What do you need to do after a vendor invoice has been approved?

But, tracking your transactions with your suppliers can be challenging at times. You may come to your office one day and see piles of invoices on your tables. Fortunately, you have a competent and efficient accounting team. But in time, you will have to scale up your process to keep up with the fast-paced market.

With that in mind, let’s look at the supplier invoice payment processes. Moreso, we will discuss some ways and tools to help you improve your workflow.

Supplier Invoices Explained

Supplier or vendor invoices are sales invoices issued for goods or services procured. The recipient of supplier invoices also gives invoices to its customers. For the sake of a clear distinction, let us put this on a company level. When we say vendors or suppliers, we refer to the suppliers of goods or services used for production.

In supplier invoices, goods and services are listed and itemised. It includes other charges, such as sales tax and shipping fees billed to the recipient. After the subtotal, taxes and other charges are added to compute the total amount.

Like most inventory transactions, suppliers may extend a credit agreement to the customers. It usually indicates invoice payment terms and methods. Suppliers may send a month-end statement for all outstanding transactions in that month for more organised payment terms. But, it must indicate that no invoices will be issued after the month-end statement. The recipient records credit agreements with suppliers on accounts payable.

Before, invoice recording and issuance were primarily done in writing. But with spreadsheets, you will only have to input the items and prices. It helps create multiple copies for the supplier and recipient. Now, software-generated invoices are available and used by most suppliers. With these, searching and sorting transactions and dates are easier.

Supplier Invoice Processing Common Workflow

Supplier invoice processing involves the tracking and payment of invoices. It is a complete cycle that begins with the receipt and approval and ends with invoice payment. Everything must be recorded on the general ledger because it is a crucial for making timely payments and assessing your cash flow. As such, it ensures an orderly stream of inventories and services. More so, you can prevent problems with your suppliers or any action against your business.

Fortunately, technological advancements make it easier for you to track everything. Most companies now have automated systems for their invoice processing. They receive invoices as electronic invoices or documents attached to emails. These contain all information you need, from the items and prices to payment terms. You must scan it into your accounting system before it gets approved and paid.

With that, invoice processing and recording of transactions are faster and more organised. It helps avoid missed or overpayments, protecting your finances. There is a workflow you must follow to ensure organised invoice processing.

Here are the basic steps in the invoice processing workflow.

1. Invoice Receipt

The process starts once you receive the invoice manually or electronically. You must first check the itemised goods and services with the accounting department. Once verified, you must check the billed amount to the original purchase order. In case of discrepancies, you must inform the supplier to resolve the issue immediately.
2. Invoice Approval
Once the issue has been settled, you can route the invoice for approval according to company policies. You can approve it immediately if there are no discrepancies upon checking.
3. Invoice Payment
After the verification and approval, it is now ready for payment. You have to pay it based on the terms and conditions agreed upon with the supplier. You may pay it in advance if you want. Doing so will let you avail of discounts or perks if there are any. For instance, suppliers may give a 5% discount if you pay for your order within a week.

How to Process an Invoice for Payment

1. Once you receive the invoice, check the itemised goods and services. Are they procured? If so, check their corresponding prices and the other charges, such as taxes and shipping fees.
2. Once checked, compare it to the original Purchase Order (PO).
3. With the help of your competent accounting team, check for any discrepancies. Are there any discrepancies?
4. If there are discrepancies, inform the supplier immediately to resolve the issue. Once settled, route it for approval.
5. Pay for it based on the agreed terms and conditions. You may opt to make an advance supplier invoice payment for discounts and perks.
6. Record it on the general ledger for reference.

Challenges in Accounts Payable Process

Often, supplies and raw materials are procured on a credit agreement. These are accounted as part of accounts payable. For this reason, it is a must that you keep track of your inventories and accounts payable. Keeping your purchase orders is crucial in settling discrepancies in invoice payments.

Remember that accounts payable has a significant impact on your working capital. That is why even a slight mistake and delay in payments can jeopardise your business. Despite scaling up processes, accounts payable processes can be tiring at times. Here are some challenges that the accounts payable department may encounter.

• Managing Supplier Invoices

It can be hard to keep track of supplier invoices at times, written or electronic. The burden doubles during peak seasons. Imagine how harder it is for those still engaging in manual processes. As such, there is a chance of losing track and paying on time. You can ask the supplier to resend the invoice. But, you will have a big problem if you are not aware of missing invoices.

• Manual Data Entry

Let’s admit it. Processes involving manual data entry are slower and more prone to errors. It contributes to inefficiency and payment errors. More so, it is hard to maintain manual records. Imagine coming to the office with piles of invoices on your table.

• Missing Purchase Orders

You must keep the original purchase orders. It will help you verify suppliers’ items and prices listed on the invoice payment. You can check if there are discrepancies and settle issues with suppliers. Missing purchase orders are a problem for the accounts payable team. Losing these can lead to more cash outflows due to double and unauthorised purchases.

The Need to Automate Supplier Invoices

Before, finance teams mostly wrote invoices on paper. With the help of technological advancements, invoices moved to spreadsheets. Yet, they are still prone to errors since they involve manual entry.

Now, companies are using software-generated invoices. So, below are some reasons to automate supplier invoices as early as now.

• More Efficient Payments

Automating invoice payment for suppliers improves the invoice payment workflow. Aside from inefficiencies, manual invoice processes are subject to more risks and errors. Lost or wrongly filed invoices can lead to wasted time tracking them down. Automation can eliminate many tedious steps.

More so, risks and errors are averted. It allows easy flows of documents through the accounts payable processes without delays. It also allows the digital routing of invoices for a quick review and approval in only a few clicks.

• Timely Payments

Late payments mar your business reputation and vendor relationships. Worse, suppliers may take action against your business. With AP automation, you can keep an eye on invoices. Also, you can have a clear view of your cash flow, particularly working capital. Timely payments can give you discounts and perks from your suppliers.

• Lower Costs

Labour accounts for more than half of your accounts payable cost, including the receipt and issuance of invoices and rectifying payment errors. Keep in mind that manual processes require more work. With automation, you will incur lower labour costs and less time with data entry.

• Audit-Ready

Automation software helps generate transactions, including invoices, anytime you want. It helps you prevent missing documents. It can make auditing less tedious. Moreso, you can easily find discrepancies, if there are any.

Save some time and resources on your supplier invoice payment process with the help of accounting automation software from Spenmo. Book a demo today.

Invoice Processing Automation Software

With automation software, companies can manage accounts payable digitally. Accounting teams can focus on more crucial tasks than sorting for missing invoices. Its functionality includes standardised coding and automated approval. There are dashboards where you can see which suppliers have been paid and not. You can see the status of invoices, whether they are for approval or payment.

Some automation software works directly with ERP platforms and b2b payment software. As such, you can maintain accurate and timely payments. Moreso, it expedites financial processes, including AP processes, and improves cash management.

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