How to streamline your vendor invoice management

Thankfully, streamlining and standardizing the vendor invoice management process doesn't‚ have to be hard. The goal is to establish a vendor invoice management system that gets the job done accurately, quickly, with minimal errors, and is ideally mostly through automation.

Below, we take a look at what vendor invoice management is, the components that come together to create an invoice, and how you can streamline your own invoice management process to garner better results.

What is a vendor invoice?

A vendor invoice is a payment request for services rendered or products delivered according to a contract. It‚ the last step in the three-step process of purchasing goods or services.

These steps include:

1. Creating a purchase order,
2. Receiving goods or services, and
3. Submitting or processing the vendor invoice.

Processing vendor invoices successfully takes a standardized multi-step approach to verifying and paying invoices while ensuring cash flow. Enter vendor invoice management.

What is vendor invoice management?

Vendor invoice management entails dealing with and processing invoices from suppliers or vendors upon receipt. An invoice management system is an accounts payable process that includes receiving invoices, putting them through an invoice approval process, and finalizing vendor payments to fulfill the invoice.

Robust vendor invoice management practices‚ especially ones that rely on software with plenty of automation and auditing features‚ come with multiple benefits.

• An easier auditing process
• Fewer errors to correct
• Less chance of vendor fraud like price fixing
• Quicker invoice turnaround
• Increased financial visibility for relevant stakeholders
• An accurate history of all vendor transactions

Components of a vendor invoice

Every invoice includes its own sections filled with information relevant to vendor agreements and contract terms. However, vendor invoices generally include these six sections in some form.

Dates

Every vendor invoice likely includes a few dates, not just the date the invoice was submitted. Invoices usually outline the dates by which payment should be received or any relevant product delivery or service dates.

Contact information

Where and to whom is the payment being sent? A vendor invoice contains all the necessary information for businesses to identify, verify, and correctly finalize payment transactions. In the contact information section, the contact information of the seller and the buyer is included. Emails, phone numbers, full addresses, and client names are all relevant here.

Invoice number

Think of invoice numbers as a bar code to identify and track an invoice for accounting purposes. Every invoice number is unique to that invoice, so they can be accurately filed and searched for if necessary.

As you can imagine, a digital solution to invoice tracking takes care of numbering invoices and archiving them. It automatically assigns the correct metadata to each invoice, which makes it a superior method to manual processes.

Description of products or services rendered

This section outlines what the buyer is getting charged for, whether a series of ongoing services or a delivery of goods as per an agreed-upon contract. In this section, every purchase gets its own line item, price, and total cost.

Payment terms

The logistics of payment terms are usually outlined in vendor contracts and have already been signed off on by both parties. This means payment terms are set in stone, and they‚ simply included for reference at the vendor invoice stage.

Payment terms take all shapes. They can be agreements to bimonthly payments, quarterly payments, or even lump-sum payments. It all depends on your relationship and dealings with each vendor.

Still, these are some common payment terms worth getting familiar with.

• Net 7 - Payment due seven days after invoice date
• Net 10 - Payment due 10 days after invoice date
• Net 30 - Payment due 30 days after invoice date
• Net 60 - Payment due 60 days after invoice date
• Net 90 - Payment due 90 days after invoice date
• Cash account - An account used on a cash basis, no credit
• Letter of credit - A documentary credit confirmed by a bank
• EOM - End of month
• CIA - Cash in advance
• COD - Cash on delivery
• Accumulation discounts - Discounts offered to buyers for larger purchases
• Bill of exchange - An agreement to pay later, backed by a bank to protect all parties involved
• CBS - Cash before shipment
• PIA - Payment in advance
• CND - Cash next delivery
• Upon receipt - Payment due upon receiving the invoice
• 21 MFI - Payment due the 21st of the month following invoice date

Freight and delivery charges

An invoice will often include any freight or delivery fees incurred in the process of delivering goods. It is typically included as a line item in the invoice total.

How to streamline your vendor invoice management

Let‚ walk through what you can do to streamline your existing vendor invoice management system.

Leverage automation and eliminate manual tasks

To level up processing the vendor invoices you receive, invoice automation is, hands down, the way to go. Vendor management software, with built-in invoice management features, can save your procurement teams many headaches as they go through the vendor invoice lifecycle.

Replacing the time-consuming manual entry of unique invoice numbers with an invoice automation process that tracks and archives incoming invoices in real-time frees up your procurement team‚ time. As a result, teams can focus on higher ROI tasks and increase profitability. Tasks like data entry, recording key invoice data, attaching delivery notes, tracking metrics, order confirmations, and notifications can all be automated.

However, this doesn't‚ happen without vendor invoice management software you can count on. With the right tool, automating and centralizing your vendor invoice workflow improves your business virtually overnight. Today, businesses can leverage machine learning to expertly execute and optimize the whole vendor management process.

Establish vendor invoicing policies and guidelines

The more ethical, standardized, and controlled you can make the processing of vendor invoices, the more effective your internal financial processes are. This takes establishing clear policies and guidelines teams can go by so they‚ informed on best practices and how to detect possible vendor fraud.

As you look to refine your invoice management processes, consider establishing a clear list of policies and guidelines that delineate what to do in different scenarios, what‚ acceptable, and what the best course of action is for reporting unethical behavior.

Continue to invest in ongoing education for procurement teams

Tech evolves, vendors update their delivery and supply chain processes, and compliance laws often change. This is why you want to continue to invest in educating your procurement teams.

Processing vendor invoices is a small part of the larger, multi-step process of finding compliant suppliers, ensuring ethical practices, negotiating payment terms, and signing off on purchasing needs from different departments. Ensuring your buyers are educated on best practices for each of these steps is critical for long-term growth.

Take advantage of early payment discounts

Some vendors offer discounts if they receive payments early. Chances are, you‚ working on a budget and looking to optimize for value while minimizing costs. Consistently taking advantage of early payment discounts can pay off.

To see the benefits over time, you must establish an invoice management process that‚ quick, accurate, and dependable.

Software like Vendr, which is built to help you manage your SaaS buying process, comes into play as your right-hand for the job. It streamlines the payment process, tracks transactions, and keeps tabs on every deal with every vendor.

Standardize your end-to-end vendor invoice management process

A vendor management platform that brings all your workflows, files, receipts, and invoices together in one accessible place enables you to standardize the process you use to ensure accurate and timely vendor payments.

Standardizing your vendor invoice process can look like

• Simplifying order management
• Leveraging analytics to eliminate process bottlenecks
• Leveraging APIs for access to payment providers
• Easily managing payments in different currencies for international deals
• Using a built-in email processing system that allows for invoice payment confirmation
• Organizing orders by features that can be sorted, such as order status
• Accessing updated tax rates per country or class

Do more with Vendr

Today, businesses that streamline their processes, including the vendor invoicing process, set themselves up for growth. Forgoing manual processes for automation and centralization is the way to go if you‚ looking for an invoicing process that‚ speedy, reliable, and tracks every transaction.

Vendr helps take care of your business‚Äô growing tech stack by helping you onboard vendors, manage payments, eliminate paper invoices, and ensure you‚ getting a fair market price.

But don‚ take our word for it. Run our free savings analysis to see how much Vendr could save you throughout the vendor management process.

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