A 10-Step Guide to an Efficient Supplier Invoice Process

The role of Accounts Payable (AP) is more important to the business than ever before. Besides processing invoices and re-keying data, there is so much more value your team can deliver. And yet, you’re still expected to process more – and faster! You are uniquely situated to perform a more strategic role in the business. From reporting and analytics to negotiating better deals, you have access to data and insights that can make a real difference. 

A 10-Step Guide to an Efficient Supplier Invoice Process

Step 1: Start With an Audit

You must review your whole process in the below 3 points

A) Invoice receiving

? How many invoices do you receive ?

? Can you accept electronic invoices emailed from suppliers today?

? Are they sent to a central place?

B) Invoice processing

? Do you still use spreadsheets to manage the AP process?

? How many people are involved in the review and approval process and how long does it take?

? How often do you receive duplicate invoices, can you easily weed them out, how long does this take? 

? How often do you pay invoices late?

? How often do you incur late payment fees and how much does this cost you?

? How much time does your team spend on answering payments inquiries from suppliers? 

C) Post-payment

? How confident are you that you have a full invoice audit trail for compliance purposes? 

? Are you effectively reclaiming VAT on your business purchases?

? Is it easy to see what has been spent per department over time? 

? Can you easily identify individual supplier spend to use for negotiations?

? Can you easily integrate this data with other spend metrics to get a full financial picture? 

Step 2: Assess Your Current Costs

You may not know all the answers to the audit questions above, but by looking closer at each stage of your AP process, you can start to identify the problem areas and hidden costs. 

Let’s see how this would work for a hypothetical organization , So what’s invoice really costing your organization?

Lets assume A Hurghada-based, large Real Estate Company with 20 locations and 5,000 employees:

– Number of invoices: 1,000 per month

– Average salary per staff member: 26.10 EGP hourly

– Time spent on data capture: 5 minutes per invoice

– Collective time spent on approvals: 6 minutes per invoice

– Time spent on exception handling: 6 hours per month

– Annual hours spent on invoice processing: 2,272

– Annual cost: 59,299 EGP (processing only)

So we can try to reduce this cost as much as we can .

Step 3: Identify the Inefficiencies of Paper and Spreadsheets

Many organizations still handle their invoice processes the way they always have – with paper and spreadsheets. When you’re a very small organization, this may be manageable, but paper-based processes aren't sustainable to scale. You’ll find your cost codes and processes get much more complex, making outdated methods incredibly time consuming and prone to errors.

So maybe you can look Look for opportunities to strip them out and replace with electronic, automated options. 

Step 4: Determine Where Your Time Savings Are 

Streamline the way invoice data is captured in your department, as this could save you significant time and resource. Here are 5 handy tips to help achieve this: 

1. Centralize where invoices are sent :

Standardize and communicate a single place where invoices should be sent to prevent confusion, delays, and multiple copies from circulating.

2. Enable suppliers to send electronic invoices:

Most suppliers prefer to email their invoices – make sure you simplify the process with this functionality.

Step 5: Reduce the Margin for Human Error

Finance professionals are smart – really smart – but they are also human. Unfortunately, whenever people are involved, mistakes can happen. 

Look for steps in the process where you can remove risk of human error, such as rekeying data into finance systems.

Step 6: Put a Stop to Unnecessary Costs 

Your business relies on you to cut costs and find smarter ways of working. This role is only going to become more critical as the expectations of the AP team evolve. Looking at your overall invoice process, where are you spending money needlessly? Identify and address these common problem areas:

? Late payment fees: When you don’t meet your vendor's payment terms, you could be charged late payment fees – and it’s more common than you think. By reducing the payment cycle through faster reviews and approvals, you can ensure you’re not hit with these needless costs .

? Fast payment services: A delay in the overall process could also force you to resort to expensive, quicker payment services. When suppliers are disgruntled and your team is the most stressed, you may have to turn to this option. Take steps to avoid the financial and emotional drain .

? Drain on resources: How much time is your team spending on rekeying data, chasing invoices and approvals, and processing them manually? Wasted time is a hidden cost and the financial impact of a loss in productivity can quickly add up.

Step 7: Let Your Suppliers Self-Serve 

Your AP team spend a lot of time fielding calls from suppliers chasing the status of their payments. That’s time that could be better spent analysing spend and negotiating discounts. Rather than wasting time on the phone, set up a mechanism that helps suppliers get the answers they need, instantly.

Building positive supplier relationships can lead to long-term benefits like added customer discounts and preferential client status further down the line. 

Step 8: Get the Data and Reports Your Business Needs 

Visibility into cash flow is the number one priority for many finance teams. When your invoices are accurately captured at source and instantly available online, you’ll get a far clearer view of your invoice spend at any moment in time. You’ll also be in a better position to budget accurately and analyse the data to make informed decisions. And when you integrate with employee expenses and other spend, you can finally get the full picture into your company outgoings. That also means there’ll be a full invoice trail for auditing purposes with access to all your invoice images. AP teams can provide meaningful insights to the leadership team that drive spending behaviors. 

Also the perfect reports will give the below advantages :

• Track monthly invoice spend and compare spend across the year
• Find out which vendors you’re consistently spending with to negotiate better rates
• Combine with Travel and Expense spend to see a full picture of outgoings
• Discover which expense types are impacting cash flow the most 
• Track invoice spend by department
• Monitor spending patterns over time
• Compare year-on-year spend

Step 9: Build a Vision for Change

By this stage you’ve identified the biggest process inefficiencies that steal time and focus away from your team. Now you’ll need to decide how best to redirect the AP team’s attention and what you’ll do with all the extra time! Create a vision of your ideal, high-functioning AP team and use it to underpin your proposal. Here are some areas you may want to dedicate your new-found energy towards: 

? Identifying trends in company and departmental spend over time.

? Spotting overspending and correcting spend behaviors.

? Protecting cash flow and understanding the status from month-to-month.

? Proactively contributing cost-saving ideas to the business.

? Providing crucial access to spend data to the senior leadership team.

? Negotiating favorable supplier deals based on historical data.

? Encouraging suppliers to provide early payment discounts.

? Partnering with other departments to support their goals with financial intelligence.

? Informing company-wide strategic decision-making. 

Step 10: Keep Building a Vision for Change over operation cycle (continued)

? Reduce operational costs ? Improve supplier satisfaction

? Accelerate payments cycles ? Eliminate duplicate invoices

? Remove late payments fees ? Negotiate better rates and discounts

? Access in-depth reports and analytics ? Strengthen your credit rating