The process of invoice payment involves a complete cycle of receiving a supplier’s invoice, getting necessary approvals, establishing a remittance date, clearing the invoice, and balancing the accounts. The smoothness of invoice payment is critical to keeping the business running.
Failure to clear an invoice on time can lead to problems in the supply chain and can interrupt the stream of services. Not to mention it can also damage the reputation of the business and relationships with the suppliers. However, thanks to the evolution in technology the process can now be made very smooth and convenient. And it is exactly what we would discuss in this piece.
How To Establish a Smooth Processing Workflow?
The smooth processing of workflow requires discipline. You need to develop a structure of hierarchy to assign a particular task to each department. The following steps are the most important in the process:
When a supplier does a delivery it comes with the invoice where the prices of each unit and their cumulative sum is written along with the applicable taxes. You need to cross-check every word on that document. Ensure that the goods that you have received an account for what is written on the invoice. If there is a discrepancy in the delivery contact the supplier and let them know before clearing the dues.
The same applies when the supplier is offering services instead of physical products. You must ensure that the service that was hired has indeed done what was required of them.
Approval of Invoice
Following the cross verification, the business should approve the invoice if it is valid. This should be carried out via professionals that have verified the information on the invoice document.
Payment of Invoice
Once the invoice has received the necessary approval, businesses must clear it as soon as possible. It is not just necessary to keep the supplier in business but also to maintain your reputation. Furthermore, some suppliers even offer early discounts when the payments are made before the deadlines. If the business has the capital to spare, it is wise to avail of the discount and use the savings to clear other pending invoices.
Balance The Accounts
Not recording the invoices can lead to discrepancies in accounts which can be a headache at the time of audit. Businesses must balance their accounts and books as soon as the invoice is paid to avoid a hassle in the future. It is especially important for the startups that are funded by investors as they can ask for the company’s book at any time. Irregularities and discrepancies in the accounts can harm the investor’s confidence and can lead to cuts in funding.
Entering The Invoice Into Account Payable System – How To Keep Things Tidy
Every business has a unique account payable system but there are few measures that can be taken to make the process even convenient. These include:
1. After receiving the approval of the invoice , enter it in the system as credit in the general ledger of the account payable system.
2. Tag the invoice as “Open Invoice”
3. Ensure that the deadline of the invoice is prominent on the ledger and if there is an early discount, highlight it.
4. Debit the amount to the appropriate accounts. Most of the items are recorded as expense on the income statement but there are some instances when you might want to record it as prepaid or fixed assets.
5. Remove the invoice from the system once it is paid and offset the credit to the cash.
Means To Clear Invoices
Modern banking systems offer several means to clear invoices.
Some of those are:
The choice of the system should be dedicated to the nature of the business, the amount of invoice, and the location of the supplier. Credit cards should be used by businesses that do not have capital in their account and get an annual return on their investment. Debit cards are suitable for businesses that have capital in their accounts. Whereas digital wallets are ideal for small amounts when the transfer is to be made outside the country.
Automation of Invoice Payment – Make Things Even More Convenient
The manual invoice process can be a hassle. It is not just time-consuming but requires additional human resources too which can increase the operating costs. You can cut down on these expenses by making the process automated. It is ideal, especially for the firm that gets the same supplies from the same suppliers after a periodic time. You can either use online portals of your accounts or use tools that are designed specifically for this task. Netsuite is one of the most popular tools for invoice processing.
Automation of the invoices frees up the time for the accounts team so they can focus on other important and productive tasks.
Payoneer and Invoice Payment – What Does It Offer?
Payoneer is a digital wallet that is available almost all around the world. It is one of the most convenient means to clear invoices and also the quickest. You just have to enter the username of the supplier and the amount of the invoice to clear the pending payment.
What sets Payoneer apart from other invoice processors is the fact that it has its own built-in invoice building application. Suppliers can pick from dozens of templates based on their business and fill it up. This document would be sent along with the total payment that is due. You can use the document to balance the books and accounts.
Furthermore, businesses do not have to worry about the compatibility of banks with international payments. Since it operates in pretty much all regions of the earth, there should not be a problem with sending the payment anywhere.
Another benefit of using Payoneer is that it allows loans on advance payments. You can use the loan to avail the early discount. Best part? The platform would not give more than what you can pay which means the risk of debt piling is non-existent.