Whether you want to know more about invoice processing for your own business or you need more information to leverage your existing set up, this article will guide you to implement the invoice processing best practices and avoid some traps.
To start, here is a quick definition:
In brief, invoice processing is the management of invoices from arrival to payment. It matches purchase orders and payment terms with invoices to ensure payments are made accurately and on-time.
Hence, it is a crucial part of a business as it manages the cash flow within an organisation. When well-executed, companies can get more favorable payment terms, better pricing or even discounts because they pay on-time.
It is a multi-step approval workflow that requires some due diligence and a strong methodology.
“Truth is many companies are doing it wrong and put themselves at risk.”
7 invoice processing best practices:
1. Don’t postpone.
No one likes the paperwork, but it must be done. Schedule days and hours in your week to get it done and do it. If no one has the time to complete it, your problem requires to employ more staff or change your way of doing it (see tip 7).
2. Be organised.
Ok, that sounds an easy one but the reality is very different. In invoice processing, being organised does not mean you have created a folder for paid invoices, unpaid invoices and differentiate both folders by a different color. No, first you need to make sure that you have a policy requiring specific information. In other words, you need to insist on your suppliers that all invoices reflect a legitimate Purchase Order (PO) number, account number, name, etc. and then create a workflow involving your entire team.
3. Use the same coding standards.
Again, for some of you, this might be already done but we have seen a lot of companies struggling to implement a unique coding standard along with their staff.
4. Create different levels of access
You have the workflow, you have the coding standards. Now to set the different levels of access. This has nothing to do with whether you trust your staff or not. It is simply giving the right access to the right user. We have seen many companies allowing their entire staff to input a manual invoice number when the system would not accept it which surely led to mistakes, duplicates, and additional costs. In other words, be smart and allocate the duties to different staff or departments.
5. Make resolving disputes a priority
Underlying the invoice processing is the resolving the dispute process. This can happen for many different reasons. Account numbers not matching, different amounts, etc. but you need to resolve these issues as quickly as they come. Otherwise, you will lose track of them, being too focused on other tasks and chances are that it will impact on the date of payment.
6. Avoid late fees
Please, don’t be tempted to pay a little late. Vendors will often charge late fees, and this could jeopardise your existing or future relationship with them. Even worse, you could miss the opportunity to improve your credit with them in the form of additional funds or better payment terms.
7. If you are not yet there, automate your invoice processing
Please, don’t be tempted to pay a little late. Vendors will often charge late fees, and this could jeopardize your existing or future relationship with them. Even worse, you could miss the opportunity to improve your credit with them in the form of additional funds or better payment terms.
“You could save 70% to 90% of your costs by going digital”
As a final word of advice, the implementation of the entire process is something you want to do with your team of experts and/or a third-party specialist if necessary. Set up the business rules, make everyone understand how important this part of the business is, assign the specific roles, create a straightforward workflow and be clear with what kind of information you need from your suppliers. If you do your part, you can increase your expectations from others.