Invoice management is crucial for every business irrespective of its scale or size. For any business seeking growth, invoice management is critical for staying compliant, competitive, and profitable in the long run.
However, as a business grows, its financial transactions become more complex and voluminous and require a seamless invoice management process.
This article will take you through the complete process of invoice management, the key steps involved in it, common challenges and solutions faced by Indian businesses, and the best software for managing your invoice management process efficiently.
Read on to know more.
What is invoice management?
Before we get into the details of an invoice management process, let us begin with the basics and understand what invoice management is.
Also known as invoice processing, invoice management is the process of managing the lifecycle of an invoice right from the time it is received from the suppliers till the time it is archived in your accounting systems.
This process is essential for a business to maintain proper financial records, have better buyer-supplier relationships, and get accurate insights into their financial health.
Steps in the invoice management process
Although it sounds simple, the invoice management process requires a lot of attention. For your business to achieve the above-mentioned benefits, it is essential that you know the steps involved in this process as each of them are critical for the optimized operational functioning of your business.
Let’s take a look at the key invoice management process steps:
Step 1: Receipt of the invoice from your suppliers
The invoice management process begins when you have ordered goods from your supplier and they have been delivered. This is followed by the supplier sending you an invoice to formally begin the payment process.
You may receive the invoice in any of these formats:
- On paper through post
- Email attachment
- Through a software
Once you receive the invoice, your accounts payable team should look for the following to be in order:
- The date of the invoice
- Description of the goods or services
- The amount payable by your business
- Contact details of your supplier
- Mode of payment
- Final amount payable after taxes and discounts
This is important to identify errors such as miscalculated amounts, erroneous charges, or any other missing information.
Step 2: Recording the invoice in your accounting system
Once your accounts payable team has cross-checked all the information on the invoice and found it to be correct, the next step is to record it and enter it into your accounting system.
Depending on the format of the invoice, they may have to make entries manually or scan invoices sent printed on paper. In case you have accounting software, it will automatically extract the data from the invoice, capture it, and store it.
Once this data gets entered into your system, it is cross-checked against the original invoice received including the purchase order that you had initially sent to your supplier while placing your order. This is important to look for discrepancies and take corrective action to resolve them.
Step 3: Approval
Once you have entered the data of the invoice into your accounting system and matched it with other documents, the third step in the invoice management process is to allow the payment to get approved.
Invoice approval processes very depending on the size of the company, your industry, and the policies followed by your company. This may lead to either automatic approval for payment or forwarding to supervisors or relevant departments for the final approval.
Step 4: Processing the payment
Once the invoice is approved, the payment is processed according to the terms mutually agreed between you and your supplier. The payment may be processed through a cheque, wire transfer, credit card charge, or other methods as discussed between you and the supplier.
Step 5: Storing and archiving
This is the last step in the invoice management process. Once the invoice is paid successfully and the payment receipt is confirmed by your supplier, it should be stored and archived.
This step is necessary for making references to the invoice for regulatory compliances, audits, and general record keeping. The documents are retained as per the company policy that defines the period of storage.
Software for managing invoices efficiently
Imagine getting a call from your supplier saying that their payment is late. Or worse, you have made a short payment.
This could get awkward and in the long run, may lead to a strained relationship with your suppliers adversely affecting your business. Whether the reason is that your teams are overburdened or your business has grown suddenly, payment backlogs and errors are never taken kindly in today’s times, especially by suppliers.
In today’s fast-paced and hyper-competitive business environment, no business can do without software for the invoice management process. This software uses advanced technologies such as Artificial Intelligence (AI) and Machine Learning (ML) to smoothen and optimize the entire invoice management process.
They help in:
- Reduced risk of errors
- Real-time data processing
- Better decision-making capabilities and organizational efficiency
Let’s take a look at some of the top software for invoice management process:
SAP Business One
Designed especially for small and medium businesses, SAP Business One is an enterprise resource planning software. Some of the top benefits of SAP Business One include:
- Comprehensive all-in-one application for streamlining all your financial transactions.
- Gives businesses the flexibility to tailor it to your unique needs.
- Seamless integration with third-party applications.
- User-friendly and intuitive interface for easy usage.
Razorpay X
Formerly known as Opfin, this is a specially designed software for streamlining all financial processes. Some noteworthy advantages of Razorpay X include:
- Centralized dashboard for efficient invoice management.
- Easy integration with third-party applications.
- Advanced security features for protection of your sensitive financial data.
Open Money
One of the most-used invoice management process software, Open Money combines and simplifies your invoicing. Open Money’s top benefits include:
- One-stop solution for your invoice management needs with advanced functions such as OCR technology for digitizing paper invoices, and three-way matching for verification of the invoice.
- Seamless integration with other accounting software and third-party applications.
- Intuitive design and ease of use.
- Cloud compatibility for data security and better accessibility.
Volopay
This is a unique software that is much more than just an invoice management process software. It integrates corporate cards, expense management, and accounting needs of your business seamlessly. Some of the top benefits of Voloplay include:
- Easy to use and intuitive design.
- Real-time expense tracking capabilities to prevent errors and unauthorized usage of your financial data.
- Multi-currency support for allowing international transactions and expense management.
- Seamless integration with other popular software for better functioning.
Common challenges and solutions
The manual invoice management process is the biggest roadblock to a business’s productivity and efficiency. With its inherent issues and challenges, it poses a significant risk to your business’s profitability, efficiency, and growth.
Let us look at some of the most common challenges that businesses face in the manual invoice management process. We will also see how automating the process can solve them to make your business more agile:
Slow processing of invoices
One of the most common challenges of the manual invoice management process is that it is incredibly time-consuming and mundane. The average time that it takes to manually process an invoice can be anywhere between ten and fifteen days. These delays lead to missed payments and the inability to give you accurate results about your cash flow situation.
Solution: Automating the invoice management process significantly reduces this time to three to five days. This faster turnaround leads to better relationships with your suppliers and better business efficiencies.
Errors in the invoice management process
When invoice management is done manually, it may cause errors and discrepancies to occur in the invoices. These may include duplicate payments, errors in supplier information, and invoicing the wrong suppliers. Correcting these mistakes not only takes time and additional resources to resolve but may also cause further delays in processing other invoices.
Solution: Invoice management software uses advanced technologies such as Artificial Intelligence to capture your financial data and synchronize it seamlessly. This leads to saved time and costs, which can be used productively in other business requirements.
Vulnerability to frauds
One of the biggest problems with the manual invoice management process is that it is extremely vulnerable to fraud such as access by unauthorized users, data leaks, and breaches.
Fraudulent users may duplicate your invoices and risk your sensitive financial information.
Solution: When your financial data is digitized, you are assured of its security. For instance, invoice management software stores data in cloud storage making it more secure. They are built with multiple layers of encryption, access controls, and multi-factor authentication.
Lack of scalability
As your business grows, it will become impossible for your team to manage and process the invoices. Additionally, if you onboard additional vendors or expand geographically, your business may not have the capability to adapt to these changing needs. This may lead to errors while recording the invoices, making your business processes slow, and making your business slow in adapting to changing business needs.
Solution: Invoice management process software is instantly scalable and allow businesses of all sizes and scales to handle increased volumes of invoices accurately and efficiently. This reduces your costs as you don’t need to hire additional resources to manage your growing invoices.
Conclusion: Streamlining invoice management
Your invoice management process must not make your business processes redundant, especially when there is professional software available to help improve your invoice management processes seamlessly.
Mocha Accounting is an invoice management process software that manages your invoicing end-to-end through its intelligent AI support for accurate data capture and usage. Designed for Indian businesses in all industries, it cuts out time-consuming and inefficient business processes while reducing the risk of non-compliance and fraud. Sign up here for your free trial.
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