Is the process of managing vendor/supplier invoices becoming too complicated for your business? It’s vital for business leaders, as well as those working in the accounting/finance team, to have a solid grasp of invoice processing and best practices for how to manage invoices. That’s why the concept of invoice management is so important. But what is invoice management? Let’s explore the definition of invoice management, as well as some of the benefits associated with automated invoice management software, in a little more depth.
What is invoice management?
In short, invoice management – also referred to as invoice processing – is a term describing how businesses track and pay invoices from their suppliers. Usually, the process is as follows: an invoice is received from a vendor/supplier, the invoice is validated, the vendor/supplier is paid, and the transaction is recorded in the company’s accounts. For most businesses, invoice management is considered part of the accounts payable (AP) process. Although invoice processing used to be completed manually, automated invoice management software is now standard, offering a range of benefits that we’ll uncover a little later in the article.
How does invoice management work?
Invoices used to be handled entirely with paper. Today, however, invoices can be delivered in a wide range of mediums. Whether you’re dealing with paper invoices, email invoices, or PDF invoices, the basic invoice management process is as follows:
Invoice is received
Invoice is validated
Invoice is approved
Invoice is paid
Invoice is logged in accounts
It’s also important to note that larger companies using legacy systems may have slightly more convoluted methods for invoice processing, although this is changing all the time as increasing numbers of businesses switch to more streamlined processes. If your business is using automated invoice management software, some or all of these steps may be automated for you. This means that the only manual intervention in the invoice management process will be review and validation.
The benefits of automated invoice processing
Many businesses use some type of automated invoice management software to streamline their invoice process. There are many benefits associated with automating your invoice processing system. For a start, it can save you a significant amount of money and time. This is because automated invoice processing requires significantly less labour, while also reducing costly errors when it comes to data capture. By automating the process, you can eliminate overpayment/duplicate payments, and because less oversight is required, your team can focus their energies on other value-add tasks.
It’s also important to note that automated invoices can provide you with more accurate data, making budgeting, reporting, and auditing much more efficient. Furthermore, invoice management software enables you to centralize your data, which allows you to unify communications within a single location and get rid of the siloed, legacy systems that may have been holding your company back. Another key benefit associated with automated invoice management software is the fact that it’s far easier to establish and track KPIs, providing better accountability within your department.
Bottom line: automated invoice management can help ensure that your vendors/suppliers always get paid on time and in the full amount, while also cutting down on costly errors and allowing you to streamline invoice processing through better data capture.
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.