For some organizations, processing vendor invoices is a nightmare. Invoice information gets lost, approval takes forever, or often has problematic typos by the time the right person sees it. Everyone involved finds the entire process tedious at best.
What’s more, invoice processing inefficiencies can lead to substantial losses through late fees, missed early-payment discounts, rework from processing errors. Such "slippage" due to errors or delays can reach 1-2% of the total invoice value annually, according to Infosys BPM. That amounts to thousands of dollars in lost savings for small to medium-sized companies and much more for larger ones.
Inefficient vendor processing also forces AP teams to spend more time communicating with vendors about payment. The latest annual State of AP Report found that 50% of AP teams spend 6+ hours monthly on vendor payment inquiries.
Thankfully, technology can streamline vendor invoice processing. Below, we’ll cover the general steps involved with invoice processing and ways to improve efficiency.
How to Process a Vendor Invoice: A Quick Overview
No matter what AP system you use to process vendor invoices, it follows the same general workflow:
- Gather invoice data. Invoices are received via email, mail, fax, or an accounts payable system.
- Capture and prepare the data. Invoice data typically needs to be coded or formatted in a specific way for processing. Some systems have an automated data capture tool that speeds up this step.
- Verify the details. Your organization should verify that the invoice is correct and authentic. Details to review include the invoice number, date, vendor information, line items, prices, taxes, and discounts, or anything that might be a typo or an attempt at fraud.
- Match the invoice with the purchase order. If your organization uses a purchase order (PO) system, the invoice must be matched with the corresponding purchase order to confirm order details against the invoice.
- Get approval. Depending on your business procedures, a manager or another decision-maker likely needs to authorize invoice payment.
- Set up payment. Once the invoice is approved, payment can be made.
- Archive the paid invoice. Having a centralized process to store invoices supports future audits. Most organizations today use technology for invoice archival and retrieval.
How to Speed Up Vendor Invoice Processing
1. Use advanced OCR technology for data capture.
OCR technology automates the process of adding invoice details to your system, and today’s technology is smarter than ever. Using a vendor invoice management system like DATABASICS that has advanced OCR, transaction line items can be autofilled.
Time-consuming manual data entry should be a thing of the past. All your team needs to do is check that the auto-filled details are correct.
2. Integrate your vendor invoice management systems.
Having to enter the same information into multiple systems is time-consuming and increases the risk of errors. Integrating your vendor invoice management system with your accounting, ERP, CRM, and timesheets and expense reporting platforms improves invoice accuracy while giving your financial team faster insights.
Integration with Accounts Payable also adds an extra layer of control and accuracy. The invoicing process becomes both smoother and more reliable.
3. Automate policy enforcement.
Every organization has a different set of rules for invoice processing, especially when it comes to approvals. With the right system, you can configure your workflow to route approvals by project, department, spending limits, or any other rules you need to follow.
4. Set reminders for the people involved.
One of the most common expense tracking challenges is outdated information. When you need formal approvals from one or more busy people, it’s easy for invoices to sit unprocessed for long periods of time, potentially frustrating vendors and leaving your company’s financial data out of date.
With some invoice processing systems, you can set rule-based email alerts. Instead of waiting for someone to get around to a task or manually sending them reminders, the system will remind them.
5. Use software with real-time reporting.
Your organization’s accountants and managers will appreciate up-to-date data as they complete reports, spend analysis, reconciliation processes, and other financial documents. Immediate visibility leads to less guesswork and more informed decisions about financial matters, including future vendor purchases.
6. Choose a scalable system.
Business needs evolve, and your vendor invoice volumes may increase significantly. Choosing a scalable, cloud-based vendor invoice management system gives you a way to meet today’s needs and the flexibility to adapt to expanding operations.
Take Control of Your Vendor Invoice Processes
DATABASICS offers a cutting-edge vendor invoice processing system that integrates with your accounting systems, like Sage Intacct, NetSuite, and Microsoft Dynamics. Our software is easy to use, customizable to whatever policies your business has, and is built with time-saving technology that handles repetitive tasks for you.
Our system offers significant improvements in workflow management and invoice assignment. By giving your company better control over who pays the invoices and how it gets done, DATABASICS ensures your payments are quick and accurate.
Download our product guide to see how DATABASICS can speed up your vendor invoice processing.
