Invoice Processing refers to the methodology of receiving bills of purchase from vendors, verifying the correctness of the invoices, approving the invoices from the management concerned, completing the payments, and recording the same in the accounting system. Invoice Processing is an integral part of running a business as the procedure offers valuable insights into maintaining your business’s financial health.

Most business owners do spend a lot of time working on the accounts receivable management where they make sure their clients are invoiced correctly and all the past dues are collected. The question here is whether you spend the same amount of time and effort on your accounts payable management as well.

A well-functioning and streamlined accounts payable workflow is essential to maintain a balanced cash flow in your accounting system, thereby mitigating the risk of late payments and manual errors. This article also discusses more on the best practices for receiving invoices and how you can transform your AP workflow.

Best Practices to be Incorporated in invoice processing

Whether you are a new budding business trying to learn efficient ways of invoice processing or a well-established organization looking to revamp the existing system, here’s something useful for you.

1. Centralize invoice receipt

Whether you receive your invoices through fax, post, or email, make sure that your invoice receipts are centralized. Centralizing the invoice receipt system will make sure no invoice is overlooked or lost. At the same time, this step will simplify the management and tracking of invoice receipts.

2. Internal controls

A lot of frauds and vulnerabilities do happen in the accounts payable department if there are no internal controls set up. Setting up internal controls and strictly adhering to them will mitigate the occurrences of fraud. All you need to do is segregate duties to every person. Make sure one person is solely responsible for performing one duty.

For example, invoice verification should be completely handled by one person, and payment authorization should be handled by another person. A single person shall not perform both duties. Doing so will help you build a much better and streamlined account payable system.

3. Invoice management

Timeline is an essential part of invoice management. Make sure that there are no delays in invoicing or billing. Consistency is the key to achieving the timeline goals in invoice management. The best time to start your invoice processing is right after you deliver your product or service to your customer.

Doing so will ensure swift payments and may give you other benefits like payment discounts. Coming to periodic invoices, you may schedule them on your weekend or at the beginning of the month depending on whether it’s a weekly invoice or monthly invoice.

4. Cross-check for duplicate payments

Even after implementing the best practices, you may still end up with duplicate payments, particularly if your accounting system is handled manually. Hence, make sure to identify duplicate payments before it is sent out to the vendor. Once a check is sent out to the vendor, you might have to face certain challenges like the vendor’s reluctance to return the check that will eventually block your money for months together.

Automation of Account Payable Processing

Automating your accounts payable system will help you minimize the issue of duplicate payments, reduce other human errors, and improve compliance. The other benefits of automating invoice processing are as follows:

  • Automation speeds up the cycle of invoice processing, thereby enhancing the overall productivity of your finance team.
  • Automation eliminates the need for manual data entry and minimizes the chances of human errors, thereby yielding more accurate compliance and financial reporting.
  • Automation fosters vendor relationships which in turn are helpful in collaboration and negotiation.
  • Automation offers better visibility in your invoice processing. This visibility is essential to make better, strategic, and informed decisions and increase the accuracy of cash flow.

Conclusion

Whether you are a small business struggling with accounts payable and accounts receivable challenges or an established organization following a manual invoice processing system, you might consider the benefits of automating your AP workflow. Hiring a professional who will help you with bookkeeping and accounting services will help you focus on your organizational goals and objectives.

If you are looking for a firm that offers accounts payable and accounts receivable services, make sure to check the official website of Back Office Accountants firm. Based in the US, the Back Office Accountants firm offers end-to-end top-notch quality accounting services under one umbrella. Be sure to review the official Back Office Accountants website to learn more.