There are many reasons organizations need to automate and streamline their invoice processing. It saves time, reduces invoice handling costs, and allows the staff in the accounts payables department to handle other higher-level tasks. It also minimizes the risk of fraud, especially in large organizations. The software also allows for the collection of data for analytics purposes. But how do you get from where you are to fully automating your invoice processing?
Start by Analyzing Your Current Process
How does your company handle invoices? Who receives them? How are they verified? In what form are they (electronic or paper invoices)? How much time does it take for your company to honor them?
By asking these questions, you will get a clear picture of your current invoice handling process. You might realize there are many inconsistencies, hitches, and a clear lack of responsibility in some cases. This often results in substandard processes, delays in payments, and opportunities for fraud and errors. The costs of invoice handling are also likely to be high in a non-automated system.
The first analysis will give you an opportunity to fix some bottlenecks even before automation.
Centralizing Invoice Management
Prior to full invoice automation, direct all your suppliers to send invoices to one central location or electronic address. Follow up this by capturing the invoice data as soon as they are received. This can be done through the scanning of physical documents. They should also be indexed as soon as they are received.
Once this is enforced, your company will need to develop clear policies on invoice handling. For instance, when handling a Purchase Order invoice, what verification is required. In cases of an expense invoice, what are the checks? Who may sign off on invoices within the company? What happens when there are discrepancies between the invoice figures and purchase order documents?
Establishing clear guidelines will help draw up a great workflow, which then the invoice-handling software will help automate. No matter how great the software is, there must be an underlying clear workflow which it augments.
Picking the right Automation Solution
Once the policies and controls are in place, you can pick an automation solution that best fits your approval workflow. This should be software that automates invoice validation, matching with source documents, resolving discrepancies, authorizing payments, and even collecting data for reports and analysis. No matter the source of the invoice, the verification and payment process are consistent. The invoice could have been sent electronically, it can be scanned, or any other method of inputting information into the software.
Getting Suppliers on Board for Self-Service
Once you get rolling, you must get suppliers on board. Explain to them the benefits the new software brings, including being able to track the progress in processing their invoices. By being able to send their invoices electronically, they will save time and money on postage services. The time taken to pay them will also reduce dramatically. Good software should have a supplier portal on the frontend where they can check current and past transactions to avoid having to call into the Accounts Payable Department anytime, they need to follow up on invoices.
Drawing Insights from Analytics
Once your system has been up for a few months, you will get the chance to optimize your purchasing processing from the data collected. You can track improvements such as average invoice processing time. You can also check the suppliers with whom you work the most and find ways to add value to your relationship. By consolidating your supplier base and giving business to the most reliable suppliers, your organization can gain from superior prices and flexible payment plans. Ultimately, a good invoice management system will build your reputation for timely processing and honoring all terms agreed with suppliers.
Another area of analysis would be finding out how much your invoice handling costs have reduced with automated invoice processing. Qualitatively, you could look at how the job description for your account’s payables staff has changed.
Being able to generate reports and searches can help track unusual spikes or drop-offs in invoice amounts from month to month. If a particular invoice has an unusual variance from previous months, it should be cause for investigation. It is possible to set up queries within your system to help spot such anomalies.
Better Invoice Capture
With time, your organization should seek to implement more efficient ways to capture invoices. In fact, it could be possible to integrate invoice management with purchase orders so that each time a purchase is made, an invoice is generated in honor of the supplier. You might need to implement new ways of invoice capture as time goes by, but it is unlikely to affect your overall workflow.
Your business can also integrate electronic payments of invoices. Despite the obvious benefits of electronic payments, most suppliers still just accept paper checks. Your business should reach out to suppliers, convince them of the security of the payment information they provide, and then slowly start paying them electronically. A strong supplier relationship will be required to ensure that all the information they provide is accurate and up to date.
Conclusion
Implementing an automated invoice processing system must start with an analysis of your current system and identifying bottlenecks in the procure-to-pay process. Your processes must have clear checks and controls before any software is introduced. The automating solution picked must complement the workflow and support all processes until payment approval. Over time, your organization should gain from faster processing, minimal errors, and better supplier relationship management.
To discuss procurement software with a consultant or to schedule a demo of our solutions, contact us today.