January 17, 2024 |
Invoice processing is a tedious but unavoidable part of running any business. Many organizations struggle to keep up with mounting invoices and find that they spend too much time resolving various invoicing issues. Read on to learn about common invoice problems and solutions that will improve the accuracy and efficiency of your Accounts Payable (AP) processes.
Top 11 Invoice Problems and Solutions
Invoicing problems can lead to expensive and reputation-damaging delays. The good news is that manual invoicing tasks and associated issues can be reduced or even eliminated through automation.
Automated invoicing software can handle the complete invoicing workflow from receipt to final payment.
Let’s explore some of the issues that companies encounter when managing invoices and how they can be resolved with automated technologies.
Invoice Problem #1: Data Processing Errors
Mistakes are inevitable when it comes to manual data entry, especially in situations where teams are trying to process large volumes of items in a short time. Even in the best cases involving only a small amount of data, you can expect an average human error rate of 1%.
At first glance, this may not seem like anything to worry about but consider that if you process 1,000 invoices, 10 of those are likely to be incorrect and require you to dedicate further resources to investigation and resolution.
Common data processing errors that can impede your workflow include:
- Incorrect data entry
- Miscalculated totaling amounts
- Formatting and structural inconsistencies
Automated invoicing software all but eliminates the human factor and leads to a significant improvement in accuracy.
Invoice automation solutions ensure precision by performing a 2-way match between invoices and Purchase Orders (POs). For example, Conexiom’s automated invoicing platform processes invoices with 100% accuracy and alerts AP teams if any exceptions are detected that require human verification.
If no exceptions are to be resolved, the invoice is delivered to the ERP for a 3-way match process with receipts. By validating invoices against multiple other sources, Conexiom achieves unparalleled accuracy and cuts data processing errors to zero.
Invoice Problem #2: Missing Data
Processing as many invoices as possible to meet deadlines can mean overlooking critical details.
Incomplete information, such as missing item descriptions or quantities, can result in inaccurate documentation. It can also hinder your AP team’s ability to track and verify transactions.
Automated invoicing software offers two different solutions for these challenges. The first is designed for high-volume vendors and involves custom-building maps and templates to handle each vendor’s business rules and logic.
The second solution, well-suited for low-volume vendors, relies on machine learning and AI to identify fields using prebuilt maps. While still a very powerful process, this solution requires human confirmation before delivery.
Invoice Problem #3: Invoicing the Wrong Person
With old-fashioned manual data entry, situations like billing or paying the wrong person are common. It can also be difficult to keep up with changing personnel and company details manually. Errors like this result in delays to payment or collection and can strain business relationships.
To ensure all information is complete and accurate, automated invoicing software performs a 2-way match between the invoice and the PO and validates the documents against each other.
It even alerts AP teams to exceptions, allowing them to quickly make any necessary adjustments before the invoice is sent to the payment system. This ensures all contact details are correct and can save your business hours of unnecessary work.
Invoice Problem #4: Overdue Invoices
Delayed payments mean that funds needed for business operations, investments, or growth are not available. This can lead to a shortfall in financial resources and affect a company’s ability to meet its financial obligations.
One of the main reasons businesses struggle to collect overdue payments is that they lack a defined process for following up on unpaid debts.
Communication is key in any relationship, including business partnerships. However, some businesses may struggle to consistently communicate with vendors or vice versa, leading to delayed resolutions.
So what can be done to address the problem of overdue invoices? First, polish your communication and negotiation skills and establish a definitive process for handling unpaid debts.
Be prepared to back up any claims with fully-signed documentation, including the contract and invoice. This will give more weight to any demands by debt collectors or other debt enforcement partners.
If all else fails, consider seeking legal counsel. Having signatures on all relevant documents will create a strong foundation for your legal claim.
Invoice Problem #5: Applying Invoice Factoring and Invoice Trading Unnecessarily
Businesses often resort to factoring due to a misjudgment of their financial needs. This tends to result from inadequate financial planning or forecasting. When companies fail to project their cash flow requirements accurately, they might hastily opt for factoring, which isn't always the most cost-effective solution.
Likewise, choosing to sell invoices at a discount without considering other options can expose organizations to unnecessary losses. For example, businesses may accept a lower amount than their bills are actually worth and ultimately lose out on revenue. They might also overlook alternative financing methods that could be more beneficial in the long run.
And the long-term implications of relying on factoring and related methods can be substantial. Aside from immediate revenue loss, continual factoring can hinder the development of a more sustainable financial strategy.
There may be some cases where such actions are unavoidable, for example, when dealing with a large volume of unpaid bills. Situations like these should be evaluated case-by-case in consultation with your legal and AP departments.
Invoice Problem #6: Fraud Vulnerability
If you manage any part of your invoicing process online, you must always be at the top of your fraud-prevention game.
However, many organizations lack adequate security measures, inadvertently exposing their accounts to fraud. Here’s why that’s an issue:
Potential Unauthorized Alterations or Duplications
Without robust security protocols in place, you're opening your invoices up to unauthorized access. Fraudsters may alter your invoices or even duplicate them, leading to double payments on your end.
Risks to Sensitive Financial Information
Invoices can contain highly sensitive information, including credit card details and other private financial information. If a malicious third party gets their hands on these details, it could spell disaster for your business or your vendors.
Automated invoicing software like Conexiom can drastically reduce the risk of fraud. Because it provides deep visibility to all involved parties, there's less chance that fake invoices will enter the system. It can also spot when credentials are duplicated without permission.
With all stakeholders connected to the system simultaneously, it’s much harder for a third party to attack or try to cheat the system and go unnoticed. This real-time visibility greatly reduces the risk of fraud and keeps fake invoices out of the system.
Invoice Problem #7: Lost or Missing Invoices
Handling paper invoices can be problematic for many reasons. Often, the volume of transactions is simply overwhelming, and it’s a challenge to check each item thoroughly. Paper invoices can also easily become lost or misplaced, leaving you facing significant difficulties in auditing and tracking transactions.
It can be particularly difficult if disputes or reconciliation issues arise. If you don't know exactly where and what to look for, the chances that you’ll be able to resolve things quickly and easily are slim.
These issues can be compounded by the very nature of some transactions, requiring specialized knowledge to understand and verify.
The best automated invoicing platforms ensure that invoices are properly entered and organized in the system from the start and are available for auditing at any time, saving AP teams countless hours of searching and sorting.
Invoice Problem #8: Lack of Scalability
As your organization grows, you’ll eventually find yourself with more and more invoices to process. However, many businesses fail to invest in solutions that can keep pace with their success and scale to handle increasing numbers of documents.
To further complicate matters, some invoicing systems are limited in adapting to changing business needs. If you start working with a vendor that uses various invoice styles, for example, you’ll need a system capable of processing multiple document formats.
Automated invoice processing solutions are instantly scalable and allow users to adjust on the fly. Solutions that use AI and machine learning, such as Conexiom, can adapt to handle novel invoice formats that are received for the first time.
Conexiom processes invoices faster and more accurately than traditional invoicing solutions. It doesn’t require any manual data entry or invoice printing, as users can attach the originals in the ERP. This degree of automation and visibility makes it easier for AP teams to stay on top of due dates and receipts.
Invoice Problem #9: Invoice Processing Delays Affect Credibility
Failing to process invoices promptly can give business partners the impression that you are slow, unreliable, and unprofessional.
Delayed billing can put a major strain on your relationships with clients and may even limit your future opportunities for collaboration.
Automated invoicing software ensures no invoice is left unprocessed until the last minute. The solution allows users to send accurate invoices when or before they’re due, keeping clients happy and allowing you to avoid late payment penalties and take advantage of early payment discounts.
Invoice Problem #10: Unclear Invoice Status Due to Lack of Transparency
Communication gaps in invoice status can complicate things for both payers and payees, causing frustration and uncertainty at best and legal disputes at worst.
Your AP team needs to be able to find out what’s been approved, what is pending, and whether or not there were any errors in processing at any moment.
With an automated invoicing system in place, invoices can be processed rapidly and error-free, meaning you won’t risk jeopardizing valuable relationships with clients due to late payments. An end-to-end digital paper trail means full visibility, so you can audit your transactions at any time during a dispute.
Invoice Problem #11: Tax Issues From Incorrect Invoices
Missing or incorrect invoice details can threaten your ability to comply with tax and reporting requirements and lead to legal and financial consequences for your business.
Automated invoicing software can verify that every invoice includes all the information required for tax compliance, keeping your financial records accurate and up-to-date.
Solve Your Invoicing Issues With Conexiom
Automated invoicing software can effectively tackle the most common invoice problems and solutions, enabling your AP team to spend more time on tasks that benefit from the human touch.
Conexiom is the only high-quality invoice automation solution with 100% data accuracy.
Conexiom integrates with the systems you already use and allows you to:
- Speed up invoice processing speeds by as much as 73%.
- Reconcile invoices in seconds.
- Free up your accounting staff for more rewarding tasks.
- Secure 5x as many early payment discounts.
- Increase employee satisfaction.
- Reduce costs by 81% compared to manual processing.
Ready to find out more about how automation can help you cut costs and make your invoice processing workflow frictionless?