When assessing the success of your various account payable operations, there are different vital invoice management metrics that matter. Although the market constantly changes, these invoicing KPIs tend to stay the same. Evaluating the metrics is critical in planning out the improvements in accounts payables and assessing their success.
Invoice processing companies are vital when it comes to evaluating these metrics. While they can help you in the evaluation process, outsourced companies offer many other benefits to achieve the said measures. This post will consider the essential invoicing metrics that matter and how outsourcing can help you achieve them.
Invoice Processing Time
Today, most businesses still use manual methods of invoice processing. An invoice might take weeks before processing, especially in organisations dealing with many vendors at multiple levels. Small and mid-sized organisations take about 25 days to process one invoice. If due, this may result in penalties and frustration for the suppliers. Experienced invoice processing companies like Oworkers can reduce the processing time to hours.
If an invoice waits long before its processing, it poses a risk of processing costs rising. This could deny the business early payment discounts. The invoices may also lump up, taking up a lot of space. By outsourcing invoice processing, the business can be in a position to enjoy early payment discounts. The invoice processing company conducts an in-depth analysis of the invoices to give you a detailed report within a shorter invoice processing cycle.
On-Time Payments Versus Penalties and Late Payments
Penalties and late payments can make a business lose considerable sums of money unnecessarily. You continuously damage your suppliers’ reputation and ultimately damage the relationship to the extent they stop supplying you by paying the vendors and suppliers late. Vendors are a vital part of your business, and you need a good relationship with them.
However, invoice processing companies help you avoid these issues altogether. They analyse and process the data on time, using a streamlined process to ensure you pay the suppliers and vendors in time. This can help a business track its performance because the accounts are updated with real-time data. There are many benefits to making invoice payments on time, like improving your brand reputation, enjoying discounts, and creating a good relationship between a business and a vendor.
The Rates of Straight-Through Invoice Processing
Straight-through invoice processing refers to a situation when a business receives, approves, and pays an invoice automatically. Straight-through invoices are faster and cheaper to process compared to invoice exceptions. If a company has higher rates of straight-through invoice processing, it will have low overall invoice processing costs.
Furthermore, because the suppliers enjoy early payments, the vendor or supplier satisfaction rates will be higher. Invoice processing companies can significantly help enhance a business’ straight-through invoice processing. They have automated workflows in place to process the invoices faster to affect the payments on time. Invoice processing companies also use machine learning to analyse and process invoices at a higher and more efficient rate.
Invoice Processing Costs
Since not all invoices are straight-through, calculating the cost of processing invoices is not easy. There are non-PO and exception invoices to consider. Invoice processing has three costs: direct, indirect, and hidden costs. Businesses that use manual invoice processing methods see a significant increase in Invoice processing costs and time, especially during peak seasons or when experiencing expansion.
However, about 64% of organisations use manual methods of invoice processing. This is even surprising considering that e-procurement solutions have existed for several decades. These platforms can significantly reduce invoice processing expenses through automation. It is estimated that manual invoice processing costs about $15 per invoice.
Outsourcing invoice processing is the best way to reduce the cost. Invoice processing companies offer dedicated services using modern technologies that hasten the process and analyse the invoices at high degrees of accuracy. Through OCR and ICR, these companies can extract information from scanned and electronic invoices with high precision. These firms’ use of machine learning ensures that the business gets a factual and thorough report for decision-making and other accounting purposes.
Invoice Discounts: Offered Versus Captured
Some vendors or suppliers offer discounts. A business can take advantage of these discounts through proper and swift invoice processing. If a company misses out on these discounts, it should automate or outsource invoice processing.
Invoice processing outsourcing can help businesses enjoy these discount benefits, especially captured discounts. Enlisting their services is paramount to ensuring your business doesn’t miss these saving avenues.
Invoice Exception Rates
It could help the business if all the invoices were processed straight through. Unfortunately, that isn’t the case. Invoice exception rates are about 23% and might grind your AP department to a halt by reducing the rate of invoice processing. Invoice exceptions require more team members, a hands-on environment, and analysis to process them. Additionally, the vendors have additional consultations as the invoice management team verifies the details necessary to process the invoice.
Luckily you can outsource invoice processing to handle the entire invoice processing process. Invoice processing companies have communication systems and platforms to reach the clients within no time to clear any doubts and get additional information needed to clear the invoice. For instance, they feature self-service supplier portals to ensure the vendors submit accurate invoices and data. This centralization of information and communication also streamlines invoice processing. These communication services lower invoice exceptions. Further, these companies also establish clear rules for automating invoice approvals. All these solutions serve to reduce the invoice exceptions.
Discrepancies, Dispute Rates, and Supplier Inquiries
If your team takes more time to untangle the problems and difficulties within the supply chain, it will have a lower efficiency. Most invoice issues arise because of human error and may result in discrepancies and disputes between the vendors and business.
Invoice processing companies have well-laid systems that ensure the discrepancies are caught and addressed earlier before escalating to full-blown disputes. They also help you handle supplier inquiries seamlessly. From QA concerns to duplicate invoices, the subcontracted can use their elaborate and modern systems to address them to minimise the dispute rates.
You cannot determine how successful your invoice management efforts are without a way of measuring them. Without a baseline, suggesting improvements or seeing your effort’s impact becomes impossible. You may also find yourself in a position where you focus more on processes that are not the real issue.
Invoice processing companies play a vital role in collecting these metrics. The outsourced company documents them in a report to the business to help you address the real issue. Hence, to leverage this benefit, enlist the services of an invoice processing company.