The pandemic has revealed the importance of a deliberate, digital-focused invoice management strategy to build stronger resiliency. Such a strategy can improve business clarity, reduce delays and errors caused by manual data entry, and free up cash for the business especially in crucial times.
One of the biggest challenges when it comes to running a business is keeping tabs on finances. It is not just about the money coming in, but also money going out. Savvy business owners recognise that good cost management is a key element to financial success. And to track costs well, you need to have a good invoice management system.
Research from SAP Concur found that it costs US$12.90 to process a single invoice. Automated invoice processing can reduce up to 29% of the costs associated with paper-based processing. For an organisation that processes 10,000 invoices in a billing period, this can amount to US$300,000 worth of savings per year. Automation will also minimise errors in double payments, inaccurate currency conversions and late penalties.
Risks of poor invoice management
Invoices represent a large portion of business costs and having poor invoice management can result in many issues such as secondary fees, risks, and costs that accumulate over time.
With poor visibility of spending across departments, teams are likely to overspend due to double payment or duplicate services. At the same time, they potentially run the risk of being charged with fraud if there are errors in invoicing records, resulting in project delays and additional financial costs to the business.
Manual invoicing records also cost more to process. Hidden fees such as receiving, validation, payments, archiving and disputes come at a larger cost when done manually.
When the tax man comes
Tax season is one of the most stressful times of the year for business leaders and finance managers. Poor expense recording is partly to blame. Business expenses come in different forms, and they are not always tax-deductible. For example, employee salaries which are considered as part of income generation is usually tax-deductible, whereas employee medical expense might not. When businesses do not have a good invoicing system in place, it becomes harder to tell which expenses are deductible and which are not.
With manual expense recording, businesses and employees face an information gap when they forget to record how and where the expense was made. In contrast, an invoice management system allows expense categorisation the moment it is entered into the database. Further categorisation by tagging tax-deductible expenses allows the system to store, organise, and furnish the information come tax time.
Smarter invoice management
With accelerated digitalisation in the past year and a half, businesses no longer need to rely on manual, paper-based processes for invoice and expense management. Several tech solutions in the market today automate financial processes, providing almost instantaneous accounts payable information with one click.
Data storage is also easier with smart invoice management. Instead of filing paperwork in steel cabinets, information is stored electronically in regulatory-compliant formats. As work transitions away from physical pen and paper, using a digital invoice management system provides future-proofing for businesses.
Why go digital?
- Enhance compliance and gain visibility: From a compliance perspective, having a paper trail is essential to verifying that a business employs good accounting practices. Clear digital records can protect businesses from charges of fraud or misreporting. Most internal revenue agencies also require businesses to keep transaction records for up to five years. Moreover, thorough expense records and reviews ensures the business is always on track with cash flow.
- Establish better invoicing structure and integration: At a time when businesses are expected to be more agile, a digital invoice manager standardises and presents data in a meaningful way. This allows managers to make informed spending decisions by identifying trends and analysing spending patterns. Invoice software can also automatically flag exceptions or discrepancies for review to improve business agility.
- Receive precise, real-time data: With a digital invoice manager, business leaders and managers can check on business spending from their devices or on the web, saving time spent on looking for physical files. It also provides automatic two- and three-way matching to immediately resolve discrepancies.
Automate for the future
It may be surprising to hear that many businesses in Singapore and the Asia Pacific still rely on manual accounting processes. As one of the most technologically advanced regions, businesses still tend to be more traditional when it comes to expense management.
Yet paper invoicing may well become a thing of the past as businesses accelerate transformation in their operations as well as spend management. By doing so, organisations can become more resilient when faced with the next crisis.