With statistics showing that only 29.1% of bills are paid on time in the post-pandemic United States, the already bill-laden world has become more complicated.
However, as messy as they are, invoices are a fundamental part of the Procure-to-Pay (P2P) process. Executives first, and affected employees immediately after, need to know how to identify and correct invoice management issues for a streamlined P2P process.
Why Invoice Management?
As a C-Suite hospitality manager, you have a lot to do. You have entire businesses to run; contracts to negotiate, supplies purchased, brand to manage, corporate culture to foster, customers to wow and ratings to improve or maintain. Why the sudden fuss around invoice management, something that has been around forever and surely already has a process in place?
First, electronic invoicing. E-invoicing is growing at a breakneck pace, with a projected growth of 80% by 2027. If you’re not already using electronic methods in your invoice management process, that needs to change, and it needs to change fast. Electronic invoicing is faster, cheaper and less prone to errors. We will go into details of how and why it should be implemented later in the article.
Second, the ubiquitous specter: taxes. An organized and thorough management of your invoices will not only facilitate the payment of taxes, but will also prevent you from being audited. And if you ever get audited, a well-thought-out system will make the process that much less of a pain as you easily locate important documents.
Third, avoid problems related to late payment of bills. This can include a stoppage of services, a fight with collections (and their impending charges), a kick to your credit score, or maybe even legal action taken against you. Even though late payments seem to be the norm in a pandemic-ridden world, the consequences have not gone away.
Number 1: Terror
Invoices are physical manifestations of sales between two parties. They detail the products or services provided by the seller and the prices charged to the buyer. They assist in placement, processing, delivery and final payment in a business transaction. But all that aside, we can’t ignore what a received invoice actually is.
If you’ve ever rummaged through a pile of mail, you know the sorting process that follows: junk mail, important information or reminders, personal mail and items you want to keep, bills. Too often, invoices are set aside to be “dealt with later”.
You can’t have that mentality in a successful business. Invoices are vital to the health of your business and need to be organized and processed quickly. Don’t let the “dreaded bills” creep into your workplace.
Problem 2: Incorrect categorization of invoices
Unfortunately, or fortunately, depending on the point of view, there are several types of invoices. Some require immediate payment and some do not, but all require special attention. Here are some basic types of bills you may receive:
- An invoice proposal. This gives you an idea of the final cost of a project or product.
- An interim invoice. These are often sent during long projects as a reminder of current loads.
- A recurring bill. These are often used for repeat or regular customers.
- An overdue invoice. That’s what the name suggests, although there may also be additional charges due to not paying on time.
- A final bill. This is sent at the end of a project, perhaps after an invoice proposal and however many intermediate invoices.
Your invoice management system must make it possible to classify them separately from each other. As you read, you will have noticed that some require immediate payment and some do not. The invoices you receive must at least be categorized by this metric.
There are several ways to organize them. You can have one file for each type of invoice and subdivisions within your separate projects, although it is easier to file by project and keep invoices in the order you received them, those requiring payment immediate being reported and addressed in a timely manner.
It is also useful to keep the proposal invoice handy when you receive interim and final invoices so that you can track how well the actual costs reflect those planned and agreed, so that you can ask questions and raise issues. if applicable.
If you work with paper, create a dedicated basket, folder, or file with the separate categories clearly marked. However, even the most organized paper-based systems can start to feel cluttered.
We recommend that you use an electronic filing system. You can scan and upload paper documents when you receive them and easily move electronic files to a location that multiple employees can access when they have electronic permission and where file backups are recurring.
Problem 3: A Poor (or Missing) Ledger System
According to a researcher from the University of Montana, “the general ledger system is the heart of an accounting system.” As “…the record of the balance of each of the accounts within a business”, it is an integral part of day-to-day operations and is fundamental in relation to tax season. Keep income, expenses, and all other financial information organized in your ledger.
It’s also a good idea to have this great book online, for the aforementioned reasons.
Problem 4: No designated time or person
To stay on top of your bills, you need to designate someone to be responsible for them. If you don’t have a single person dedicated to this, as many companies don’t, make sure it’s clear who is responsible and when to work on the documents.
Schedule specific days when paying and organizing bills is taken care of. Respect the schedule scrupulously. If tasks get pushed back once, who knows how many times that might happen and what kind of deadlines you might miss in the meantime. The designated person must also keep a record of the status of invoices received and paid.
Problem 5: You’re still writing checks
It’s 2022. Let’s face it: the era of checks is behind us. Even if you’ve gone from handwriting to printing, the payment evolution isn’t over for you. First reason: checks are expensive. It costs on average about three times more to pay by check than to pay by ACH. ACH is also safer and faster.
Checks are vulnerable to fraud in a way that ACH payments are not. Plus, the turnaround time of up to five business days slows down business in a fast-paced world. If you’re still using checks, this is your sign to switch to a safer, faster, and more cost-effective option.
BirchStreet Pay, a tool available from BirchStreet Systems, is a great way to manage payments. BirchStreet Pay helps you switch your payments from checks to virtual cards. Not only do you save money by ditching the cost associated with checks, but you can also earn money with BirchStreet Pay rewards.
This tool is easy to set up and use – the simple interface allows you to make payments at the touch of a button. It also has high-level security features and excellent, easy-to-reach customer service. May the days of the check die.
Problem 6: You receive bills in the mail
Just avoid invoices received by mail whenever possible. Receiving invoices by email not only saves you time sorting physical mail and scanning documents into your electronic system, but also saves paper and office storage space.
Simply ask the person you are dealing with to email their invoices. It’s not a hard sell because it saves resources on both ends of the transaction.
Problem 7: You are not taking advantage of OCR technology
While we’re on a modernization spree, let’s talk about Optical Character Recognition (OCR) software. This software recognizes text characters in a digital document.
This way, information from an invoice can be automatically entered into an accounting system, saving someone from spending time doing the same thing manually. This saves an average of about five minutes per invoice, and it can add up to an entire day’s worth of hours, depending on how many invoices your business typically processes.
In a busy, recovering world, some things just can’t afford to slip through the cracks. Invoice management is one of them. To ensure your business thrives, be sure to address common invoice management issues.
Organize, organize, organize.
Designate, book time and implement the software.
When you proactively take care of your business, it will be better organized to take care of you.
About BirchStreet Systems
BirchStreet Systems powers hospitality businesses with a complete procure-to-pay business solution. As the world’s leading provider of expense management solutions to the hospitality industry, 15,500 companies in over 130 countries subscribe to BirchStreet to connect to a network of over 450,000 suppliers.
Founded in 2002, BirchStreet is privately held and headquartered in Las Vegas, NV with offices in California, China, Singapore, India and the United Kingdom. For more information, please visit www.birchstreetsystems.com.
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For more information about BirchStreet Systems, visit www.birchstreetsystems.com