Managing invoices can be pretty straightforward when you only have a few vendors. But once your company starts to scale, invoice management becomes more challenging.
Slow processing times can damage relationships with your vendors and hurt your company’s long-term success.
Coding errors can result in items being billed to the wrong projects or GL categories – problems that are often hard to find and fix later.
So how can you easily manage incoming invoices, categorize them, ensure they’re valid, and make payments on time? How can you streamline and automate these processes?
This article will cover invoice management and some of the challenges that companies face when managing invoices. We’ll also look at how you can create an automated approval workflow using software from frevvo to streamline the invoice management process.
Click the links below to navigate to the section you want to learn more about:
- What Is Invoice Management?
- Top Invoice Management Challenges
- How to Automate Invoice Management in Five Steps
- Essential Features of an Invoice Management System
What Is Invoice Management?
Invoice management is the process by which supplier invoices are received, coded, approved, and submitted for payment with full visibility into spend metrics.
To put it simply, invoice management involves managing accounts payable (money you owe to vendors) according to the business norms established by your organization.
Every company has different processes, but a typical invoice approval workflow looks like this:
- Receive invoice
- Verify invoice
- Flag irregularities
- Approve invoice
- Issue payment
Invoice management may seem straightforward on the surface — once you review and approve an invoice, you issue payment and record it in your accounting system.
However, one survey found that 13% of invoices to small businesses are paid late. In addition, companies spend an average of 15 days a year chasing unpaid invoices.
It’s possible to manage these invoices manually, but it’s an inefficient way of doing things.
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From printing paper invoices to chasing signatures for approval, manual invoicing increases turnaround times and the likelihood of costly mistakes.
Paper-based invoices might work for very small organizations. However, as you grow, it quickly becomes more cost-effective to use invoice approval software. This will help your company scale invoice management and handle a growing volume of invoices.
Let’s look at how invoice approval software helps your company address the common challenges of manual accounts payable (AP) processes.
Top Invoice Management Challenges
Without the right systems in place, organizations struggle to maintain an efficient process for managing invoices. Here are the top pain points of manual AP processes.
Let’s look at how using invoice approval software can help address some of the top challenges.
1. Manual Data Entry
Manual invoice processing is extremely time-consuming. Depending on the number of invoices your company processes, your team can easily spend hours on data entry alone.
In fact, 38% of small business employees say that data entry is their most time-consuming task.
Manual data entry takes your employees away from more productive tasks.
Entering data manually also increases the risk of errors. From adding extra zeros to missing decimal points, even a small error can lead to issues like overpaid or underpaid invoices.
With invoice approval software, you can digitize invoice forms and processes and have fields populated with pricing data from a database. You can also have fields automatically calculate totals based on quantities and unit prices, which helps reduce manual data entry and the risk of human error.
2. Manual Routing of Invoices for Approval
The problem with manually routing documents and chasing down signatures is that it often leads to long cycle times — the time it takes to complete a task. This can delay invoices and strain relationships with your vendors.
Novice organizations, companies that rely on manual processes, take 45 days on average to process invoices from receipt to approval.
Innovators, companies that have digitized their processes with automation tools, take just five days on average to process an invoice. They also have much lower processing costs.
With invoice approval software, you can create a workflow that automatically routes invoices to the right approver. This way, employees don’t have to waste time hunting down signatures.
3. Lost or Missing Invoices
Without an effective invoice management system in place, it’s possible to misplace or even lose invoices that you receive.
You might not even realize that you have an unpaid invoice until a vendor follows up. Since the invoice has gone missing, you would have to ask the vendor to send another one which reflects poorly on your company.
Using invoice approval software can help you avoid this problem. It allows you to track incoming invoices and you can even set notifications when due dates are approaching.
4. Invoice to Payment Matching
Payment matching is a practice that companies follow when processing invoices. It involves matching an invoice against a purchase order.
The point is to verify the legitimacy of incoming invoices, which is important, as 82% of organizations have reported instances of payment fraud.
With frevvo’s invoice approval software, you can integrate your workflow with your accounting system and perform this matching automatically. It ensures that you only pay what you owe, no more and no less.
5. Inability to Approve Invoices in Time to Capture Discounts
Vendors may offer discounts for making early payments. A common discount is 2/10 net 30, which is when buyers can receive a 2% discount if they pay their invoices within ten days.
Those discounts can translate to huge savings depending on how much business you do with a vendor. However, many companies aren’t able to approve invoices in time due to slow invoice approval processes.
Automation can improve processing cycle times by 73%, allowing you to take advantage of early payment discounts. This also helps you maintain positive relationships with your vendors.
The challenges above are some of the top pain points of manual processes. The good news is that implementing invoice management software can help you address them.
Let’s look at how in the next section.
How to Automate Invoice Management in Five Steps
It costs companies $12.90 on average to process a single invoice. Using automation software can help you automate invoice approvals and reduce processing costs.
With frevvo’s invoice approval software, you can create and customize an approval workflow that’s tailored to the specific needs of your organization.
Follow these steps to get started.
1. Create an Invoice Approval Workflow With the Workflow Wizard
You don’t need to hire a team of coders and wait through months of development time to automate your invoice approval process.
With frevvo’s workflow wizard, you can create your own custom workflows from scratch without any coding experience. Create new forms, add approval steps, and more with visual tools.
Here’s an example of how you can build your own workflow in frevvo:
Simply add the steps that reflect your invoice approval process, and frevvo will automatically generate a workflow in seconds. Alternatively, you can also install a pre-built template.
Here are some of the pre-built templates available in frevvo:
Each template comes with a fully functional workflow and form, saving you both time and effort.
2. Customize the Form and Add Business Logic to Your Workflow
Once you’ve created a workflow (or installed a template), the next step is to customize the invoice approval form to fit your business requirements.
frevvo’s dynamic form builder includes simple drag-and-drop tools. Add text boxes, radio buttons, signature fields, and more to easily customize your form.
Here’s an example of an invoice approval form:
The example above is a standard invoice approval form. But you can also create forms for different types of invoices like:
- Credit invoices
- Debit invoices
- Proforma invoices
- Interim invoices
With the visual workflow designer, you can add conditional logic to your workflows. For example, you can add a rule that routes invoices above $10,000 to a senior executive.
Here’s an example of a workflow with a conditional rule:
Invoices that are below $10,000 are automatically routed to the finance department without requiring VP review. Adding rules to your workflows like the one above can improve their efficiency.
3. Integrate the Workflow to Your Accounting System
Once you approve and pay an invoice, there’s another important step — entering the data into your accounting system. However, doing this manually is time-consuming and prone to errors.
Ensure your records are always up to date by integrating your invoice approval workflow with your accounting systems. This not only saves time on manual data entry but also helps you maintain accurate records for compliance and auditing purposes.
4. Test Your Invoice Approval Workflow
Run your workflow through several tests before deploying it across your organization. Get feedback from your team and make any adjustments.
With frevvo, you can test your workflow to ensure everything works as designed. You can even preview how your forms will look on mobile devices like smartphones and tablets.
Here’s how mobile previews look in frevvo:
Once everything looks good, you can deploy your new workflow with a single click and start using it right away.
5. Measure and Improve Your Workflow
Creating an automated invoice approval workflow is just the beginning. Keep a close eye on metrics like cycle times and continue to make improvements.
Here are some of the reports you can generate in frevvo:
Making small improvements over time can help you speed up approvals and reduce processing costs even further.
Essential Features of an Invoice Management System
Choosing an invoice management system can be challenging. To help you make an informed decision, the following are essential features to look for.
Let’s take a closer look.
Sending a form back due to missing or invalid data can be frustrating.
Look for an invoice management system that has a form designer with automatic validation features. An example is creating a field that can validate data (e.g., valid email addresses in an email address field).
Some invoices may require additional approval before you can issue payment. For this reason, you’ll want an invoice management system that lets you add conditional logic.
Here’s an example of what frevvo’s Rule Builder Wizard looks like:
By following these steps, you can add all kinds of conditional logic to your workflows.
Chasing signatures for paper invoices can drastically slow down approvals. Manually signing documents means printing, signing, scanning, and uploading them back to forward to the next person – a tedious process at best. Further, if a manager is traveling or away from the office, approvals get held up until they return.
Look for a solution that lets users add digital signatures to an invoice from any device. That way, managers can approve and sign electronically from their mobile device at any time even if they are on the road.
Role-based access control is simply a must, as it allows you to grant varying levels of access to each user. It ensures that only authorized users can view and take actions on the workflow thereby protecting sensitive information. Using roles also makes it much easier when employees move to a different job, get promoted, or leave the company.
Here’s how you can set restrictions on your workflows in frevvo:
Notifications & Reminders
When a manager receives an invoice to review, you’ll want that person to receive a notification so they can take action right away.
A good invoice management system will let you customize these notifications and ensure that approvers have the information they need to approve invoices.
Further, the system should also have the ability to automatically send reminders if someone does not perform their tasks by a specified deadline or to reassign the task to a different user if the original assignee is on vacation. That way, invoices aren’t delayed and employees aren’t forced to chase down managers or supervisors to get approvals in time.
PDF Generation & Storage
You may wish to generate PDFs to keep hard copies of invoices or to send them to your vendors after you issue payment.
In frevvo, you can use the mapping feature to generate PDFs. Any signatures that are on your forms will also transfer to the PDF.
Typically, these PDF documents are then stored in an electronic document management (EDM) system, e.g. SharePoint or DocuWare. Ideally, your automation software should transmit the documents electronically to the EDM system along with the proper indexing without requiring any manual intervention. Users can then search for and retrieve invoice details at a later date from the EDM system.
Workflows are more powerful when you can connect them with your existing systems.
With frevvo’s invoice approval software, you can integrate your workflows with your accounting system and have the data update automatically. This reduces manual data entry and helps you maintain accurate records.
Nowadays, more work takes place on the go.
Look for an invoice management system that works on all devices. This will let your team review and approve invoices no matter where they are.
To continue improving workflow efficiency, you need a tool that lets you view and track key metrics in real-time. This will help you measure the effectiveness of any changes you make.
Internal processes like invoice approvals contain sensitive data.
When choosing any kind of software, it’s important to check their security policy first to ensure that your data is secure and they comply with all standards.
Managing invoices may seem straightforward at first. But as your company starts to scale, you’ll need an invoice management system to help you manage approvals.
With frevvo’s invoice approval software, you can create an approval workflow that fits your specific business requirements using visual tools.
Best of all, you can try a free 30-day trial here to test out the software for yourself.