Best Practices and Tools for Invoice Management in Procure-to-Pay

Where your attention goes, your time goes.

Idowu Koyenikan

The procure-to-pay cycle is one of the key components of procurement management, which is the foundation upon which all supply chains are built. It ensures a constant supply of high-quality goods and services are obtained at the best prices. Additionally, it provides greater visibility into your procurement process, which, combined, results in improved operational effectiveness for your business.

Invoice management is a critical part of this cycle that ensures that:

• All the vendors you depend on for services or supplies receive timely payments.
• Your business only pays for the goods (and services) it has received.
• No invoice or reconciliation slips through the cracks.
• Your business complies with best practices and regulations.

This blog will walk you through how to improve this process within your businesses and will give you the insights and the tools available to help you do so along with best practices to follow for maximum efficiency.

Invoice Management in a Nutshell

Invoice management appears at the fag end of the procure-to-pay cycle after the goods (or services) have been delivered. It typically involves the following steps:

Step 1: The accounts team receives the invoice.

Step 2: The details on the invoice are then matched to the Purchase Order (PO) as well as the Goods Receipt (GRN), a process known as three-way matching.

Step 3: If there is a three-way match, the essential details of the invoice (vendor information, tax calculations, tax identification numbers, payment methods, etc.) are validated.

Step 4: The invoices are then routed to the necessary channels for invoice approval.

Step 5: Once approved, the payment is disbursed to the vendors.

If there is a mismatch during the three-way matching process, accounts payable teams work together to resolve the issue, either by revising the invoice, returning excess goods, or issuing credit memos.

If your business is handling this process manually, there is a chance of human error and delays in payments to vendors, which can affect the relationship with the vendor.

Together, these factors can have a major impact on your bottom line, and this is where technology can help.

Invoice Management Tools to Streamline Your Procure-To-Pay Cycles

Invoice management tools are specifically designed to digitize and automate the entire invoicing process. First, they help overcome the challenges listed above. Second, they will become essential to your business as you scale and process increased volumes of invoices with accuracy while being compliant.

Some of the most common features of invoice management tools:

• Automated three-way matching to verify invoices
• Customizable approval workflows to route invoices through pre-defined approval channels based on certain criteria
• Compliance checks to ensure that invoices meet tax, legal, and regulatory requirements
• Real-time tracking and notification for visibility into the status of each invoice, including alerts for pending approvals or payment deadlines
• Reporting and analytics for detailed insights into payment cycles, supplier performance, and your business's overall financial health

Best Practices for Invoice Management Processes

While invoice management tools can give you a major push toward end-end digitalisation, there are a few best practices you can follow to further improve the entire process such as:

1. Standardizing Your Invoicing Process

Implementing a standardized invoicing process can greatly improve your operations. This can take the form of standardized invoice templates, a well-thought-out cataloging/numbering system, consistent terms and conditions for all vendors, and fixed payment cycles.

2. Using Electronic Payment Methods

Electronic payments can speed up your invoicing process significantly. In addition, they are easily traceable and give you the option to set up recurring payments for repeat orders.

3. Standarized Payment Terms

Adhering to all the payment terms and conditions will help establish your reputation as a reliable and trustworthy client in the eyes of your vendors. As a result, you may be able to strike better deals with your vendors in the future and decrease the likelihood of delays.

4. Conducting Regular Audits

Conducting regular audits of your invoice management process will help you identify bottlenecks, discrepancies, or inefficiencies. In conjunction with AI-powered analytics, modern invoice management tools can provide you a ton of insight regarding your invoice management process.

Wrapping Up

Invoice management significantly impacts the procure-to-pay cycle. Implementing and adhering to industry best practices, along with using technology to your advantage, will help you avoid the common pitfalls this process suffers from.

Remember, a well-managed invoice management process ensures accurate payments as well as contributes to a stronger, more sustainable supply chain.

Perhaps the most significant requirement for an invoice management tool must be to integrate seamlessly with procure-to-pay, Enterprise Resource Planning (ERP), and accounting systems. Remember, your invoice management process must integrate both upstream and downstream in your procure-to-pay software. Explore procure-to-pay software that natively integrate invoice management workflows. This is essential to enable a smooth flow of data across your entire organization's financial management infrastructure.

In addition to invoice management, Hubler also provides ready-to-use tools for the entire procure-to-pay process. Streamline your entire procure-to-pay cycle with one solution.