Where Invoice Management Falters (And What To Do Instead)
Imagine walking into the office on a Monday morning and seeing your desk buried in invoices. You spend the next week manually uploading each one. You barely have time for a coffee break because the piles never actually go away. You keep at it because that’s your job and how your company manages invoices. But you know your desk will look exactly the same next week and next month.
This is the reality of day-to-day life for thousands of accounts payable (AP) professionals. Half of respondents to a recent IOFM survey say they are working longer hours to keep up with the rising volume of invoices. The same report showed that invoice volume increased 75 percent in Q1 of 2022 alone.
This increase in volume and associated work are leading many AP professionals to burn out, with one in four overworked individuals considering leaving the field as a result. Additionally, one in five AP professionals is approaching retirement age. In total, nearly 50 percent of the professionals surveyed are at risk of leaving the industry.
Since the list of reasons new businesses fail is already long enough, there’s no need to add overwork to the mix. Thus, using proper invoice management is vital for your employees and your company. Before we hop into how to fix invoice management, let’s first define what it is — or at least what it’s supposed to be.
Download the free tool: Invoice Tracking Template
What is invoice management?
Simply put, invoice management is a process by which a company receives, organizes, validates, pays, and records supplier invoices.
Seems easy, right? It is, but believe it or not, proper invoice management isn’t as common as you might think. If you’re not careful, poor invoice management can plague your company’s growth and bottom line.
What is the manual invoice process?
The core problem with invoice management is not the invoices themselves. Businesses have to purchase products — that’s a given. For many companies, even in today’s digital world, the problem with invoices is the manual process by which they’re managed.
Each invoice flowing into the company follows a process. Invoices must be:
- Entered into the system
- Processed and coded
- Matched against purchase requisitions and purchase orders
- Approved and submitted for payment
- Tracked and reconciled at month-end
Ask anyone in Finance — manual invoice management is a lot of work. Not only that, if you don’t keep the massive piles of paper invoices organized as you go, you might as well take Donnie Brasco’s advice and “Forget about it!”
The vicious cycle of poor invoice management
Most companies procure a constant flow of products, especially when expanding or adding locations. With all those purchases come invoices that must be managed. The basic process goes something like this:
- AP collects invoices submitted via email, fax, or snail mail
- Team members manually enter invoices, taking time to match the invoices against POs or other purchase data
- Once matched and entered, AP initiates the payment processes, typically by issuing paper checks; manual supplier payments take more time than electronic payments and may incur late fees or missing payments
- Finance conducts reconciliation on a spreadsheet or in a homegrown system
Invoice Tracking Template
Download the invoice tracking template to avoid costly mistakes, clarify financial patterns, and track spending throughout the year.
The top 5 impacts of manual invoice management
The effects of manual invoice management go beyond wasted time. The process can present a host of negative impacts for organizations. These are the five most damaging outcomes of manual invoice management:
1. Poor visibility: Manual invoice processing relies on outdated data collection methods like spreadsheets or homegrown tracking software. These manual organization methods offer no options to search through or contextualize data dynamically. This creates data silos that rob decision-makers of valuable information for future planning and analysis.
2. Frequent errors: Everyone makes mistakes, and overwhelmed AP staff are no exception. Manual entry creates an average exception rate of up to 23 percent, with errors requiring research and remedy — if they’re even detected. Over time, such frequent exceptions add up to considerable wasted hours and lost revenue.
3. Slower processing: AP clerks can only type so fast, and even skilled clerks can only process an average of 5 invoices per hour. For companies generating thousands of monthly invoices, the headcount required to process everything promptly is prohibitive.
4. Higher processing costs: It’s expensive to perform manual data entry, with higher costs coming from a variety of places, including:
- Increased labor cost
- Late payment fees
- Invoice exception costs
5. No scalability: The most pervasive problem with manual processing is the lack of scalability. With only so many people to process invoices, manual entry issues worsen over time. For growth-minded companies, scalable systems are the key to success. That’s hard to accomplish if your AP team is treading water or falling behind. AP automation can keep up with your company no matter how fast you scale.
What does good invoice management look like?
Manual invoicing can seriously weigh down the finance department. Fortunately, there’s a better way. Automated invoice processing software converts invoice management from a days-long, high-touch process to an instantaneous, touchless event. It streamlines every invoice batching, matching, and processing step to reconcile thousands of invoices per hour.
Here’s how automated invoice processing works:
- Batching/receipt: Invoices flow into the organization from one of several channels (mail, email, or e-invoicing). Optical character recognition (OCR) scanners batch and digitize paper invoices, integrating invoice data. Email and electronic billing information go into the system automatically for validation and processing.
- Reconciliation and matching: Formerly tedious processes such as invoice reconciliation and three-way matching between the purchase order, invoice, and purchase requisition happen automatically. These processes occur within the system during invoice processing, eliminating the need to manually check vendor payments against spreadsheets.
- Approval: Invoice approval is automatically routed through approval workflows so any relevant stakeholders (for instance, Finance or Procurement) can sign off. The entire process happens within the system, eliminating the need for back-and-forth communication that would otherwise slow things down.
- Payment: Using an integrated electronic payment method linked directly to accounting systems, the platform approves the invoice and issues an electronic payment directly to the supplier. This enables cost savings through early payment discounts.
- Reporting and archiving: All centralized data is available for real-time reporting and analysis. AP or other stakeholders can dynamically search for information by time period, vendor, category, department, or other criteria.
Invoice management software can help you achieve all this and more. The best platforms can also help consolidate billing and payment into a single, automated event, saving AP hundreds of hours of work researching and paying vendors. Instead, a single click pays them all.
Invoice Tracking Template
Download the invoice tracking template to avoid costly mistakes, clarify financial patterns, and track spending throughout the year.
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Real-life examples of effective invoice management
Cutting down on the number of invoices your company processes saves your team and business time and money. With consolidated invoices, a company can reduce monthly invoices from hundreds or thousands to just a few — or even pay just one bill a month.
Let’s look at some real-life examples of how consolidated invoicing and proper invoice management drastically increase the productivity of finance teams and foster companies' exponential growth.
ZeroCater gets better process efficiency
ZeroCater discovered the time and money it could save using consolidated invoices and efficient invoice management.
Once describing invoice management as “the bane of my existence,” IT and Operations Director Keith now credits Order.co with lightening his workload, freeing up time for more valuable tasks.
They receive 50x fewer invoices, cutting monthly invoices from 200 down to three or four. What used to take two full business days every month to reconcile and pay invoices is now accomplished with a single click.
Clinton Management gets payments under control
Getting a call from a vendor who says your payment is late is just awkward.
Clinton Management, a property management company based out of New York, suffered from this exact problem. Its team was trying to manage hundreds of separate invoices, which led to backlogs and overdue payments. By consolidating invoices and keeping track of payments, the company became the gold standard for both property and invoice management.
“Our vendors aren’t calling to ask where their payments are anymore,” explains Purchasing Manager Nadia Nizam. When you consolidate all your invoices into one, paper stacks go away, and you can see exactly whom you owe and ensure they are paid on time.
3 Invoice management tools to consider for 2024
The right tool is one of the biggest differentiators in launching a successful digital invoice management process. Platforms with a host of features provide flexibility and performance so that you can build a system tailored to your business.
Order.co offers one of the most comprehensive invoice and procurement management platforms on the market, giving companies of every size access to streamlined processes and total visibility.
Order.co
Order.co makes invoice management automated and simple. It provides a single space for matching, approving, processing, GL coding, and paying all invoices within the organization, even across locations.
The platform offers invoice processing features that let you pull valuable data from your accounts. You’ll always know the details of an invoice, which will always tie to a purchase through the system. While offering a granular view of your payables activity, the system also allows you to pay all your vendors efficiently for timely settlement.
Procure-to-pay software lets your staff get the preferred items they need through approved channels while offering approvals for spend control and reporting tools to identify invoicing trends.
Top features:
- Invoice consolidation that lets users pay multiple invoices, even across vendors
- Dynamic budget guidance by user, location, department, product type, and more
- Streamlined approvals to keep the invoice and payment process moving forward
Pros:
- Order.co makes invoice management part of the total procure-to-pay process within one powerful platform.
- The platform automates invoice collection, matching, reconciliation, and payment.
- Consolidated payments give businesses the power to pay multiple invoices across vendors with a single click.
Cons:
- Some limitations on reporting, though the development team responds swiftly to requests for needed functionality.
- Order.co does not support OCR, but the platform eliminates the need to manually batch invoice information.
Best for: Order.co is great for companies of all sizes.
Spendesk
Spendesk provides tools to streamline the invoice process. The system makes it easy to make purchases, track approvals, and monitor spending through reporting. It also offers real-time budget management features to prevent surprises at the end of the fiscal year
Top features:
- Streamlined month-end close
- Invoice processing
- Zero-cost setup
Pros:
- The app-based interface makes it quick and easy to upload invoices.
- Real-time budget management helps Finance see spend as it happens.
- Automated receipt matching enables easier end-of-month close.
Cons:
- The upload feature for certain images doesn’t always harvest information accurately.
- Spendesk isn’t intended for small businesses or solopreneurs. It’s a mid-market tool meant for larger, more mature finance teams.
Best for: Spendesk primarily serves the mid-market.
Stampli
Stampli is an AP management and invoice processing software designed to streamline and simplify accounting workflows. It features a user-friendly interface that employs AI to seamlessly adapt the program to your enterprise resource planning (ERP) systems. Billy the Bot, Stampli’s AI and machine learning technology, learns the organization’s current AP processes for invoice capture, coding, and approvals.
Top features:
- AI-enhanced processes
- Mobile app capabilities
- Easy integration with the existing stack
Pros
- According to online user reports, Stampli delivers good value for the money.
- Its user-friendly design makes it easy to process and pay for invoices.
- It provides AI-enhanced and OCR-based invoice capture with some GL coding options.
Cons
- Filtering out duplicate invoices with Stampli can be challenging, leading to confusion and data accuracy and visibility complications.
- Deleting duplicate or incorrect invoices from the system takes time and research.
Best for: Stampli primarily serves the mid-market.
Free yourself from invoice management with Order.co
Establishing a good invoice management process is essential to scaling your business. Without it, you’ll be stuck in the vicious cycle of invoice overload with no clear way out. If your company is looking to tighten up its invoice management system (and let its finance teams sleep better at night), we’re here to help.
Order.co consolidates your invoices and automates many manual processes that bog down invoice management. The platform centralizes invoice management and brings you a competitive advantage. Never again will you ask, “Where did I put that invoice?” or “Did I pay that vendor yet?”
Order.co’s invoice automation features help some of the world’s fastest-growing companies streamline their invoicing and payment processes. Reduce manual entry, increase productivity, improve invoice management, and consolidate payments, all within one robust automation software tool.
Schedule a demo to see exactly what Order.co can do for your business.
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