When it comes to running a business, one of the more challenging tasks is keeping tabs on finances. It’s not just about the money coming in, but also money going out. Many savvy business owners know that a key element to financial success is good cost management. And to track your costs well, you need to have a good invoice management system.
When a business is starting, manually tracking paper invoices might have been the default, workable option. Once operations scale, though, relying on paper records and spreadsheet logs starts to become a nightmare. Different suppliers will have different invoicing systems. Internally, your departments might have varying reporting mechanisms. Things get even trickier once you have to deal with cross-border transactions in dollars, ringgit, and rupiah. All this complexity comes at a cost.
The crisis revealed the importance of a careful, digital-focused invoice management strategy in elongating a company’s runway and building resiliency. Such a strategy can improve business clarity, reduce delays and errors caused by manual data entry, and free up cash for the business to use.
The cost of manual invoice management
SAP Concur estimates it costs US$12.90 to process a single invoice, not to mention the energy and time involved in such a tedious activity. Multiply that by a hundred invoices in a month, 12 times a year—that’s money going down the drain, especially when there are smarter, more cost-efficient methods like process automation.
Digitised and automated invoice processing can reduce up to 29% of the costs associated with paper-based processing. For an organisation that goes through 10,000 invoices in a billing period, this can amount to savings of US$300,000 per year.
Automation also reduces errors like double payments, wrong currency conversions, and late penalties (like when you forgot about that one invoice due last month).
Risks of poor invoice management
Invoices represent a large portion of business costs, and not only because the items purchased are necessary for operations. There are many secondary fees, risks, and costs that quickly add up over time.
Poor visibility between departments can lead to overspending in the form of double payments or duplicate services.
Incorrect records put you at risk of being charged with fraud. Though the accounting error may be an innocent mistake, auditors will take errors seriously.
High processing costs
Paper and PDF invoices can cost time and money to process. Hidden fees such as receiving, validation, payments, archiving, disputes are even more expensive when done traditionally.
Stressful seasonal periods
Tax season can be a huge hassle if departments haven’t recorded their invoices clearly. Leaders must spend overtime trying to figure out the meaning and context behind incomplete records.
Each department is responsible for incurring and paying the invoices it incurs. One department may be struggling with internal issues and have a more difficult time keeping up with outstanding invoices, resulting in late fees.
When the tax man comes
Tax season is one of the most stressful times of the year for business owners and their finance or accounting managers. Poor expense recording is partly to blame. Business expenses come in different forms, and they’re not always tax-deductible. When you don’t have a good invoicing system in place, it gets harder to identify which expenses are deductible and which aren’t.
A quick rule of thumb—expenses incurred as a part of income generation is typically considered tax-deductible. For instance, employee salaries are deductible. Employee medical expenses, on the other hand? They might not be. Since it can get pretty complicated, we recommend checking with your local regulatory authority in managing invoices for Asian companies.
With manual expense recording, what typically gets noted is the supplier you paid and what you paid for. Sometimes, you forget to record how and where that specific expense was used. This information gap makes it harder to decide whether you should file an invoice as a tax-deductible expense once tax season comes.
In contrast, an invoice management system allows you to categorise expenses the moment you enter them into the database. You can tag entries as tax-deductible and let the system store, organise, and furnish the information come tax time.
Smarter invoice management
Businesses no longer need to rely on manual, paper-based processes for invoice and expense management. There are a number of tech solutions that automate financial processes, serving up accounts payable information with one click. Even better, the software standardises and organises the information to present data in a meaningful, structured way. No more time wasted trying to reconcile records and compiling them by hand.
Data storage is also easier with digital invoice management. Instead of filing away paperwork in steel cabinets, information is stored electronically in regulatory-compliant formats. As more and more work transitions away from physical pen and paper, using a digital invoice management system future-proofs your business.
Why go digital?
It’s more visible. Out of sight, out of mind rings very true; if expenses aren’t recorded and reviewed, it’s easy to fall into the trap of overspending (or even overpayment). With a digital invoice manager, expense reports can be generated and sent out regularly, helping you keep tabs on your cash flow.
It’s better for compliance. Having a paper trail is also important for regulatory compliance. Records are essential to prove that your business employs good accounting practices. Clear digital records can protect you from charges of fraud or misreporting. Additionally, many internal revenue agencies require businesses to keep transaction records for up to five years.
It’s faster. You can build electronic approvals that move the invoicing process along faster. And data reconciliation? Let computers do the work of sifting through past records and identifying duplicates or errors. Automated two- and three-way matching makes linking purchase orders, invoices, and payables simpler and quicker. You can even approve suppliers online instead of going through a lengthy and tedious paper-based process.
It’s more structured. A digital invoice manager standardises the data and can produce reports on a scheduled, regular basis. Consolidated data is displayed in a meaningful way, which allows managers to make informed spending decisions. Invoice software can also automatically flag exceptions or discrepancies for review.
You get real-time, accurate data. With a digital invoice manager, you can check on business spending on your mobile or on the web—no need to spend time looking for physical files. Automatic two- and three-way matching also allows your business to immediately resolve discrepancies.
It’s easy to integrate. The best accounts payable and invoice management software comes with systems integration into existing ERP or accounting software. Most also allow payment solutions integration, allowing you to pay from the platform and record the transaction automatically. This reduces the chances of double payments.
It powers better business insights. Having your business’ spend data in one place helps you see the bigger picture. When all of the information is in a single place, it becomes easier to analyse trends and patterns in spending.
Traditional invoice management
Digital invoice management
Pen and paper, countless receipts stored in bulky file cabinets
Digital files such as PDFs and images are stored online in the cloud, saving space
Receipts can be lost, incurring late fees and resulting in information gaps
Invoices can be handled completely online
Anyone anywhere with the right access can access a pertinent invoice
Invoices may be paid twice because others weren’t informed about its status
Everyone can see outstanding vs. paid invoices
Manual searching for key information could take hours or days
Key information can be searched for in an instant online, quickly accessed to resolve inquiries or respond to audits and analysis
Don’t get left behind
As surprising as it may sound, many businesses in Singapore and beyond still rely on manual accounting processes. The region has one of the highest levels of consumer tech adoption, yet companies still tend to be more traditional. It could be a matter of inertia and a ‘this is how it’s always been done’ mentality. Sometimes, though, it’s simply a matter of not knowing where to start.
If you’re a business that wants to digitalise your financial processes, SAP Concur can help you take that important first step. As a trusted partner in invoice and spend management, SAP Concur will help you make paper invoicing a thing of the past. Organisations that successfully seize this chance will be more resilient in weathering the next inevitable crisis.
Many Asian enterprises have used SAP Concur to manage their finance and procurement processes, gaining better control of their spending as a result. Why not try it out today?
Check out our self-guided demo for a quick overview on how the modern spend management process works.
For more on our #BusinessSpendManagement series, click here.