How to Best Optimize Invoice Tracking
There are myriad ways of driving organizational change – consistent readers of this blog will agree, as we’ve covered this issue from numerous angles.
But, one we haven’t mentioned as yet is how to best optimize invoice tracking (an important factor in any organization, to be sure).
Before we look at how to actually achieve such optimization, it’s instructive to first look at the challenges and troubles caused by not optimizing or effectively managing your accounts payable process.
Courtesy of consulting giant Deloitte, here’s a very thorough list of the risks associated with an inefficient AP process:
“A failure to adopt effective accounts payable processes can hamper a company’s ability to process invoices on a timely basis, take advantage of available discounts and set either longer or shorter payment terms with suppliers, depending on which are most favourable.”
Sound good? Of course not – these are all facets of a successful business that any organization should strive to achieve.
That said, achievement isn’t easy and not all companies grasp every facet of organizational efficiency. For those that struggle in the area of invoice tracking optimization, some of the effects of such a problem are (again courtesy of Deloitte):
- “Relying too heavily on error-prone manual processes to approve requisitions, scanning supplier invoices and issuing payments;”
- “Failing to issue purchase orders for each new order;”
- “Not confirming if order deliveries match contractual terms or inability to easily access vendor contracts;”
- “Losing access to early payment discounts by over-extending payment cycles or simply accept discounts without calculating the cost of capital outlay;”
- “Neglecting to take advantage of maximum savings through volume rebates or trade spend initiatives;”
- “Incorrectly loading supplier and/or contract information into master data files;”
- “Lacking processes and systems to prevent late payments, under- or over-payments, duplicate payments or missed payments.”
The tie that binds
Although the aforementioned list presents a sweeping set of effects of poor invoice optimization (a list that seems to touch all corners of a company), there is a tie, or solution, that can bind them together: technology.
A procurement software suite can manage this process. For example, a hallmark of procurement software is the request for purchase stage – every action in Procurify starts with a request, which alleviates a cumbersome manual requisition process.
Procurement software also, in broad strokes, can help with issuing consistent purchase orders, receipt of goods and capturing any pre-negotiated pricing in the catalog.
Further along the procurement continuum is the AP (accounts payable) function and, once again, procurement technology can handle that as well. This is where the optimization of invoice tracking takes place.
We’ve discussed this at length on this blog about automating accounts payable processes, and we also offer tips on managing your accounts receivable here, too. But, in short, AP modules assist in critical functions such as cost allocation, three-way matching and invoice approval routing.
Most importantly, however, is the invoice management ability an AP module provides. As far as optimizing your organization’s invoice tracking this is as good as it gets – store all of your invoices in one place. This repository will improve the accuracy of accruals, bill approvals and audit trails, amongst others functions.
Just as poor invoice optimization can have ramifications across an entire organization, so too can one well-designed procurement suite help a multi-faceted payment process that includes an accounts payable module.