If you’re a business owner or someone tasked with creating efficiency in your organizations Accounts Payable processes, you know that it’s a critical component for your company’s success. Understanding the invoice processing steps and the inherent inefficiencies and risks they create is the first step in creating total efficiency for AP. In this blog, we’ll explore the invoice process and discuss key best practices and automation tips for the AP process – so you can refocus your time, money, and energy on adding real value to your organization.
At the surface, the invoice process is simple – receiving the invoice, and paying it. But there are many steps that exist in between, which can quickly become complex depending on the size of your business. And the bigger your organization, the more considerations you’ll need to make to operate at your best.
Invoices come into our organizations via email, physical mail, as PDFs or physical paper, or other formats. In a typical AP process, someone must file, record, and approve each of these invoices prior to payment being issued.
Let’s take a closer look at these steps in more detail:
1. Receiving an invoice from a vendor
Vendors deliver invoices once their work, services, obligations, or product are fulfilled. These typically arrive by physical mail or email, and invoice data must be entered into the accounting system, often manually by AP clerks, bookkeepers, or perhaps even you!
Manual data entry is rife with potential to introduce errors and delays into your AP process. And all that time spent manually entering invoice data costs your company money.
2. Creating and managing copies & backups
Best practices dictate that a copy of the invoice should be scanned/copied into your paper or electronic filing system, which is necessary to address discrepancies that might be discovered later.
If you’re making and storing paper copies of invoices, you likely have rows and rows of filing cabinets. Sorting, finding, and managing retention of these invoices becomes a major burden – not to mention the storage cost and additional end-user time required to hunt for them.
Perhaps you’ve invested in an electronic invoice filing cabinet and have more flexibility and ease of access to your invoice information. But, it still needs to be kept well-organized, and your team must be vigilant about scanning and filling invoices properly. This still takes time and effort, but far less time than searching for a lost invoice copy when you need it!
3. Invoice Approval
Once invoice details are recorded in your system and a copy of the invoice is filed, approving payment is the next step. In a smaller organization there may be 1 or 2 individuals that have the authority to approve these payments, sometimes managing approvals by having a bookkeeper or AP Clerk walk the invoice over and leaving it for the approver’s signature. This is not a best practice, especially considering remote or hybrid working environments. Invoices left in approvers inboxes can get lost or forgotten, leading to late payment penalties.
Small-to-medium sized businesses may email a PDF copy of the invoice to the approver in a more paperless fashion. But again, emails can sometimes be ignored or accidentally deleted, leaving the vendor unpaid.
In both processes, the AP Clerk must constantly chase after approvals (if they’re able to keep track of all of those that are outstanding). Larger businesses have a more complex set of rules that guide invoice approvals, which can further agitate an already unorganized Accounts Payable process.
The bottom line: Using a manual or paper-based approval process in these cases is a recipe for disaster.
4. Invoice is paid
Once the correct person (or people) authorize the invoice for payment, it needs to be paid. This might be handled by a separate accounting or finance department, which can further lengthen the invoice fulfillment timeline. Individuals can sometimes lose paper or emails despite their best efforts, or must focus other priorities elsewhere for a period of time.
Regardless of your Accounts Payable process or the size of your company, the rules and hierarchy that comprise a well-oiled AP machine are far more complicated than meets the eye. Accounts Payable Automation addresses each of these issues, and more, and will help you further expedite your invoice processing while alleviating tedious manual data entry and errors.
At Shamrock, we’re AP experts! Our technologies allow organizations to automate and streamline many tedious Accounts Payable processes so you can eliminate duplications and delays and focus on more critical, high-value tasks for your company. But don’t just take our word for it – view our recent AP Roundtable Discussion and discover 5 key aha’s, gotchas, and takeaways to consider for your AP automation journey.