Apr 23 2024
Have you ever wondered how some businesses manage their cash flow effortlessly, while others struggle to keep the lights on?
Think about it: how much time do you spend each week sorting through piles of paperwork, chasing down clients for payments, and trying to make sense of who owes what?
It’s a headache, right? Not anymore. Why? Because I am going to give you a solution to streamline your workflow and boost your cash flow in the process.
This article provides a complete guide to automated invoice management, including its benefits, working process, and implementation.
If you’re ready, let’s dive in.
Invoice management is an internal business process that helps to manage and track your business expenditure. It involves:
Invoice processing automation involves using software and technology to automate the entire invoicing process, from receipt to payment and record keeping.
An average-sized company usually takes around 25 days to process an invoice manually. This time could increase further when the number of invoices increases massively.
Additionally, manual invoice processing increases the risk of errors, double payments, fraud, and employee embezzlement of resources. All of the above can lead to dissatisfied customers, wasted resources and time, and decreased productivity.
Invoice automation ensures the whole invoice processing workflow is efficient, accurate, and error-free. Hence, it’s crucial to automate invoice processing.
Below are some other benefits of automated invoice processing:
Traditionally, invoice processing starts when the accounts department receives an invoice from a supplier.
After that, the personnel from the accounts department will match the invoice with the goods/services received. Then, the payment is entered into the system. It’s issued after invoice matching and validation checks.
This manual approval process has around 15 steps and takes a long time. Automated invoice processing has the same workflow as above, but it eliminates repetitive manual tasks, errors, and delays.
Here’s how automated invoicing works:
Data stored includes vendor details such as the name, purchase amount, details of the goods, and a clear account of the invoice. These are shared with the appropriate departments for approval and review.
Cash flow management is crucial for all businesses. Without proper cash flow management, you could end up with insufficient funds to pay bills, pay employees and invest in business growth.
This is where automated invoice processing comes in. It can automate repetitive tasks, reduce errors, improve workflow efficiency, and increase cash flow.
How? Let’s look into it in detail.
Manual processing involves manual data entry, data extraction, and data validation.
This consumes a lot of time and is prone to human errors such as typos, missed details, incorrect calculations, etc. Some of these errors can cause huge losses to your business and strain customer relationships.
Automation software can swiftly perform invoice data entry, data extraction, and validations without any errors. This reduces the likelihood of payment disputes, duplicate payments, and delays.
Additionally, automated software reduces the time taken for the invoicing process, allowing you to receive payments quickly and thereby maintain a steady cash flow.
Automating invoice processing reduces the costs required for manual data entry, printing, and bill posting. You can invest the cost savings to develop your business.
Unlike paper invoices, electronic invoices are stored in an electronic document management system. This eliminates the physical space required for storage and allows you to easily access the data anytime.
Invoice automation also accelerates the payment cycle. Compared to traditional mail, you can deliver electronic invoices and receive payments promptly.
Additionally, going paperless has become a trend to minimize the environmental impact the business have. Do you like the idea of a climate-conscious company? If so, you must automate your invoices.
Automated invoice processing reduces the need for human intervention. This is helpful, especially for small businesses.
You don’t have to allocate a huge budget and time to hiring new people unless it’s an absolute necessity. Even then, you can use machine learning to find the perfect hire to manage the high workload.
Overall, invoice automation cuts labor costs, which is the main factor driving up the cost per invoice in most companies.
It also smoothens the operational process involved in generating invoices, validating, making timely payments, etc.
Late payments can halt business growth and block the cash flow.
Having well-defined automated accounts receivable and accounts payable (AP) processes ensures a steady cash flow.
The automated accounts payable process allows you to send invoices promptly to customers regularly. It also ensures speedy and efficient payment processing.
When your customers settle the invoices on time, your business will have a steady cash flow. Moreover, you don’t have to spend time chasing down payments; instead, you can invest it in more important tasks for business growth.
Invoice automation helps to make vendor payments in a timely manner. Some vendors give early payment discounts.
Manual AP processing is too slow to take advantage of early payment discounts, as it takes time to process invoices. An automated invoice processing solution ensures speedy invoice processing. This prevents loss of revenue and resources, and impacts your cash flow positively.
Some accounting systems come with vendor portals. You can give vendors and suppliers limited access to your existing accounting system.
They can check their invoices and payment status and upload any due payments easily. This creates transparency and improves your relationship with the vendors.
Automating the accounts payable process makes it easy to make B2B payments with commercial credit cards.
Commercial credit cards provide working capital extensions through credit lines and allow short-term cash flow with cash-back rebates.
The problem is that before making credit card payments, you must determine whether the vendor accepts the card.There will also be separate login credentials for each vendor. This can be a hassle, but you can do it easily with automated accounts payable.
Hence, automated accounts payable gives you the advantage of paying with a commercial credit card while making the process hassle-free.
Invoice automation allows customers to settle their bills seamlessly and conveniently. This leads to customer satisfaction and repeat business.
Some small errors are inevitable in manual processing, but these errors can cost you a lot and cause disputes with customers and a loss of trust in your business.
When you automate invoices, there will be no errors, and it reduces the invoice processing time significantly, leading to steady cash flow.
A simple and efficient invoicing process builds trust and strengthens the relationship with your customers over time.
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Your company’s accounts payable team can use automation to gain key insights into its present state of cash flow.
When an invoice arrives, the accounting software tracks and records all the events and details. It also easily gives you access to real-time data.
Therefore, you can use the data in the automated system to track cash flow and create data-driven business strategies to improve it.
An automated invoice management system provides your business with many benefits. It increases the efficiency of invoice processing drastically.
With proper planning, you can smoothly automate the manual processes. Here are the steps you must follow to implement an automated invoice management system.
Did you know? Now, you can use artificial intelligence for software testing and automation. How? Check out this article.
Before implementing the above steps, clean the outdated data. Take your time and implement them phase by phase.
There are many software for invoice processing automation. How do you choose the right invoice automation software for your business?
Consider the following points:
An automated invoice processing solution is a strategic investment in financial stability and business growth.
Processing invoices automatically improves cash flow, reduces errors caused by manual processes, saves time, and increases the overall efficiency and accuracy of the workflow.
To implement automated invoice processing, first, you must select the right automation software and integrate the ERP system, accounting software, and other necessary systems. Then, customize the invoice matching and approval process according to your business needs.
The automated invoice process employs encryption, data backups, and user authentication to maintain the confidentiality and integrity of the payments, making it secure.
Invoice automation reduces the manual processes. However, human involvement is required for activities that cannot be automated, such as approvals and handling discrepancies.
The ease of automating invoicing processes depends on your business type and the invoice automation software you choose. However, you can do it smoothly with proper planning.
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