How Automation Through E-invoicing Software Can Improve Efficiency?
The world of the economy is more fragile and competitive today than it ever was. As more and more businesses struggle to survive, the need of the hour is to optimize the revenue cycle.
Newer technologies in invoicing software have made it possible to optimize financial workflows and improve accounting efficiency. Electronic document management in the form of e-invoicing can do just that.
All you need to know about automation through e-invoicing
What is E-Invoicing?
The accounting process is one of the most sensitive and challenging processes for any business. Businesses are constantly on the lookout for ways to improve it. This has become especially necessary as businesses with manual, paper-based processes are investing too much time money and resources on mundane, repetitive tasks and fixing human errors.
The manual process is fraught with inefficiencies. How can businesses save time and money, without compromising on the attention to detail or accuracy?
Automation in the form of e-invoicing may be the answer. What is e-invoicing? In the simplest terms, e-invoicing, or electronic invoicing is when buyers and suppliers exchange invoices in an electronic format. The whole system is based on automated, integrated machine processing.
Businesses that have adopted e-invoicing have found much value in it. They have found that not only does it save time, but also increases the level of transparency, leads to fewer errors and enhances liquidity. They have also registered lower costs and enjoy a better relationship with their stakeholders.
E-invoicing comes with a long list of benefits. During the course of this article, we will discuss them in detail. However, to truly appreciate the importance of e-invoicing, let’s take a quick look at some of the pitfalls associated with a manual, paper-based process.
Issues with Manual Accounting Processes
There is a common misconception that manual processes are cheaper. Many argue that e-invoicing software can be expensive. However, here are some of the covert ways in which a manual accounting process may be draining your resources-
- Inaccurate data entry owing to human error
- Loss of time, money and resources in order to fix human errors
- Mundane, repetitive tasks that may be keeping resources from being invested in productive business activities
- Duplicate entries leading to duplicate payments
- Strained relationships with stakeholders owing to accounting inefficiencies
- Archiving huge amounts of paper trails
- Fraudulent activities
E-Invoicing and E-Billing: What’s the Difference?
Let’s also take a minute to differentiate between e-invoicing and e-billing as it is easy to confuse one for the other and assume that they both mean the same thing. While both systems are designed to make the accounting process more efficient, there is a major difference between the two. E-Invoicing systems manage and store invoices electronically. They do not collect payments.
E-Billing software work performs the same functions as e-invoicing systems, but they also come equipped with a payment system. Buyers are able to review the invoice and make a payment using an e-billing system. In this article, we will purely discuss the merits of an e-invoicing system.
Benefits of E-Invoicing
Let’s talk about some of the proven benefits of e-invoicing:
Increased Cost Savings
With e-invoicing, you do not waste time and money printing, posting and processing paper invoices. The entire process is electronic and automated. You can save up on administrative costs, processing times and even printing and postage costs. You also do not waste resources in reversing manual errors. All of this can have far-reaching cost benefits in the long run.
Improved Cash Flow
E-invoicing helps you get paid faster. Electronic invoices can be prepared, sent and received much faster than paper invoices. Your customers are likely to pay on time, if not earlier since processing e-invoices is much easier than handling paper. Most suppliers offer early payment discounts to ensure quick payments. With e-invoicing, buyers can enjoy such discounts while suppliers can be paid quicker.
E-invoicing is an automated process that keeps human intervention to a minimum, thereby reducing the scope of human errors. There are fewer chances of buyers and suppliers getting tangled in unpleasant and time-consuming invoice disputes.
E-invoicing information is typically stored in a central location. Even when disputes arise, they can be resolved quickly by retrieving supporting documents and communication from an electronic repository in a matter of minutes. Again, all of this can facilitate faster payments.
More Transparency
When it comes to finance and accounting, transparency is non-negotiable. Too many organizations have gone under owing to faulty and fraudulent finance and accounts management. With e-invoicing, managers and key business stakeholders enjoy complete visibility in invoice processing. They are able to keep a constant eye on how finances are being managed without going out of their way to do so.
Since data is available real-time, automated e-invoicing solutions are equipped with dashboards that give a complete picture of which invoices have been paid, which invoices are overdue and even reveal any gaps or bottlenecks that are causing the delay and fix accountability.
E-invoicing can also help manage the performance of employees in the finance department and also the department as a whole. Performance metrics can show weak areas within the process so that steps can be taken to improve the overall performance of the finance and accounting department.
Control inventory
Businesses can manage inventory better with real-time invoice data that can help them track inventory efficiently. When invoicing data is available real-time, procurement departments are fully equipped to order items as needed. Future purchasing decisions can also be data-backed. This, in turn, helps businesses plan strategically and control overspend. Warehousing costs and spoilages can be minimized in this manner.
Reduced Carbon Footprint
Typical finance and accounting processes involve huge amounts of paper. Which means fewer trees, more paper waste and more carbon in the atmosphere. Ditching huge mounds of paper will help you do your bit for the environment. E-invoicing makes it possible to cut back and sometimes, totally eliminate paper usage in the invoicing process.
Improved Productivity
The manual invoicing process is no stranger to errors. It is very vulnerable to human inefficiencies. Data entry errors are fairly common in the manual process. Accounting professionals typically spend a considerable amount of time and effort in reversing these errors. Delays in reviewing and approving invoices only make matters worse. E-invoicing systems or accounting software require minimum manual intervention. They automatically alert managers when they need to approve invoices.
E-invoicing systems automate repetitive tasks allowing skilled professionals to devote their time to strategic business activities and does not eat into your human resource bandwidth. An automated system ensures that more invoices are processed correctly and in a timely manner. Your cash flow remains stable. All of this contributes to making you more productive as an organization.
Statutory Compliance
Staying on top of changing tax regulations can send even the most seasoned accounting professionals in a tizzy. This becomes even more complex when businesses have multiple offices and operate in various markets spread out all over the world.
Missteps in tax compliance management, can expose businesses to heavy fines and gravely impact their reputation. Most e-invoicing software systems are equipped to handle such complex tax compliance needs. They even support multiple languages, currencies and auto-update themselves when there are any changes in tax regulations.
Digital Archiving
Most accountants dread the audit season. Most businesses with a manual space invest huge sums of money and create vast storage spaces for document management. They spend a considerable amount of resources in archiving them in a manner that allows relevant documents to be retrieved easily. They also invest time and effort in storing the documents in a safe and secure manner.
An e-invoicing system, on the other hand, stores all the data automatically in an electronic archive. Documents can be located and pulled out quickly. They do not just make regular audits a breeze, but they also prepare you for surprise audits. Also, all documents are digitally signed and time-stamped which limits exposure to fraudulent activities.
Managing E-Invoices
Since we have now discussed some of the benefits of e-invoicing, let’s take a look at what we can do to make the most of e-invoicing systems:
- Every invoice must first be submitted to the finance and accounting department. Only the finance department must route invoices through the correct channels for approvals. The finance department cannot be unaware of any invoice doing the rounds. They must always be in the loop.
- Communicate terms and conditions clearly. Vendors and suppliers must know exactly when to submit invoices or when they will receive invoices. The timelines and payment schedules must be absolutely clear.
- Set deadlines carefully. Whenever you set deadlines, ensure that you leave enough room for unforeseen issues and circumstances. Keeping an adequate buffer may also help you earn early payment discounts. It also ensures that you get paid well before you need to be paid.
Future Trends In E-invoicing
E-invoicing is here to stay. Here are some trends in invoice management that we can expect to see in this space in the near future:
More Eco-Friendly Invoicing
The environmental threat that we hear about today in the form of climate change is a very real phenomenon. E-invoicing can help businesses curb their paper usage drastically. With time, managing invoicing without papers may become mandatory as opposed to a choice that businesses must make.
Big Data and Invoicing
Manual processes provided most invoice data in an unstructured and decentralized format. As more and more organizations adopt e-invoicing, all this information will be available in an organized, structured format in real-time. Businesses can then use this data to understand consumer behavior and reduce tax frauds.
Real-time Economy
Real-time and accurate data that flows in e-invoices will help businesses obtain real-time services and even take advantage of things like dynamic discounting. Tax agencies will be able to use all the real-time data to validate businesses and generate reports. Mobile apps by e-invoicing service providers will further contribute towards this cause.
Market Consolidation
There are many big and small e-invoicing service providers in the market currently. However, given the sensitive nature of invoicing and the complexities of providing an affordable and cost-effective solution and top-of-the-line service, it is only logical that over time, the market will organize itself and there will be a few large players that will remain. This may cause the price of e-invoicing software to drop.
Government-Mandated E-Invoicing
Governments of major countries all over the world are trying to build a paperless economy. More and more countries, including those belonging to the European Union, have adopted e-invoicing. Governments are beginning to incentivize businesses for adopting e-invoicing and even mandating it.
Conclusion
Outdated manual processes are detrimental to efficient invoicing procedures, resulting in huge processing costs, accruals that are inconsistent, and a never-ending backlog of overdue and unprocessed invoices. Inefficient invoicing systems weaken relationships with suppliers and are vulnerable to errors. Late payment penalties and other costly issues can be easily avoided with an automated system.
The Finance and Accounting department, as we know it, is undergoing a transformation for the better. Businesses must jump on the bandwagon or risk being left behind. As more and more businesses adopt e-invoicing, people are becoming increasingly wary of dealing with a business that makes accounting errors.