An Essential Checklist For Reducing Your Invoice Processing Costs

Accounts Payable has always been a fundamental of shared services, and the focus on honing the P2P process has never gone away. In 2024, the need for productivity gains, and the desire to make use of the abundance of data housed within AP, means that the need for practical advice and innovative ideas in this space is essential. That’s why SSON have gathered a series of Accounts Payable Experts who will be giving their advice, in a fortnightly column, on increasing the power of the Accounts Payable process.

Reducing invoice processing costs is crucial for improving overall efficiency and optimising financial operations within a business. Here's a checklist to help you streamline and lower your invoice processing costs:

1. Automate invoice data entry

Implement an automated invoice processing system to reduce manual data entry. Use optical character recognition (OCR) technology to extract information from invoices.

2. Centralise invoice receipt

Establish a centralised location or system for receiving invoices, whether through email, a dedicated portal, or electronic data interchange (EDI).

3. Implement electronic invoicing

Encourage vendors to send electronic invoices to reduce paper handling and manual processing. Invest in e-invoicing solutions to automate the creation, submission, and receipt of invoices.

4. Establish purchase order process

Ensure that purchase orders are issued before goods or services are received to streamline the matching process. Implement a system that automates the matching of purchase orders, delivery receipts, and invoices.

5. Establish robust approval workflows

Define and implement clear approval workflows for invoices to prevent bottlenecks and delays. Utilise technology to automate approval routing based on predefined rules.

6. Leverage early payment discounts

Negotiate early payment discounts with vendors to incentivise faster payments. Take advantage of dynamic discounting options for early settlements.

7. Enforce invoice compliance

Regularly review and enforce compliance with invoice submission guidelines. Identify and address non-compliant invoices promptly to avoid processing delays.

8. Train staff and stakeholders

Provide training to employees involved in the invoice processing workflow to ensure they are familiar with the system and procedures. Educate vendors on your preferred invoicing methods and requirements.

9. Regularly monitor key performance indicators

Establish KPIs to measure the efficiency and effectiveness of invoice processing. Monitor metrics such as processing time, error rates, and costs to identify areas for improvement.

10. Invest in invoice analytics

Use analytics tools to gain insights into spending patterns, identify cost-saving opportunities, and optimise processes. Analyse historical invoice data to make informed decisions about future process improvements.

11. Negotiate favourable payment terms

Negotiate extended payment terms with vendors to improve cash flow and reduce immediate payment pressures. Explore mutually beneficial agreements that consider both your organisation's needs and vendor relationships.

12. Regularly review and update processes

Conduct regular reviews of your invoice processing workflow to identify areas for improvement. Implement changes based on feedback, technological advancements, and industry best practices.