuring payments reach suppliers.
Invoice management can be broken down into the following key steps:
- Receipt validation
- Approval
- Payment
- Archiving
Every step is critical in ensuring a business maintains accuracy and transparency throughout its financial processes. To summarise, invoice management is the lifecycle of invoices within a business.
The mechanics of invoice management
Much like many other business processes worldwide, managing invoices was typically a manual, paper-based system that was time-consuming and prone to errors. Just think about the volume of invoices your team has to deal with every day — meaning there shouldn’t be any surprises if innocent yet critical errors do creep through.
Invoices would typically arrive on paper and be re-routed to various departments across a company for review and approval. Any paper-based process has high chances of risk and complication for a business.
The physical nature of traditional invoicing leaves companies susceptible to the misplacement of documents, leading to consequential delays.
If your focus is to become a paperless office, modernising it is a worthwhile first step.
Much to the benefit of businesses, invoice management has undergone a digital transformation. Digital invoice management leverages the power of automation and software solutions to streamline and error-proof the entire process.
Specialised software can facilitate receiving e-invoices, automate data extraction, verify the accuracy of invoices and route them for approval — all in a fraction of the time compared to traditional methods.
The digital revolution has made invoice management more efficient, accurate and less prone to costly errors.
What are the advantages of invoice management?
A good first step is to look at your existing invoice processing methods and then compare them with the benefits of implementing invoice management within your organisation.
By leveraging the power of software and automation, businesses like yours can tap into the advantages of modern invoice management. These benefits include:
1.Enhanced financial accuracy and fewer errors
Automation minimises the risk of human error when processing invoices, facilitating financial accuracy.
Accurate financial data is also vital for making informed business decisions. When businesses have more accurate data to refer to, it ensures that financial records are precise and that decisions are much more likely beneficial to the business.
Improved financial accuracy also helps companies comply with regulatory requirements, as they’re able to provide transparent and timely financial data. Unreliable or delayed data can lead to missed deadlines for regulatory submissions, and inaccurate reporting to regulatory bodies can result in penalties or legal consequences.
Compared to automated processes, manual data entry is often prone to errors such as typos, duplicate entries or the misinterpretation of data. Even the smallest data entry mistakes can lead to discrepancies in your financial records and result in damaging losses.
Leveraging the latest software will minimise the risk of these errors, maintaining the accuracy of your financial records and reducing the time spent correcting any mistakes.
2. Streamlined processes
Digital systems remove much of the legwork from traditional invoicing methods, streamlining the entire operation.
With the power of automated software, businesses can reduce the time and effort spent on administrative tasks as invoice automation does the bulk of the heavy lifting.
This gives employees the time to focus on other key areas, such as strategic tasks and business growth.
Overhauling traditional invoice management methods facilitates faster invoice approvals, increased productivity and reduced cycle times. On average, it takes 10.1 days to process an invoice manually, but just 3.9 days with an automated system. Overall, this contributes to a healthy business environment, especially in dynamic circumstances.
3. Improved cash flow
Companies can maintain greater control over their cash flow, accelerating the approval and payment of invoices. Delays in invoicing can result in delayed payments, impacting your company’s ability to meet its financial obligations.
Not only this, but digital systems also provide real-time tracking, allowing you to have up-to-date overviews of your financial commitments. As a result, your company can enable more accurate financial planning and identify investment opportunities.
4. Better supplier relationships
Invoice management facilitates timely payments, enhancing supplier relationships and leading to greater collaboration. This also contributes to building trust and long-term partnerships, leading to deals that benefit your business.
Strong supplier relationships can result in more than just discounts, as your business could also benefit from better terms and priority in the supply chain.
Automated systems help to foster these positive interactions between business and supplier by ensuring the prompt and accurate handling of invoices.
5. Scalability
The efficient handling of payments enables businesses to scale up without requiring an increase in staffing levels or being burdened by an increase in invoice volumes.
As a business grows, the volume of invoices it receives can increase significantly. With a manual process in place, a company may struggle to handle this growth efficiently.
Automated invoice management solutions are equipped to handle increasing workloads without a proportionate resource increase. This means that, even as the business expands, the invoicing process remains as efficient and effective as ever.
The features of modern invoice management systems
Modern invoice management systems increase efficiency and accuracy for companies in various ways.
Automation tools help significantly reduce the risk of human error and ensure that data entry and calculations are quick and accurate. With the help of specialised software, the chance of discrepancies will be minimal, and your business will run smoothly.
These systems also cater for the digital storage of invoices. This saves physical space and makes invoice retrieval fast and convenient. Your entire records management of invoices is also far more accessible and you can retrieve historical invoices in just a few clicks.
There’s also a reduced risk of non-compliance with ever-changing tax and regulatory requirements when using these systems, minimising the risk of any potential costly penalties.
Other advanced features of invoice management systems that can streamline your business include automated matching, workflow automation and real-time tracking. Let’s explore some features in more detail.
Automated matching
Automating your invoice systems means you’ll no longer have to process invoices manually or deal with the data entry errors that come with traditional methods.
Auto-match software matches incoming e-invoices against any pending payment requests. Once a match is made, an invoice is automatically created for approval and both parties are sent an electronic copy.
Workflow approvals
With invoice approvals set up inside workflows, your data can be used to approve invoices, reducing wait times and streamlining your business.
Not only this, but you can also set up notifications and reminders for invoice approvals so you never miss another critical payment date.
Real-time tracking
Payment tracking helps your payment teams stay on top of payments throughout the entire invoice process. With tracking available, you’ll have greater insight into your cash flow and streamline your daily operations.
Payment tracking is typically a standard feature of modern invoice management systems due to its benefits. This insight into your cash flow can facilitate essential business decisions such as budgeting.
All data is usually stored using cloud accounting technology, which means companies can access critical financial data whenever and wherever they need it.
Automated data capture
Automated software can capture and extract relevant data from a business' invoices. Optical Character Recognition is often employed to convert paper-based or PDF invoices into machine-readable text.
This accelerates data entry for companies, enhances accuracy and reduces the risk of manual error. Extracting meaningful information, such as invoice numbers, dates, amounts and line items, is also automated.
Integration with accounting systems
It’s likely businesses rely on several systems to perform their day-to-day responsibilities, meaning that seamless integration between them is vital.
Modern invoice management solutions are often integrated with accounting and Enterprise Resource Planning (ERP) systems, ensuring the seamless transfer of invoice data to the company’s accounting software.
This enhances the accuracy of business financial records, improves the overall data consistency and allows for real-time updates of financial records.
Analytics and reporting
Reporting is a powerful asset for any business, and the more information available, the more impactful the reporting will be.
Advanced invoice management systems often include analytics and reporting tools which can provide key insights into invoicing KPIs, such as approval rates and processing times. With this information, companies can also quickly identify any potential bottlenecks.
Compliance and security
Invoice management systems are equipped with features to ensure your company’s compliance with regulatory requirements and data security standards. These features include encryption and audit trails to keep your business safe.
This helps mitigate non-compliance risk and protects your sensitive financial information.
Why you should consider an invoice management system
Efficient invoice management is the financial platform for any successful business. It offers financial stability for companies and, if performed effectively, can give businesses clear opportunities to grow.
Embracing digital solutions and automation can help companies streamline their operations, improve financial accuracy, and strengthen supplier relationships.
The advantages of modern invoice management systems are clear, with these solutions offering scalability opportunities to companies worldwide.
Plus, technology continues to evolve so it’s arguably a necessity rather than a nice to have moving forward. With invoice management set to be a key player in building a successful enterprise, this type of solution is something your business needs to adopt sooner rather than later.
