Are invoices arriving late? In different formats? Lost in email threads? Or, worst of all, not approved by the right individuals?
Missing, incomplete, or incorrect invoices happen frequently, especially when your startup doesn’t have a clearly defined system. Additionally, as your business grows, so does the number of invoices you have to manage.
The good news is that when you incorporate a clearly defined system, you can put the accounts payable and accounts receivable growing pains behind you.
Read on for invoice management tips to help you control invoicing errors and streamline your accounts payable and receivable processes.
What Is Invoice Management?
Invoice management is a way to track the bills going out and coming into your business. Whether manual or automated, your invoicing management system helps you process invoices and other billing documents from vendors and suppliers.
You also use this system to track the invoices you send clients for your products and services.
6 Must-Follow Invoice Management Tips
New business owners with few invoices may simply cut a check for an invoice as it comes in. They may also send invoices on a one-by-one basis as needed through email.
But as your business grows, managing incoming and outgoing invoices manually or in spreadsheets will only do more harm than good.
Instead, you should be able to easily track payments, save vendor information, manage approval flows, automatically sync transactions to your financial reports, and auto-fill important payment information.
Simply put, you’re going to need a system for invoice management.
Below are six invoice management tips to help you with the process as your startup grows.
1. Take Advantage Of AP Automation Tools
In a LinkedIn poll conducted by B2BE, respondents voted that increased invoicing automation would be one of the biggest trends for 2023. That’s because invoice processing takes over five days per month for two-thirds of AP teams.
Accounts Payable (AP) automation tools, often known as bill pay services, automate the manual process of paying your startup’s bills.
The best accounts payable software uses AI to auto-upload and save vendor information, connects to your bank account, allows you to set automated approval flows, and custom schedules payments. This ensures the following:
- Your payments are always on time
- You spend less time managing invoices
- You save on overhead costs
Pro tip: As you choose your AP software, look for options that don’t require additional payments or fees.
2. Establish A Payment Cycle That Supports Cash Flow
You should balance your incoming and outgoing cash flow at every stage to stay net cash positive.
Consider how your cash flow supports your invoices and create a payment cycle that takes advantage of seasonal influxes of cash flow.
For example, if you get more business in the second quarter than the rest of the year, your payment cycle should include advance payments in these months to alleviate financial strain in the slower months.
This is also important in accounts receivable. Consider how often you need to invoice your clients and how much time you’ll give them to pay their invoices.
3. Regularly Evaluate Your Accounts Payable And Receivable Processes
Take the time to evaluate your accounts payable and accounts receivable process every quarter.
When you do, ask the following questions:
- Are there any cost-saving opportunities?
- If there are cost savings to take advantage of, will you have to give anything up to do so, and is the trade worth it?
- Are there any software solutions that can increase efficiency?
- Are there any processes that may lead to accounting inaccuracies?
4. Set Payment Terms With Vendors In Advance
As you bring new vendors on board, think about how their invoices will fit into your payment cycle. Consider this before you sign any contracts.
Also, have a chat with new vendors. Explain your payment cycle and any unique information concerning how your company usually pays its invoices. Ensure that your new vendors and suppliers agree with your payment terms before you decide to use their services.
If you can’t agree, consider working with other vendors.
5. Record Payments In Real Time Instead Of The End Of Month
Every time you make or receive a payment, you should record it in your accounting software or accounting journal. You can easily set this up with real-time bookkeeping and automated accounting software (more on this below!).
With up-to-date financial reporting, you can explain any questions or concerns related to payment. If you wait to record your payments, you may forget key details, adding guesswork to the process.
6. Invest In Accounting Software
Ultimately, your invoice management system (both AP and AR) should work in conjunction with your accounting software. Better yet, it should function within a single platform.
We call this financial operations (FinOps). And it’s a major aspect of ensuring proper cash flow and that you always have a big-picture view of your finances – not just vendor-related expenses and income.
To bring efficiency to your accounting process, you need to invest in quality accounting software. The best invoice management software solutions make automating the most mundane parts of the process easy.
Why You Need A Solid Invoice Management Process
A solid invoice management process ensures that every one you need to pay gets paid without adding strain to your business. It also helps you keep track of payments you expect to receive and send reminders for late payments.
In both accounts payable and receivable, an invoice management system helps you:
- Avoid making late payments
- Maintain clear, concise financial records
- Find savings opportunities
- Track customer payments
- Find late payments that are due
- Send payment reminders and late payment messages
Manage Payments Effortlessly And Reduce Invoicing Errors
The old way of invoice management simply doesn’t work anymore. Pen-and-pad accounting lacks efficiency, leading to more employee hours and headaches than necessary. A sturdy invoice management system will help you handle payments and reduce invoicing errors.
Take your business accounting to the next level with software and automation. Save time and evaluate data to find ways to improve your business process while keeping your books in shipshape in real-time.
With the right practices and invoicing management software, you can expect to improve your business processes significantly. Why wait? Enhance your invoice management process today.
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