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Guide: Invoice Automation Best Practices

 
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Best practices for invoice automation to increase operational efficiency and accuracy.

Relying on paper slows down your Order to Cash (O2C) process leading to delayed deposits, prolonged days sales outstanding (DSO), and inaccurate cash flow projections. By capturing and processing payments automatically, you will increase the speed and accuracy of your accounts receivable (AR) process.

One would imagine that billing is relatively straightforward, but companies often struggle in this area. Errors appear in units of measure, price, customer accounts, or other inaccurately recorded master data. Some also fail to generate invoices in a timely fashion, or at all. Switching between mailed and electronic invoices results in confusion and is often the root cause of these errors. Establishing a billing process that ensures accurate invoices are sent on a timely basis is essential to accounts receivable.

1. Invoice Sending Automation

Automation can reduce time and human error. In business to business (B2B) and business to consumer (B2C) enterprises where invoices are sent on a regular basis, an automated system would initiate a recurring process to send out those invoices without the need to manually create/send them. An electronic data interchange (EDI)/electronic invoices can reduce delivery time and allow customers to download invoices directly to their accounting/Enterprise Resource Planning (ERP) system. Setting a predetermined invoicing and payment schedule ensures that invoices are received by the client in a timely manner and the payments are received on time in return.

2. Invoice Delivery/Approval

An automated system ensures that there is no need for taking manual confirmations and approvals from the client. Confirming the invoice has been received and approved by the client, helps to ensure that invoices are verified and received in a timely manner. The approval process coincides with the payment process and automation allows credit card details of the client to be linked with the payment getaway of choice. Payments can then be automatically transferred to the vendor’s bank account upon approval of the invoice.

3. Integration of Customer Portals

Integrated document management systems enable end-to-end exchanges of B2B documents with hundreds of customers while reducing manual hours dealing with cash applications, disputes, and collections. Adding to the efficiency of these processes, an automated solution seamlessly integrates with existing ERP and customer relationship management (CRM) databases to ensure there is no need to invest time in new systems and improves the return on investment.

4. Automated Reports & Payment Reminders

Running automated invoicing reports can provide in-depth financial analysis and efficient management of business finances. This means you can easily account for every quote, order, field ticket, invoice, and more. Automated reports help in analyzing the average payment cycle of all clients, efficient management of resources and timely corrective action for any discrepancies in the system. Such reports include invoice aging reports, outstanding reports, PO reports, estimate reports, and tax reports. Exception reports can also help flag account anomalies for items such as sales exceeding credit limits and discount rates above company policy.

Timely and effective invoice generation and reporting can help ensure billing is completed in a timely manner, but an automated payment process should be complemented with automated payment reminders. In the instance that not all payments arrive in a timely fashion, these automated reminders will remove the need to make manual follow-ups for collections. A late fee or an interest penalty can also be automatically charged to the bill when the payment is not made on the due date of the original invoice.

Decreasing your dependence on paper allows you to increase your operational efficiency and decrease the occurrence of misapplied cash. Information flows through your processes, reaches everyone who needs it, integrates with critical applications, and provides real-time insight into the status of your finances.

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