Last editedMar 20223 min read
Invoicing errors can tie up your employees’ time and eat into your profits if not addressed. From bottlenecks in accounts payable to missing payments from accounts receivable, tackling the most common invoicing issues is essential to keep your business in working order. Here are a few invoice processing problems you’re likely to encounter – and how to avoid them.
System-related invoice processing problems
The first set of invoice processing problems start with a business’s accounts payable and accounts receivable departments. Whether you’re processing incoming or generating outgoing invoices, you’ll need to tackle issues like the following.
1. Standalone systems
How do your sales, accounts payable and accounts receivable departments communicate with one another? Many businesses use separate software systems, some of which are unrelated and outdated. Without an end-to-end solution, you’ll struggle to connect the dots and are more likely to face issues like double payments.
2. Heavy paperwork burden
If you’re still using a paper-based accounting system, you’ll end up with a complicated set of files to keep in order. Those in the process of switching over to a cloud-based system might find the situation even more daunting, with a combination of emails to chase up on and paper invoices to pay and reconcile.
3. Reliance on postal systems
Do you send or receive payments through the mail? Your system could slow while you wait for the physical delivery of paper invoices. Mail does occasionally go missing, so it’s always worth paying extra for a signed receipt despite the added cost.
Human error-related invoice processing problems
While the issues above relate to the invoice processing system itself, there are also issues that arise due to simple human error. Even the most capable accounts payable professional can make mistakes.
1. High volume of invoices
A small business might only need to settle a few invoices each week, but as companies grow so does its volume of invoices to process. Accounts payable departments can quickly become overwhelmed, creating bottlenecks in the billing process while your team manually processes each document.
2. Line-item errors and typos
Whether creating invoices for clients or processing invoices from vendors, not every typo and line-item error will be spotted the first time. If a purchase order doesn’t match the invoice, it holds the entire process up while you go back to find and correct the error.
3. Miscommunication between business and vendors
Even long standing client-business relationships can turn sour due to a misunderstanding between departments. An email tone of voice or turn of phrase might be taken the wrong way, or a query gone unanswered. Poor personal interactions can then lead to disputes which require time and effort to resolve.
Payment-related invoice processing problems
The final set of invoice processing problems relate to payments. When a business creates an invoice, it does so to request payment. What happens when payments are delayed or missing? The entire billing system gets held up.
1. Late payments
Many of the invoicing issues mentioned above can lead to late payments. For example, if an invoice goes missing in your accounts payable department due to human error, you’ll pay a late fee, and your vendor relationships will suffer. Similarly, when your own customers don’t pay their invoices on time, it impacts cash flow and your ability to pay vendors.
2. Reliance on paper-based payment methods
The type of payment method can also be a problem. Some vendors will request paper checks or money orders, which have a higher chance of going missing in the mail. Look for automated payment solutions like direct debit for faster, more secure payments.
How to avoid invoice processing problems
The bulk of the issues mentioned above arise due to the way that manual processing works. Making a switch to joined-up automated invoicing software helps prevent most problems. Here’s how:
It does away with complicated paper-based filing systems, moving documents to the cloud.
It brings multiple departments together for smoother, more efficient processing.
Businesses can create and issue invoices automatically, along with payment reminders and requests.
Automatic three-way matching ensures that purchase orders, receiving reports and invoices all contain the same figures.
Staff time is freed from the burden of repetitive tasks like chasing up on errors and mailing receipts.
Of course, simply transitioning to automated accounting and invoicing software isn’t enough to fully eliminate all problems. While you can reduce your manual admin and shrink your paper trail, you’ll also need to ensure that your business provides proper training on any new digital tools. An ongoing commitment to best practices ensures greater efficiency and positive results.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.