A large part of your small business's success relies on effective invoice management. Invoice automation streamlines your accounting processes, saving important time for your business.
In this guide, we'll cover the ins and outs of invoice automation. You'll learn what invoice automation is, how automation can improve your business processes, and how to automate invoices as a small business owner. Then, you'll learn about automated invoice processing and how it can simplify your workflow.
What Is Invoice Automation?
When small businesses struggle to keep afloat, it's often because they aren't getting paid on time. To avoid cash flow issues, it's essential for small businesses to send invoices in a timely manner. Whether customers pay on a subscription basis or they are billed regularly, setting up automatic invoice billing can help you avoid errors, allowing your small business to get paid faster.
With invoicing software, invoices can be automated to be sent at a certain time. Plus, invoices can be scheduled to fit your needs, recurring weekly, monthly, quarterly, biannually, or annually.
Aside from automatically sending invoices at a certain time, invoicing software can also send an alert if the customer has missed their payment. This alert allows business owners to be proactive and send reminders to their customers, helping them get paid promptly. To avoid late payments altogether, invoicing software allows businesses to set payment reminders for customers.
The Benefits of Invoice Automation
Regardless of your industry, automating business processes can help your business succeed. As a small business, you have a lot on your plate. Whether you own a restaurant, a jewelry store, or a photography business, you'll have to consider your finances.
The benefits of invoice automation include:
- Avoid the time-consuming nature of invoicing. Ensuring you've added the correct price, quantities, payment terms, and descriptions can be tedious and time-consuming. Streamline your business processes with automated invoices.
- Avoid cash flow issues. When invoices are sent out late, you can run into cash flow issues. If you don't have enough working capital, your business can run into trouble with paying bills.
- Reduce late payments. An invoice automation software can help reduce late payments by sending automatic reminders to customers or clients. This way, your customers or clients will be better informed and more likely to pay on time. Additionally, you can offer early payment discounts as an incentive for customers or clients to make payments prior to the due date.
- Avoid human error. Humans make mistakes. In terms of invoicing, this could mean forgetting to send an invoice, using the wrong invoice number, or forgetting to add applicable taxes, which can delay payment. When you set up recurring invoices, you can avoid errors by filling out a template and setting a schedule.
What Is Automated Invoice Processing?
Invoice processing encompasses the steps that take place when your business receives an invoice from a supplier or vendor until it's paid and recorded in an accounts payable system. Whether it's a paper invoice or a PDF invoice attached to an email, the invoice data must be digitized into an accounting system. Afterward, the invoice must go through approval workflows, which is a validation and payment cycle.
While manual invoice processing can be time-consuming, automated invoice processing is a way to streamline your business's accounts payable process. Without an efficient solution, delayed invoices can interrupt incoming services, supplies, and materials. Ultimately, this can damage your relationship with suppliers.
The Benefits of Automated Invoice Processing
Similar to invoice automation, invoice processing can benefit from automation. Invoice automation helps with managing finances and relationships with suppliers, vendors, and customers. Additional benefits include:Reduced operational costs. How much time do you spend on invoices and accounting for your small business? Research shows that it costs some organizations an average of $10 to manually process an invoice. Switching to invoice automation software reduces that cost to just $2.07 per invoice. Reduced risk of late payments. When your invoice processing is automated, you lower the risk of making late payments. Late payments can be detrimental to relationships with suppliers and vendors, as well as your business’s credit score. Reduced approval process time. Using automation software speeds up the approval process for vendor invoices and reduces invoice processing times.
How Does Automated Invoice Processing Work?
The invoice processing cycle starts when the accounting department receives the invoice. During the first step, they need to confirm that the product was produced or that the service was delivered. Then, they match the billed amount to the purchase order amount. Afterward, it's sent for invoice approval with the appropriate employees.
At this point, these employees must resolve any discrepancies. For instance, the purchase order amount might be lower than the actual invoice. During this step, the change in amounts charged should be checked over to make sure no mistakes were made. Once it's been approved, the invoice will need to be paid.
An automated invoice workflow makes it easier to track what's owed and ensures that essential approvals and processes have been completed. Automated invoicing works by using invoice data to fill in essential information to an accounts payable system.
Accounts payable are short-term debts that your business owes to vendors or suppliers. For example, when a small jewelry business purchases beading from a vendor and owes money for a short time period, the small business would account for this debt in their accounts payable. It's essential for the accounts payable to be managed properly, as it can impact your cash flow, your relationship with vendors, and your business's credit rating.
Automated invoicing scans invoice data, reducing the time spent doing manual data entry. Invoice automation software streamlines processing by digitizing data into a document that artificial intelligence (AI) can read.
While some documents can be difficult for AI to understand, optical character recognition (OCR) algorithms enable AI to automatically read text data. The invoice data extracted from OCR can then be added to an automated solution, like an enterprise resource planning (ERP) system or another accounting system. An ERP system is used to help manage and merge important parts of a business, which would include planning, purchasing inventory, marketing, finance, human resources, sales, and more.
How to Automate Small Business Invoicing
Business processing automation uses machine learning to turn time-consuming tasks into an efficient process. Invoice automation solutions should help streamline your workflow, avoiding bottlenecks. As a small business owner, cutting back on laborious tasks allows you to spend time on other essential aspects of your business.
To automate your small business's invoicing process, follow these steps:
- Create and manage subscriptions. An invoice automation solution should allow you to set up subscriptions quickly. For some businesses, this might mean managing club memberships, while for another, it could mean managing a makeup subscription.
- Use an invoice template. Using an invoice template ensures that you add all of the essential information to the invoice. Invoice data can include your business address, shipping details, notes regarding the invoice details, discounts, and even a personalized note. Using Skynova's invoice template enables you to add as much or as little information as you see fit.
- Streamline invoicing. You can then automate invoices using automation software. As you create your subscription, you can set an invoice schedule that works for you. Whether your schedule is set to bill weekly, annually, or anywhere in between, a good invoice automation solution should have the functionality for flexible scheduling.
- Set up flexible payments. Do you want to avoid late payments? Providing customers with flexible payment options helps you get paid faster. Research shows that when online payments are an option, invoices are paid 16 days faster than other payment options. Sometimes, invoices even have a "Pay Invoice" button that allows customers to pay the invoice balance right when they receive it.
- Manage invoices. An invoice automation software should allow you to track, manage, view, duplicate, and change the status of the invoices. This means they should allow you to monitor which customers have outstanding balances and know when your invoice is viewed. To reduce the chance of receiving late payments, invoicing automation solutions should have the ability to send payment reminders.
All in all, invoice automation shouldn't be a difficult process. Using machine learning and artificial intelligence, automation software should improve your workflow. Create a subscription, use a template to create the perfect invoice, and set a schedule. It's just that simple.
Easily Create Professional Invoices With Skynova
Skynova helps businesses improve their workflows, avoiding cash flow issues, cultivating professional relationships, and simplifying day-to-day tasks. Our free printable invoice template provides business owners with the steps they need to take to create a professional invoice.
Add a logo, personalized note, or sales tax with just a few clicks. Once you've completed the invoice, send it to your customer or client directly from the site. Afterward, you can see whether they have opened the email and when they've paid the outstanding balance.
In addition to helping small businesses create and manage invoices, Skynova also offers a variety of business templates.
Notice to the Reader
The content within this article is meant to be used as general guidelines to invoice automation and may not apply to your specific situation. Always consult with a professional accountant to ensure that you're meeting accounting standards.