The daily routine of the Accounts Payable (AP) team involves processing invoices and payments. Unfortunately, this process is often done manually and causes numerous errors, which can be a major pain for employees. In this article, we will show you how to improve the invoice tracking process and optimize your business’s cash flow.
Throughout the history of humanity, certain patterns have emerged.
Since humans first stood upright, mistakes have been an ever-present companion.
Before humanity figured out how to properly start a bonfire, many huts were burnt down resulting in skin burns and other tragedies. Yes, it’s a gruesome image, taken straight out of a horror movie, but humans tend to learn the hard way.
Then for hundreds or thousands of years, the art of error-making has enabled progress. These mistakes resulted from the trial-and-error method or just human curiosity.
Let’s look at another, even more iconic example.
Remember Ross from Friends, who got married three times, and each of those marriages ended in divorce?
You could say that Ross has made the same mistakes three times in a row – putting a ring on the hand of a woman who would eventually break up the sacred bond.
Ross is a character who makes spontaneous decisions and gives in to his on-the-spot feelings. One could argue he doesn’t learn from his mistakes. Or, as many Friends fans would explain, he’s just cute and unlucky.
However, Ross as an example shows the mechanism of human error. Ross shows how easy it is to make the same mistake by following a hunch rather than the voice of reason.
How does it relate to creating invoices and tracking payments?
Well, you probably forgot that Ross was an accountant…
Okay, jokes aside.
Modern technologies focus on reducing human errors and they are especially helpful in areas like accounts receivable, accounts payable, and wherever the payment process takes place.
That’s where AI-based software thrives.
In other words, new technologies are human-centered. They are created to assist human work and eliminate many human errors. For AP teams, that error-prone area is processing payments and the entire workflow of invoices – from reception and approval to invoice payment.
Now let’s go back to our movie example.
Would Ross have made the same mistakes if there was a brand new technology that analyzed every possible outcome, and each one of these marriages had a 99.9% chance of ending in divorce?
Or maybe he would, but that’s his nature.
One thing is certain – that tech would have saved him from another failure after the first regrettable marriage.
The same logic applies to the world of business. New technologies based on automation are now becoming more widely used and are becoming the backbone of businesses. Experienced and well-managed companies avoid acting rashly. Instead, they use technology to help them make the most optimal decisions.
We finally arrive at the invoices and payments and how automation helps in keeping track of the company’s liabilities.
Since invoices and payments are processed in literally every industry, this article proposes tips applicable to a wide range of businesses.
Read on to discover our 5 tips on how to keep track of invoices and payments in your business.
What is Invoice Management?
It’s a business process of organizing invoices and payments. It involves the management and control of all aspects related to those documents, including:
- Handling invoice payments
- Tracking invoices
- Managing recurring invoices
- Detecting unpaid invoices
Let’s consider the basic invoice management workflow with a single invoice example in a company that falls to an SMB (small and medium-sized business) bucket.
Say, there is a company called Sparrow. They operate in the financial industry. Sparrow specializes in travel insurance and has many sales reps that are hired as external contractors (thus creating invoices every month to charge the company for their services).
Now, let’s assume that Sparrow received an invoice from one of their salespeople.
Before taking further steps, the company’s employees must verify invoice details and whether it’s correct. The accounting department analyzes the invoice, extracts the information, and verifies it.
Then one of the AP team members gets approval to pay for it.
In the case of physical products purchase, Sparrow’s accounting team would also have to do purchase order matching to make sure the professional invoices match with details on the purchase orders. It’s called 2-way matching.
But let’s get back to the salespeople as external contractors’ cases.
Finally, the company pays the supplier and records the payment in the company’s records, thus archiving the invoice for future use.
The image above and the steps shown were for just one document.
If Sparrow decides to move to new markets or hire more people, the number of invoices might increase.
How do Small Businesses Keep Track of Invoices and Payments?
Invoice and payment management can be applied to smaller businesses as well. The most important thing is to find an invoicing software that fits your needs.
You might be tempted to find a free invoice tracker or even use the invoice tracker Google Sheets alternative.
While that may seem like a viable option for starters, you’ll soon see that investing in document automation pays off.
Free tools won’t be able to extract data from documents, especially when they come in low quality, have coffee stains, or other damages.
So, what are the practical tips to start and how to keep track of invoices and payments without a hassle?
What are the 5 Best Ways to Keep Track of Payments?
1. Go Digital by Investing in Invoicing Software
These days, digitalization goes along with innovation. Managing thousands of physical invoices is no longer in vogue.
Why should you go digital instead of managing payments manually?
- By digitizing your financial data, you will have quick access to all the information you need,
- Processing paper invoices takes up valuable employee time. They could use their potential on more creative activities rather than the tedious and schematic ones,
- Reviewing and transcribing all the invoice data is prone to human error which may increase business expenses
- Processing physical invoices isn’t sustainable and business owners can use automation that saves energy costs
- Sending scanned documents makes payment collection easier
2. Research and Choose the Best Payments Software
The best solution is to find an organized system where all invoices and payments are in one place. However, there are many ready-made tools on the market, so finding the best software to keep track of clients isn’t that simple.
What criteria should you consider?
- Opt for cloud-based accounting software
The cloud-based option allows you to stay up to date with your invoices anywhere and provides access to multiple users. It’s also much safer thanks to the application of increased protection via multi-factor authentication, data anonymization, and encrypted data information.
- Check if there are available integrations
Find accounting software that includes features for both invoice processing and payment management. This allows you to enjoy two functions in one. Additionally, if you want to add other integrations, the software should enable you to do so. For example, you can connect Alphamoon via Zapier with other apps.
In this case, you can automate invoice management by scanning documents in Alphamoon and extracting invoice data, and later sending that information to other tools in your accounting stack.
- Assess if the tool is scalable
Growing businesses need software that is tailored to their needs. So make sure that the software can process a greater amount of documents and will fit into multiple teams’ workflows.
- Check security measures as the invoicing process has to stay safe
Security is one of the critical areas to consider when choosing a system for managing financial documents. Make sure that your accounting program is safe to prevent any potential data leaks.
3. Follow Invoicing and Payment Best Practices
To capture the full potential of your accounting and invoice management software, follow best practices from industry experts.
- Enter your contact information accurately
Dumy-proof tip #1: don’t forget to update your initial settings.
Make sure your details such as address and phone number are up to date and clear to avoid confusing your customers.
- Take care of the details
Make sure that all the invoices have accurate data, details, and descriptions. Of course, this also applies to invoice number tracking.
- Check the payment date
Make sure that the payment dates on your invoices are correct – especially because there are times when the program automatically determines the payment date. This will help you avoid overdue payments and keep full control over cash flow.
- Actively track liabilities
It’s a good idea to analyze the payment status of your invoices. In case a customer is having a bunch of late invoices, make a courtesy phone call or write an email with a payment reminder.
4. Track Payments and Results Regularly
It is not enough to use the software, you also need to regularly analyze your company’s performance in this area. Generating reports regularly and drawing conclusions from them will help.
One of the reports you probably generate is a profit and loss statement. This report is a particularly useful tool because it adds up all your invoices to date and subtracts your expenses to give you a total net profit. To sum up, it takes a look at the overall business.
5. Automate invoice processing in your business
Invoice management affects many areas of the business and has many benefits too.
However, you can take it one step further… and automate invoice processing with AI-based OCR.
Automated invoice processing has many benefits and can increase your company’s technological advancement.
Because invoice automation allows you to process financial documents much faster and with far fewer errors.
Also, it helps to shorten the time required to process a single invoice, which might take up to 50 minutes. Imagine how automation can speed up your accounting processes, especially if you have thousands of documents to tackle.
Automating invoice processing leads to better insights and more accurate data that are extracted from the documents. If your invoices comes in various languages or have less typical layout, zero-shot model can handle such invoices too. As a result, the turnover of documents is quicker and you have better control over the whole process.
A nice extra is that, as payments are made on time, your relationships with stakeholders and contractors flourish.
As you can see, automated invoice processing brings many benefits to your small or mid-sized business, so consider this in your workflow planning.
How Alphamoon helps you Track Invoices And Payments
Alphamoon specializes in automating processes that used to be manual. One of them is invoice processing.
With our AI-based technology, you’ll get a lot of support for your document workflows and invoice processing will get a lot easier. What’s cool is that Alphamoon has 89.5% data extraction accuracy on invoices that’s the best score among competitors.
Would you prefer to follow Ross’ steps, make costly mistakes, lose money and time, and eventually see that this could all be prevented?