As a hardware-centric startup, managing invoices and accounts payable can be a time-consuming and tedious task for accounting, finance, and procurement teams. However, implementing best practices for invoice management can alleviate the burden and free up valuable time to focus on more critical tasks, such as developing innovative products. Invoice management allows companies to track and pay supplier invoices efficiently, ensuring timely payments and potentially unlocking early payment discounts.
This process is typically managed by the accounts payable department and can be automated through invoice management software. Prioritizing invoices, streamlining the invoice processing workflow, ensuring fraud detection, tracking and resolving disputes, and leveraging automation are some of the best practices for successful invoice management.
Ultimately, implementing invoice management software can save time, improve the purchase requisition process, strengthen supplier relationships, eliminate fraud and bottlenecks, increase transparency, and boost employee productivity. For fast-growing startups, invoice management is a necessary tool for staying competitive in managing supply chains and purchases.
What is Invoice Management?
Invoice management is a method that lets companies track and pay supplier invoices in an efficient manner. Typically, this is a back-office function that is a part of the procurement process. In most operations, the accounts payable department manages this process. It’s issued by accounting systems.
A simpler definition is that it is a process that manages the process of receiving an invoice for purchased products and services, recording the data from it, validating and ensuring the data is accurate, verifying the invoice, and then paying for the service. The final step involves recording the payment as a transaction in the company’s books.
When invoice management is applied, it is possible to regulate the payment process. That is, it is possible to ensure that invoices are approved and paid properly to minimize any excessive fees and penalties for making payments late. It also enables potential discounts for early payments. This is an important part of best practices with accounts payable.
How Invoice Management Processes Work
The days of a paper invoice are gone in most operations. Though you may receive a paper invoice, most of the time, invoice processing is automated. Invoice automation is an empowering process as it can make paying a purchase order more efficient. With invoice management software, there are typically four steps involved.
#1: Receive the Invoice from the Vendor
The first part of the invoice management process is to receive the invoice from the vendor. Suppliers send invoices once they deliver products, complete work, or otherwise provide a service. Often, the accounts payable, finance, or accounting person receives the invoice.
The invoice typically includes the date it was sent, the contact information from the supplier as well as buyer information, purchase details outlining what it is for, and the payment details.
#2: Recording the Data from the Invoice
The next step in invoice automation is recording the invoice data into the accounting software. The information from the invoice is verified as a part of the invoice processing. This may be done manually or with AP automation. Invoice management software typically handles this through automation.
A digital version of the invoice is then made. This serves as a backup to the original. The copies are beneficial if suppliers find any problems, including a duplicate invoice or a mistake in the billing.
#3: Validating and Verification of Received Invoice
With the invoice logged, the next step is to have the accounts payable department or person verify that it is accurate. This is a final approval step. It is done prior to making payment.
With automated invoice processing, this task is eliminated. The invoice management software can compare the purchase order to the invoices as well as other goods receipts. This speeds up the billing process allowing for faster approval.
This invoice management process tends to be more efficient because it can allow for the supplier invoice to receive approval faster, allowing for the invoice to be paid sooner. Invoice approval is an option for many invoice processing software programs like this.
#4: Approving Payments
The next step is the payment. At this point in the invoice approval workflow, the purchase order received approval from the system. The invoice management software checked for duplicate invoice documentation. Every step is complete, and the invoice is sent to the person who handles the actual payment.
The payment process can take several days or longer. The payment system itself is an important component of this process. In some cases, email confirmations can get lost. Accounts payable needs to then ensure that there is good communication in this step to ensure processing invoices is done properly.
Automated invoice processing can handle this step for you as well. It will allow you to set up the invoice processing through payment and allow for approval to be automated or done by hand, depending on your needs.
How to Get the Best Out of Invoice Management
Automation is an important solution for many engineering directors who need to speed up the procurement process. If you handle procurement within your startup, it is critical that no delays in payment occur, as that can slow down the procurement process for your organization.
With a limited supply chain and vendors often having multiple buyers for their products, it’s critical to ensure invoice approval can be fast and efficient. It is not uncommon for vendors and creditors to stop working with companies that fail to make payments on the agreed terms. This could impact your startup's ability to compete, especially in situations where the supplier has other buyers.
Consider these best practices for invoice processing and billing management.
#1: Prioritize Invoice and Billing Processes
While invoice management is a valuable tool, organizations need to ensure that they are prioritizing invoices to keep track of what is paid and what is essential to pay first. In fast-growing startups, this can be critical. The accounts payable department needs to understand the payment date and payment terms upfront to streamline the billing process. That is the case even with automated invoice processing.
Prioritize which items are most important to pay first, such as recurring invoices, those that relate to accounts receivable, and those where the supply chain and procurement process are of the highest priority. It is also important to focus on the costs associated with the process. For example, some purchase on credit carries a higher interest rate than others. Spend on the lowest level of interest possible, but ensure that billing pays down the highest interest rate first to save money.
#2: Streamline the Invoice Processing Workflow
In a procure to pay system, it is critical to have a streamlined process for ensuring billing is handled properly. Look at existing workflows within the accounts payable department. Look for any bottlenecks that could be delaying invoice approval, especially with recurring invoices.
No matter the accounting system, ensure that invoice approvals are centralized and standardized. This should be applied throughout the organization and all invoice management software used. Also, factor in a purchase order or paper invoice that may need to be a part of the process.
Do not overlook the value of AP automation. Automated invoice processing saves time, reducing the risk that invoice approval may not occur on time. AP automation may reduce the invoice processing time by as much as 709 percent in some situations. At the same time, it ensures the invoice in a p2p process is accurate, and payments are made on time.
#3: Ensure Fraud Detection Is Present
This is one of the best practices you cannot overlook when it comes to invoice management. Even with Invoice management software, mistakes can occur. It is critical to ensure that invoice software has some type of backup that can help to detect and eliminate fraud in the procurement process and billing.
Recognize the risks. With automation, the risk of someone writing a check to themselves or otherwise manipulating the spend within the company is much harder to do. Purchasing is streamlined, and invoicing software is difficult to manipulate.
#4: Track Problems Within the Invoice Management Tool
Another way that invoice management software can help you is by providing a way to track any disputes within the procure to pay process. Mistakes happen, and errors occur in any aspect of the supply chain. With invoicing software like this, it is possible to pinpoint those problems, dispute them, and track resolutions. That can be a part of the accounts payable automation.
This is important in procurement. In the p2p process, good relationships with suppliers are critical. At the same time, organizations need to manage cash flow and ensure their purchasing is properly documented. The procurement team needs to know that information is up to date and accurate and that if a purchase requisition is inaccurate, it is fixed quickly.
#5: Automation Saves Money
With strategic sourcing so important today, a procurement team or an engineering director needs to ensure that spend is under control and procurement is as affordable as possible. Automation enables this.
Within the invoice management process, automation is often the solution organizations need to fix bottlenecks within procurement software that cost time and money. In addition to this, accounts payable automation increases transparency in the invoice process. It helps improve relationships with the suppliers, which are critical to strategic sourcing efforts. Overall, it helps to simplify the procurement process while at the same time boosting employee productivity. In many ways, this is a very valuable solution in accounting software.
Key Takeaways
For accounting, procurement, and engineering teams at a hardware-centric, fast-growing startup, this type of automated accounting software offers a number of core benefits.
- It saves time.
- It creates potential improvements in the purchase requisition process.
- It builds supplier and vendor relationships.
- It works to eliminate fraud and minimizes the risk of problems and bottlenecks in the entire process.
- It makes procurement software more streamlined and efficient to use, boosting employee productivity.
Invoice management is no longer an option for many organizations. It is a tool that they need to have to remain competitive in a fast-growing startup where managing supply chains and purchases are critical.
Learnings
Invoice management is an essential tool for accounting, finance, and procurement teams in hardware-centric startups to track and pay supplier invoices efficiently. The burden of managing invoices and accounts payable can be alleviated by implementing best practices for invoice management. The process involves receiving an invoice, recording the data from it, validating and verifying the invoice, and approving payments. Automated invoice processing can handle most of these steps, saving time and reducing the risk of delayed payments.
Implementing invoice management software enables organizations to prioritize invoices, streamline the invoice processing workflow, ensure fraud detection, track and resolve disputes, and leverage automation to save time, improve the purchase requisition process, strengthen supplier relationships, eliminate fraud and bottlenecks, increase transparency, and boost employee productivity.
Prioritizing invoices can help organizations keep track of what is paid and what is essential to pay first. Streamlining the invoice processing workflow ensures timely payments and can be achieved through centralized and standardized invoice approvals. Ensuring fraud detection is present in the invoice management software helps detect and eliminate fraud in the procurement process and billing. Tracking problems within the invoice management tool helps organizations pinpoint and resolve disputes quickly, improving supplier relationships and cash flow management. Finally, leveraging automation saves time, reduces the risk of problems and bottlenecks, increases transparency, and boosts employee productivity.
Overall, implementing invoice management software is crucial for hardware-centric startups to remain competitive in managing supply chains and purchases. The benefits of using invoice management software include time savings, potential improvements in the purchase requisition process, building supplier and vendor relationships, eliminating fraud, and increasing efficiency in the entire process. Ultimately, moving to automated invoice processing makes financial sense for any organization aiming to achieve a better outcome.
Frequently Asked Questions
What is invoice management, and how can it benefit my startup?
Invoice management is the game-changing solution that allows you to track and pay supplier invoices efficiently and with automation. It saves you hours of tedious work, reduces manual processing, and ensures you never lose an invoice again. With this awesome tool, you can streamline your financial processes and focus on what matters most – growing your business!
How does automated invoice management work?
It's as easy as 1-2-3-4! First, receive the invoice from your vendor. Next, record the data into your accounting software. Then, verify that everything is accurate and ready for approval. Finally, hit that "pay now" button, and you're all set!
How can I maximize the potential of automated invoice management?
You're in for a treat! Prioritize invoices to pay the most important ones first and take advantage of early payment discounts. Streamline your invoice processing workflow with centralized and standardized approvals. Rest easy knowing the software has your back with fraud detection, and it even resolves disputes swiftly to keep your supplier relationships strong.
What are the benefits of using automated invoice management?
A: Buckle up for some major perks! Not only does it save you precious time and money, but it also boosts employee productivity. Plus, it fosters strategic sourcing, making your business operations a breeze. And let's not forget the peace of mind that comes from knowing your finances are safe and sound.
Is automated invoice management suitable for hardware-centric startups?
Absolutely! Whether you're a hardware-centric startup or any other type of business, this cutting-edge solution is designed to supercharge your financial processes and keep you ahead in the competitive world.
How do I get started with automated invoice management?
It's as easy as hitting that "subscribe" button to stay updated with amazing content. If you're ready to revolutionize your startup, jump on the invoice management train, and say hello to a world of efficiency and innovation!
