Invoice and payment processing is the daily routine of the Accounts Payable team. This process is often done manually, causes numerous errors to pop up, and is simply pain for employees. In this article, we will show you how to keep track of invoices and payments without a hassle and how to reap the benefits for your business.
Delving into the history of humanity, some patterns appear.
Ever since humans first stood up, mistakes have followed them.
Before someone figured out how to properly start a bonfire, many burnt-down huts, skin-burns, and other tragedies have taken place. 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, the example of Ross depicts 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 keeping track of payments and invoices?
Well, you probably forgot that Ross was an accountant…
Okay, jokes aside.
Many modern technologies focus on reducing human errors in business and work-related processes. That’s where AI-based software thrives.
In other words, new technologies 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 paying them.
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.
What is Invoice Management?
Keeping track of invoices and payments is part of a broader concept of invoice management.
Invoice management is an internal business function that covers the processing of individual invoices from receipt to payment. Invoice management aims at organizing documents from suppliers and vendors in a way that helps companies keep control over cash flow and enable financial projection.
The above does not apply to enterprises with thousands of documents processed every month. Let’s consider the basic invoice management workflow with a single invoice example in a company that employs up to 100 people.
Imagine that there is a company called Sparrow, operating in the market in the financial industry. Sparrow specializes in travel insurance. A huge chunk of the team consists of sales reps, who are all hired as external contractors.
Now, Sparrow receives an invoice from a supplier of such services – one of their salesmen.
Before taking further steps, the company’s employees must verify that the invoice is legitimate and correct. The amount to be paid checks out, etc.
The AP team analyzes the invoice, extracts the information, and verifies it.
Then one of the AP team’s members goes to the appropriate people within Sparrow, consults the invoice, and gets approval to pay it. Along the way, the AP team could also need to conduct purchase order matching, if Sparrow purchased physical products.
Finally, the company pays the supplier and records the payment in the company’s records, thus archiving the invoice for future use.
The above diagram and the steps shown were for just one document. If Sparrow decides to move to new markets, hire more people, or enter new verticals other than travel insurance, the number of invoices might double, triple, and so on.
How do small businesses keep track of payments?
As mentioned earlier, Invoice and payment management can be applied to smaller businesses as well. The most important thing is to find a system 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.
So where to start in practice and how to keep track of invoices and payments without a hassle?
5 Tips On How To Keep Track Of Invoices And Payments
1. Go digital
These days, digitalization goes along with innovation. Managing thousands of physical invoices is no longer in vogue.
Why should you consider digitalizing them?
- 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 invoice data is prone to human error, which is not easy to avoid,
- physical invoices are not eco-friendly – it is worth reducing the amount of paper used in the company,
- it’s easier to send scanned documents and check that invoices have been paid.
2. Research and choose the best 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 solutions on the market that you can implement, so finding the best software to keep track of clients isn’t that simple.
What criteria should you consider?
- Opt for cloud-based software programs
The cloud-based option allows you to stay up to date with your invoices anywhere and provides access to multiple team members. It’s also much safer thanks to the application of increased protection via Multi-Factor Authentication and encrypted data information.
- Look for 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.
However, there are also tools – such as Alphamoon – that can deal with document automation and document scanning and then source this data into your existing tools.
- Assess the scalability factor
Growing businesses need software that is tailored to their needs. It is advisable to make sure that the software is scalable and will work across multiple areas in the company.
- Once again – bet on security!
Security is one of the critical features to consider when choosing a system for managing the financial documents. The information concerning invoices to customers is tracked by enterprise staff. You can’t afford potential 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 confusion from customers.
- Take care of the details
Make sure your invoice descriptions and data are detailed, specific, and accurate. 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 late payments and keep full control over your customers’ payments.
- Actively track liabilities
It’s a good idea to make a phone call to your customer or write an email with a payment reminder and an attached invoice when they are late with a payment.
4. Track 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 report. 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.
Automated invoice processing can be the first step in increasing a 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 according to research. So imagine how much faster invoices will be processed automatically in a company where there are thousands of them. Even Sparrow, the travel insurance guys, could step up their game!
Automating invoice processing leads to better insights and knowledge from documents, making the turnover of documents quicker.
Businesses can benefit from increased security of their documents, as well as better control over headcount. Also, payments made on-time guarantee better relationships with contractors.
As you can see, automated invoice processing brings enormous benefits to the entire company so it’s worth considering it.
How Alphamoon helps you Track Invoices And Payments
Alphamoon specializes in automating processes that should be automated. One of them is invoice processing.
We created AI-based technology to support document workflows. Thanks to it processing invoices in your company will be super easy.
With us, you can achieve up to 98% of data extraction accuracy from invoices and use the leading solution on the market.
Would you prefer to follow Ross’ steps, make costly mistakes, lose money and time and eventually see that this could all be prevented?
Or get in touch with us and start benefitting from automation today?