Invoice processing is crucial in a company’s accounting system as it impacts cash flow and financial reporting directly. Invoices must be processed and recorded accurately in a company’s accounting system to manage its accounts payable and draft accurate financial statements.
The article highlights how manual invoice processing can lead to several issues, including cash flow concerns, vendor disputes, and increased turnaround time that can slow a company’s Accounting. Also, know if accounts payable automation is enough to achieve the aim of efficient accounts payable function.
How Invoice Processing Slow Company's Accounting
Inefficient or inaccurate manual invoice processing leads to several issues, including payment errors, delays, etc., that impacts a company’s financial health negatively. Lets understand how invoice processing can slow down a company’s accounting:
1. Onerous Supplier Management
Using manual processes and email/mail to onboard suppliers is costly, time-consuming and risky. Supplier information is not updated regularly. It may be that key documents are not collected.
2. Lack of Visibility
When different systems and departments are involved in invoice processing, it can be hard to track the status and progress of each invoice in a company following manual accounts payable processes. It can lead to delays, duplication, miscommunication and missed payments.
3. Inadequate Time for Strategic Tasks
Manual invoice processing can consume enormous amounts of time and resources that could be better spent on more value-added activities, such as data analysis, cash flow management, and supplier negotiation.
4. Poor Relations and Disputes with Suppliers
Slow invoice processing can affect the company’s reputation and create trust issues with its vendors. Suppliers may charge late fees, withhold goods or services, or reduce the quality of their delivery if they are not paid timely and accurately. Discrepancies in invoicing can lead to disputes with suppliers and vendors. While it will ruin the relationship with vendors, the payment processing will also be delayed.
5. Lots of Supplier Inquiries
Manual invoice processing can lead to a lack of transparency and communication with suppliers, who may frequently contact the accounts payable team to check the status of their invoices and payments. It can increase the workload and frustration of the staff.
6. High Costs
Manual invoice processing can be costly and prone to errors. As per a report by the Institute of Finance and Management (IOFM), the average cost for enterprises handling up to 100,000 invoices per year is approximately $6.10 when they process each invoice manually. For growing enterprises that process 20,000 or fewer invoices, the cost is a staggering $15.97 per invoice.
7. Too Many Standalone Systems
Manual invoice processing can require multiple systems and tools that are not integrated or synchronized. It can cause data inconsistency, duplication, and errors.
8. Increased Turnaround Time and Effort
Inaccurate invoices will increase the turnaround time as accounts payable teams need to put more effort to identify and correct errors. It will make the payment cycles longer.
9. Too Many Emails and Paper
Manual invoice processing involves handling a lot of email and paper documents that are prone to loss, damage, or fraud. Emails and papers also make it harder to track and audit invoices and payments.
10. Inaccurate Financial Reporting
When invoices are not processed accurately and promptly, they can distort the company’s balance sheet and income statement. It can impact the company’s cash flow, budgeting, forecasting and tax compliance. The company receives incorrect payment amounts due to inaccurate invoices. Inaccurate payments can create cash flow issues for the company. Ultimately, the company will be unable to manage expenses and pay timely bills. Invoicing errors may create audit and compliance issues. Incorrect invoices lead to errors in financial reporting that create regulatory compliance issues.
To resolve such issues, many companies are adopting invoice automation solutions. Let’s discuss how automation benefits companies.
Invoice Automation as a Solution to Accounts Payable Concerns
Invoice automation is a process that relies on software to handle the end-to-end receipt, management and payment of vendor bills. Automating the invoice process results in the following advantages to a business:
- Reduced Data Entry Errors: Manual invoice processing is a repetitive task and generally leads to data entry errors. Automating invoicing can minimize data entry errors and save time.
- Faster Approval: Automated invoice processing also reduces the approval times as compared to a manual process. Businesses can pay their vendors and suppliers timely and avoid late payment fees.
- No Duplicate Payments: Manual processing may result in duplicate payments. Automated invoice processing systems help to eliminate duplication issues as they can automatically flag duplicate payments before they are sent out.
- Fraud Detection: Using digital records in the automated system, businesses can reduce the risk of fraudulent activities.
- Reduced Costs: Automated invoice processing allows businesses to save on processing costs as they reduce the potential for errors involved in manual errors.
- Digital Storage of Documents: Businesses can benefit from electronic storage. It helps them to retrieve the documents easier whenever needed, especially for reconciliation.
- Prevents Over- or Underpayments: Automated invoice processing helps in three-way matching for the invoice, purchase order, and receipt and prevents overpayment or underpayment.
Invoice automation works by receiving vendor invoices and automatically managing their processing through payment via a specific workflow that is constructed around a series of “if this, then that” business rules. For example, when the software identifies the purchase order on the invoice, it might query the purchase order database to ensure a matching number is on file. Then, it moves to the next step in the process.
ARDEM can help companies seeking invoice automation using advanced software.
ARDEM's Invoice Manager (AIM)
AIM is a cloud-based network that helps companies to tackle the challenges of in-house AP processing. It is easy to integrate into the client’s accounting system and helps them to normalize data from multiple formats with extended ease.
The process-as-a-service (PaaS) model not only utilizes automation in invoice processing but also includes a human quality control element that guarantees 99.97% accuracy on all invoices processed, without any additional effort from the client. It helps businesses to reduce the average processing cost by 30%.
When Invoice Automation is not Enough.
It is crystal clear that invoice automation can reduce the time and costs involved in error-prone manual processing, boost visibility, improve invoice data accuracy and maintain sound relationships with suppliers. However, even with automation, many companies still struggle with accounts payable functions.
Some of the issues of invoice automation are:
- Training and Maintenance Costs: Implementing an automated invoice processing system can be expensive due to various costs, including hiring IT professionals to maintain the system, training costs, etc.
- Technical Challenges: Sometimes, companies face technical difficulties using automation software in their existing accounting systems. It happens when the software is not compatible with their accounting system. It can result in loss of crucial data, and other problems can deter the usefulness of the software.
- Human Touch: Although invoice automation software can process a high volume of invoices efficiently, there can be a few limitations. For example, there can be missing information or discrepancies for which the software has flagged the field and require human review. Incorporating a human touch into the accounts payable system, like invoice processing, can verify the data quality and ultimately boost the effectiveness of the company’s invoicing process.
As soon as companies realized that invoice automation using a software or workflow/OCR (Optical Character Recognition) tools may not be enough, they came to ARDEM – a reputable brand among finance and accounting outsourcing companies.
Those companies ask ARDEM what their teams could offer to help them to get their accounts payable back on track. Over the past couple of years, they have been working to implement an automated accounts payable process. But it has caused some accounts payable issues that have resulted in late payments, reputational damage with their vendors and increased requests for prepayments/deposits.
They are looking to get immediate help with processing their backlog of invoices and then potentially outsourcing. Few of those companies have another accounts payable team in the Netherlands also (other than the US). They found that the invoices processed in the Netherlands are significantly less than that in the US.
ARDEM is among experienced business process outsourcing (BPO) companies that offers a complete accounts payable solution package and can help companies to simplify the entire accounts payable workflow.
Here is how ARDEM can help companies to achieve efficiency in accounts payable function and improve the company’s accounting processes:
Human + Machine Approach
ARDEM can help businesses across industries with its Invoice Automation Services – combining human efforts and the latest technologies. The human element drives innovation and technology drives collaborative success in business processes. Companies can have their customized accounts payable team to optimize processes that are agile and can easily adapt to their existing systems or can work on cloud platforms.
Trained Accounts Payable Team
By partnering with ARDEM – specialized in accounting outsourcing services, businesses can stabilize accounts payable processes conveniently. They need not put efforts to re-train existing staff or hiring more professionals. Re-training or hiring new staff members can be time-consuming and costly. By outsourcing to ARDEM, businesses can eliminate these issues and focus on other areas of growth and development.
Outsourcing accounts payable to ARDEM eliminates the need for additional staff, office space, and equipment. It can significantly reduce costs for businesses. It is more valuable especially for small or medium-sized businesses that need to be efficient with their resources.
Free up Resources for Strategic Tasks in Accounting
Outsourcing to ARDEM can result in increased workforce productivity, as skilled teams using technology can manage large volumes of work efficiently. By outsourcing time-consuming tasks in accounts payable, businesses can free up their resources who focus on strategic tasks.
ARDEM customize accounts payable workflow built on industry experience that enables their clients to optimize their invoice processing, streamlined approvals, and ultimately saving time and efforts.
In conclusion, proper invoice processing is critical for maintaining the company’s financial health. It enables companies to avoid payment delays and errors that can slow down their accounting functions. Therefore, most businesses consider reputed outsourcing business process outsourcing companies. ARDEM can help businesses who don’t want to spend their capital on any automation and choose outsourcing as well as those who have invested in automation but are still creating tons of manual work for their teams.
ARDEM provides Business Process Outsourcing and Business Process Automation Services to established companies to help them improve operational Efficiency and Reduce Costs. For more information please reach out to us at email@example.com or call us at 908-359-2600.