5 Reasons Why Your Business Should Focus on Invoice Management

An invoice is an essential document that every business has to deal with, in one way or another. Every business, regardless of its nature, size, and business volume, sends and receives invoices or does both in most cases. Every time a business buys or sells goods or services, it generates or receives an invoice. It is said that an invoice is the most commonly used commercial document. It is, therefore, necessary for a business to put focus on invoice management. In business, buying and selling at some future terms is quite a routine. So, in a business, an invoice is usually meant for a deferred payment. This makes invoice management more crucial for a business. Depending upon its nature an invoice is either an asset or a liability for a business, therefore it must be dealt with accordingly.

Invoice

An invoice is generated by the seller of some goods and/or services upon the buyer of the same. It is a time-stamped document and acts as evidence of a commercial transaction of goods and services between relevant parties. An invoice can either be instantly payable or at some agreed-upon future date.

Accounts Payable And Accounts Receivable

Every invoice is simultaneously an asset and a liability depending upon the status of the parties in a transaction. For the seller of the goods or services, it is an asset and a liability for the buyer in the same transaction. So both of the parties will record the transaction differently.

Accounts Payable

Accounts payable are considered as a liability as they depict the amount to be paid by the business. It is recorded as a liability in the balance sheet of a business. Payable invoices are usually a short-term liability for a business, so they are considered an important factor in cash flow management. While making financial decisions it becomes necessary to consider accounts payable status.

Accounts Receivable

Accounts receivable are dealt with as assets by a business as they represent the amount to be received by the business. Accounts receivable are presented as an asset in the balance sheet of a business. The amount to be received by a company against the invoices is part of the accounts receivable. Like accounts payable, accounts receivable is also a major factor to be considered in the cash flow management of a business.

Invoice Processing

Invoice processing represents all the functions performed by a business on an invoice it receives till the payment is made against the same. Invoice processing is a function of accounts payable so it is attributed to the buyer of the goods and services. It begins with the reception of the invoice and ends with the disposal for payment of the same.

Invoice Management

Unlike invoice processing that only deals with payable invoices, invoice management is a broader term that covers both aspects of an invoice. Invoice management is a mechanism that helps businesses effectively deal with invoices. Depending upon the role, invoice management can be categorized into two heads.

  • Invoice Management for Buyer (Accounts Payable)
  • Invoice Management for Seller (Accounts Receivable)

Invoice Management for Buyer (Accounts Payable)

From the accounts playable perspective, invoice management is not limited to invoice processing only. Following are the components of invoice management from the buyer’s perspective:

  • Supplier On-boarding / Management
  • Management of Invoice related documents (quotations, purchase orders, delivery receipts)
  • Invoice Processing
  • Invoice Reception
  • Invoice Validation
  • Invoice Approval
  • Invoice Payment

Invoice Management for Seller (Accounts Receivable)

Contrary to the common understanding, a seller, the supplier of goods or services, the one who draws an invoice, also needs to do a lot to achieve the goal of effective invoice management. Components of invoice management at the supplier’s side are:

  • Customer management
  • Management of Invoice related documents (quotations, purchase orders, delivery receipts)
  • Creation and dispatch of invoices
  • Ensuring the timely acknowledgment of Invoice by the buyer
  • Invoice Tracking
  • Payment followup
  • Invoice Financing/Factoring against the receivable invoices
  • Payment management

Why Your Business Should Focus on Invoice Management

Now that we’re familiar with the concept of invoice management, it is not very difficult to value the importance of invoice management. Let’s take a look at the 5 reasons why your business should focus on invoice management.  

  • Accuracy
  • Agility
  • Efficiency
  • Economy
  • Analysability

Let’s explore these factors a little further.

Accuracy

Invoice management is not only about the invoices but also about the documents that come before and after an invoice. With a proper record of quotation, purchase orders, delivery, and payment receipts, it is easy to maintain the accuracy of the overall process.

Agility

Effective invoice management ensures the availability of all the relevant documents as well as monitoring the process. In this way, it is easy to identify and rectify the factors that can slow down the process. With timely availability and delivery, the process can be made much faster.

Efficiency

Functional invoice management adds a lot in terms of efficiency for a business. By improving the accuracy and speed of the overall process through effective monitoring, the efficient utilization of effective resources is possible. More can be achieved without requiring new resources.

Economy

By utilizing all the resources efficiently, accurately, and speedily a business can save a lot in terms of time, resources ultimately contributing to significant cost-effectiveness.  Better invoice management practices help an organization to save unnecessary spending.

Analysability

A business must continuously analyze its financial situation to make effective business decisions. Invoices, either payable or receivable have a significant impact on the cash flow management of an organization. Transparent information of receivable and payable is vital for accurate analysis of business health.

Considering the above reasons a business needs to focus on an effective invoice management system to remain productive and profitable. With the evolution of businesses and technology, invoice processing and invoice management have become automatable. For any business with a reasonable transaction volume, It is not possible to handle these processes manually. That is why a business needs an effective automated invoice management solution.

InvoiceMate by MateSol is the next-generation invoice management system on blockchain that offers the best of trust and efficiency throughout the invoice lifecycle. It offers complete invoice ecosystem management. InvoiceMate utilizes the trust, transparency, and efficiency of blockchain and artificial intelligence. To learn more about the future of invoice management or to experience the product, please feel free to write us at:

mate@invoicemate.net

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