Streamline Invoice Processing? 4 Actionable Steps to Help
Invoice processing is a classic back-office bottleneck in business. Everyone likes getting paid. Similarly, everyone worries about cash flow.
When working capital gets low, your company becomes less agile. Thus, if you can find ways to increase invoice velocity, you can get paid faster. As such, a streamlined invoice process can help you manage your cash flow and keep you agile.
Today, we'll review four tips to help you streamline your invoice processing. Here's what we'll cover:
- A classic invoice checklist (and a word of caution)
- How to negotiate faster payment terms (or at least get paid more)
- Automation tools (how to get paid faster with the right tech)
- How to handle discrepancies (because they will happen)
When errors happen on invoices, there can be payment discrepancies. Payment issues are the worst type of customer interaction. They can lead to the type of customer dissatisfaction that hurts your future dealings with a customer, as well as the reputation of your business.
When you're stuck dealing with invoicing discrepancies, you aren't focused on your core competencies. Instead, you're exhausting time and resources.
I encourage you to find the bottlenecks in your invoice processing. What can you do to increase processing speed and avoid the dreaded payment discrepancy? Let's find out!
1. The Classic Invoice Checklist Used Everywhere in Logistics
Your client can't pay your invoice if you haven't provided the correct information. Thus, omissions are the easiest mistake you can avoid. How? With a simple checklist.
Because freight bills are fairly comprehensive, they provide a good starter checklist of invoice information. Here's everything needed on a logistics invoice:
- Date of shipment
- Total charges due
- Associated paperwork, such as bill of lading, proof of delivery, and lumper receipt
- Description of freight—this usually includes weight, total number of packages, measurement, and class
- Name of consignor and consignee
- Name of carrier
- Origin and destination points
- Remittance address and correct contact person
You can add or subtract any information to this invoice checklist as required by your industry.
To Itemize or Not to Itemize? A Word of Caution
Depending on your industry, you need to be cautious about how much information you provide on invoices. Some customers will want you to itemize. They might tell you that itemized invoices help them create a business case on their end.
But if you aren't careful, itemization can be used like an audit. This may lead to the types of discrepancies we all want to avoid.
For instance, if you're in manufacturing, what do you gain from providing your customer your shop rate, material pricing, and markup? In manufacturing, when you provide that type of information, it can quickly lead to open-book costing.
First, the customer will challenge your material costs. Then, they'll tell you how much money you're allowed to make. What should matter is your bottom-line price, not how the sausage is made.
To put it another way, this article is about efficiency. When a customer requires more information, that creates more back-office work for your organization. More touches mean more opportunities for errors, omissions, and discrepancies.
That said, don't withhold any information you legally agreed to share. But consider the long-term costs before you agree to overshare. Sometimes you need to push back on your customers.
2. Negotiate Quicker Payment Terms
Let's stay on the subject of strategically pushing back on your customers. Another way to get paid faster is through the payment terms in your contract language. You must have agreed-on terms and conditions. Don't acknowledge receipt of your first purchase order with a new customer until that client has signed the terms and conditions agreement.
Are your payment terms with a customer at 30 days, 60 days, or (gulp) 90-plus days? If you're at longer than 60 days, consider revisiting your payment terms. Take every opportunity you can to move up your payment terms. Granted, you'll still run into customers who request longer payment terms. But at least you can negotiate.
And keep in mind: If your customer is unwilling to pay you sooner, it still isn't the end of the negotiation.
If You Can't Get Paid Faster, You Can Always Get Paid More
Your company isn't a savings and loan institution. So it follows that you shouldn't be expected to float your customer an interest-free loan for the pleasure of doing business with them.
Some customers (or the bureaucratic entity you're dealing with) won't be willing to pay their invoices within what you define as an acceptable range of payment terms. In that event, you might consider adding a percentage point to the purchase price for every 30-day block they wish to extend terms.
Two additional thoughts on the 1-point-per-30 rule:
- The rule could apply to any cost-bearing terms your customer is trying to force onto you. If you politely inform your customer what it will cost them, they might remove those terms. You know the deal—this is business.
- The rule works in reverse when you're the party paying the invoice. Politely angle to keep your cash flow working in-house as long as possible.
It might make you uneasy to increase prices in our competitive landscape. But remember, in business we want to be more than a faceless supplier. We all want long-term trading relationships, with terms amenable to both parties.
3. Automated Invoicing: Start With a Perfect Scan
OK, you've negotiated the best possible terms up front. Now look for ways to integrate yourself as a valuable asset to your customer. How can you streamline your in-house invoicing procedures?
Without a doubt, the answer is technology. Advances in automation software are the best way to reduce back-office workflow and streamline invoice processing. Look for a mobile imaging solution that can handle even torn or damaged documents.
Dozens of automated invoicing platforms are on the market. Unfortunately, not all invoicing platforms are created equal. This isn't hyperbole. All invoice automation platforms are driven by the quality of their imaging software. Look for a company that provides best-in-class mobile imaging technology. The company Vector refers to its imaging as "perfect scans."
One-Click Invoicing Is Pretty Fast!
Look for mobile invoicing tech that automatically captures, crops, and enhances all paperwork, rivaling the quality of the originals.
Once you have the mobile scans, the invoicing tech lets you share them through the cloud with your company's internal operating software and synchronize them with invoice processing. In other words, you can set your customers' billing preferences one time. Then, everything will be automated from that point forward.
Billing as simple as the press of a button—how nice is that?
How many steps of the invoicing process could you eliminate from your workflow with one-click billing?
4. The Best Way to Handle Payment Discrepancies
By far, the most effective way to handle discrepancies is to eliminate them. Once you implement invoice automation, the number and seriousness of discrepancies will greatly decline.
You can set your system to accommodate each customer's preferences. Once you've done that, most invoicing issues will disappear.
Let's look at an extreme example: A driver delivers a load in an area without cell phone coverage. In that case, automation software will simply send the document once coverage is regained. There's no additional work required.
Your company's reputation is built on reliability and customer service. The less frequently discrepancies happen, the more leash you will have when they inevitably happen.
As soon as an issue comes up, deal with it. Have all your data ready to fire off in a PDF format. But always follow up with a phone call.
Raiders of the Lost Art
Why is it effective to follow up with a phone call? The ability to relate with people is becoming a lost art due to our current era of email, emojis, and texting.
A conversation about payment issues can be difficult. I'm not telling you to be a pushover. You need to get paid! But I am suggesting you address the issue head-on. Pick up the phone, and call the customer.
Lean on the facts, but employ the bedside manner of a good doctor. You'd be amazed at how quickly an issue can be resolved when you treat your counterpart the way you like to be treated.
In closing, keep your cash flow humming. Avoid discrepancies as much as possible by always including the correct information on an invoice. Improve your payment terms up front.
Arm yourself with automation. "Perfect scan" document imaging can streamline things to a single click.
And whatever you do, when discrepancies happen, always make the phone call.
This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.